98 F. Supp. 3d 147
D. Mass.2015Background
- Shareholders sue ARIAD and underwriters in a proposed class action over ponatinib (Iclusig) safety, efficacy, and commercial prospects during 12/12/2011–10/30/2013; complaint divides into fraud claims (Section 10(b)) and a non-fraud Section 11 claim; FDA actions and black-box labeling followed interim trial data showing cardiovascular risks; 2013 secondary offering raised $310 million; post-offering data showed increasing adverse events and FDA actions; court must resolve motions to dismiss by ARIAD Defendants and Underwriters.
- The class targets statements and omissions regarding ponatinib’s safety profile, dosage reductions, and front-line use potential; market reactions to the December 2012 and October 2013 disclosures are central.
- The court applies heightened pleading standards for Section 10(b) claims (fraud requires PSLRA scienter) and lower pleading standard for Section 11 (standing and material omissions).
- The court recognizes pre-Twombly pleading standard for Section 11 standing but notes a developing circuit split post-Twombly and Iqbal on standing pleading, ultimately denying lack-of-standing as to Section 11 against the ARIAD Defendants while dismissing the Section 10(b)/Section 20(a) claims against them.
- The court concludes that: (a) Section 10(b) claims fail for lack of a cogent inference of scienter; (b) Section 11 claims against ARIAD Defendants fail due to lack of material misstatements/omissions and insufficient standing on traceability; (c) Section 15 claims fail as dependent on Section 11 liability; and (d) Underwriters face dismissal for failure to state a Section 11 claim, though standing survives.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing under Section 11 to sue underwriters and ARIAD Defendants | Plaintiffs allege traceable purchases of the 2013 Offering. | Defendants argue lack of traceable link to the December 2013 Offering. | Standing maintained under pre-Twombly standard; Section 11 claims allowed to proceed against ARIAD Defendants and Underwriters on standing. |
| Material misstatements/omissions in Section 11 offerings | Offering materials omitted adverse cardiovascular data and front-line potential. | Disclosures were made or data was non-material; statements not misleading. | No actionable misstatements or omissions established against ARIAD Defendants under Section 11. |
| Scienter and misrepresentation standards for Section 10(b) (fraud) | Defendants knew or recklessly disregarded adverse safety data; insider trading supports scienter. | Insider trading insufficient to establish scienter; post-approval statements not knowingly misleading. | Plaintiffs fail to plead strong inference of scienter; dismissal of Section 10(b) and Section 20(a) against ARIAD Defendants. |
| Forward-looking statements and PSLRA safe harbor | Projected 2018 sales and front-line use prospects were misstated or misleading. | Safe harbor protects forward-looking statements with caveats. | PSLRA safe harbor applies to the 2018 sales projection; no liability for forward-looking statements. |
| Effect of Section 15 (control person) liability | Controls liable if primary Section 11/12 violations occured. | No primary liability under Section 11 established;Section 15 cannot attach. | Section 15 claims dismissed for lack of underlying primary liability. |
Key Cases Cited
- Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27 (U.S. 2011) (materiality of adverse events not requiring statistical significance)
- Twombly, 550 U.S. 544 (U.S. 2007) (plausibility pleading standard)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (plausibility and pleading requirements)
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (U.S. 2007) (requirement of strong inference of scienter)
- Century Aluminum Co. Sec. Litig., 729 F.3d 1104 (9th Cir. 2013) (standing requires particularized showing when shares could be from multiple offerings)
- Silverstrand Invs. v. AMAG Pharm., 707 F.3d 95 (1st Cir. 2013) (Section 11 claims can be actionable when undisclosed adverse events affect revenues)
- In re Number Nine Visual Tech. Corp. Sec. Litig., 51 F. Supp. 2d 1 (D. Mass. 1999) (post-Twombly/Iqbal standing pleading developments cited)
- In re XM Satellite Radio Holdings Sec. Litig., 479 F. Supp. 2d 165 (D.D.C. 2007) (non-fraud forward-looking statements and safe harbor context)
- In re Evergreen Ultra Short Opportunities Fund Sec. Litig., 705 F. Supp.2d 86 (D. Mass. 2010) (control/secondary liability framework)