315 F. Supp. 3d 721
S.D.N.Y.2018Background
- Plaintiffs brought a putative class action under §10(b) and §20(a) against Neurotrope and two officers, alleging misleading statements about Phase 2b trial results for Bryostatin-1.
- Neurotrope is a small clinical-stage biopharma; Bryostatin was its sole lead Alzheimer’s candidate.
- Phase 2b tested two doses (20 µg and 40 µg) vs. placebo; 20 µg showed improvement on the SIB at p < 0.1 (one-sided), 40 µg did not. The trial was small.
- Plaintiffs contend defendants misled investors by failing to disclose the use of a one-sided test and a p < 0.1 threshold (rather than the more common two-sided p < 0.05), and by touting the drug’s ability to “reverse” AD.
- Stock rose after certain optimistic statements and fell sharply after disclosures about the one-sided test and the 40 µg negative result.
- Court considered whether alleged omissions/misstatements were material and whether plaintiffs pleaded scienter; defendants moved to dismiss under Rule 12(b)(6).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Materiality of failing to disclose one-sided test / p < 0.1 | Omission made statements touting "statistical significance" misleading because the positive result depended on nonstandard methodology | Use of a particular p-value or one-sided test is not per se required; the statements about positive, preliminary results were accurate and contextualized | Not material; omission did not render statements misleading |
| Failure to disclose that 40 µg dose lacked significance | Omitting the negative 40 µg result hid adverse information about efficacy across doses | May be of interest but absence of dose-response disclosure is not required where press releases did not promise or rely on a dose-response | Not material; non-disclosure not actionable |
| Statements about Bryostatin’s ability to "reverse" AD | Statements inflated efficacy and suggested cure-like effects | Statements characterized as potential, preliminary, and puffery; contextual qualifiers and small sample size were disclosed | Not misleading; treated as non-actionable puffery or qualified opinion |
| Scienter (state of mind) of individual defendants | Senior executives at a tiny company had motive and access to contrary facts; promotional articles suggest manipulation | Allegations fail to show concrete personal motive or particularized contrary information; Seeking Alpha articles unreliable and speculative | Insufficiently pleaded; no strong inference of conscious misbehavior or recklessness |
Key Cases Cited
- Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27 (2011) (disclosure required to avoid making statements misleading in context)
- Omnicare, Inc. v. Laborers Dist. Council Const. Indus. Pension Fund, 135 S. Ct. 1318 (2015) (opinion statements not actionable absent lack of belief or omission making opinion misleading)
- Kleinman v. Elan Corp., P.L.C., 706 F.3d 145 (2d Cir. 2013) (failure to disclose specific post-hoc methodology not necessarily misleading)
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007) (standard for pleading scienter: inference must be at least as compelling as opposing inferences)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility standard for Rule 12(b)(6))
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must nudge claim from conceivable to plausible)
- Vivendi, S.A. Sec. Litig., 838 F.3d 223 (2d Cir. 2016) (corporate statements and limits of puffery/omission doctrine)