965 F.3d 165
2d Cir.
2020
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Background

  • Plaintiffs (Michael and Kelly Nguyen) filed a Rule 10b-5 class action after NewLink’s Phase 3 trial of algenpantucel‑L (HyperAcute Pancreas) failed and NewLink’s stock collapsed.
  • Phase 2 (nonrandomized, no control, excluded patients with <6‑month expected survival) showed a median survival of 24.1 months; NewLink publicly described these results as "encouraging" and an "efficacy signal."
  • Sept. 2013: NewLink CMO Vahanian told investors that "all the major studies" show resected pancreatic‑cancer median survival of about 15–20 months.
  • Mar. 2014: After the first interim Phase 3 read (222 events) missed its threshold, Vahanian told analysts he had "no reason to believe" the control arm median would exceed the low‑20s, and that the study was "designed" for a low‑20s control median; subsequent interim reads also missed and the trial failed in Mar. 2016.
  • Plaintiffs alleged (a) misstatements about drug efficacy (2013–2016 Assessments), (b) misleading statements about the scientific literature (September statement), and (c) misleading statements about trial design/enrollment (March and Enrollment statements); a Confidential Witness alleged pervasive GCP violations and improper enrollments.

Issues

Issue Plaintiff's Argument Defendant's Argument Held
Are the 2013–2016 Assessments actionable misrepresentations? The positive descriptions of Phase 2 were misleading because Phase 2 excluded sicker patients and thus overstated efficacy. Those statements were generic corporate optimism/puffery and not actionable; defendants reasonably believed the assessments. Affirmed: statements were nonactionable puffery absent plausible allegation defendants disbelieved them.
Was the September 2013 statement ("all the major studies" show 15–20 months) false/misleading? It implied no credible study showed medians >20 months, but several major American studies did; omission made the statement misleading. The statement was opinion/interpretation and not falsifiable; plaintiffs failed to allege defendants disbelieved it. Vacated dismissal: plausible that the statement implied falsifiable facts and was misleading by omission under Omnicare.
Was the March 2014 call actionable (opinion v. fact)? Vahanian’s remark that there was "no reason" to believe medians were > low‑20s implied no competing evidence and was misleading; the related statement that the study was "designed" for low‑20s was factual and false. The opinion was nonactionable or legitimately based; the design statement was true/accurate as pleaded. Vacated dismissal in part: the opinion portion was plausibly misleading and actionable; the factual claim about study design was not shown false and is not actionable on pleadings.
Did plaintiffs sufficiently plead loss causation for the Enrollment Statement (improper enrollments)? The trial’s failure constructively disclosed the enrollment misconduct (improper/ ineligible patients), and that concealed misconduct foreseeably caused the stock drop. The Jefferies flash note did not correct the Enrollment Statement and plaintiffs failed to tie the Enrollment Statement to their losses. Vacated dismissal: flash note was not an adequate corrective disclosure, but plaintiffs plausibly pled that improper enrollments could have caused the trial failure and thus loss causation survives to discovery.

Key Cases Cited

  • Omnicare, Inc. v. Laborers Dist. Council Const. Industry Pension Fund, 575 U.S. 175 (2015) (opinion‑statement liability; opinions can be actionable when they imply false facts or omit material context a reasonable investor would expect)
  • Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336 (2005) (loss‑causation requirement in securities fraud)
  • Ganino v. Citizens Utilities Co., 228 F.3d 154 (2d Cir. 2000) (pleading standards for securities fraud)
  • ECA, Local 134 IBEW Joint Pension Trust of Chicago v. JP Morgan Chase Co., 553 F.3d 187 (2d Cir. 2009) (statements of corporate optimism/puffery not normally actionable)
  • Novak v. Kasaks, 216 F.3d 300 (2d Cir. 2000) (scienter and when puffery can be actionable if defendant knew the contrary)
  • Rombach v. Chang, 355 F.3d 164 (2d Cir. 2004) (Rule 9(b) particularity in securities fraud pleading)
  • Fait v. Regions Financial Corp., 655 F.3d 105 (2d Cir. 2011) (opinion‑versus‑fact analysis pre‑Omnicare)
  • In re Vivendi, S.A. Securities Litigation, 838 F.3d 223 (2d Cir. 2016) (loss‑causation analysis)
  • Lentell v. Merrill Lynch & Co., Inc., 396 F.3d 161 (2d Cir. 2005) (proximate causation and corrective‑disclosure framework)
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