34 F.4th 828
9th Cir.2022Background
- Nektar presented Phase 1 EXCEL interim data (a widely‑circulated “30‑fold” chart claiming ~29.8× increase in intratumoral CD8+ T cells across N=10 patients) at investor conferences in 2017.
- Nektar later reported Phase 1/2 PIVOT results (NKTR‑214 combined with Opdivo) in June 2018 showing lower efficacy (overall response rate fell from ~85% to ~50%), and the stock dropped about 42%.
- Anonymous short‑seller authors published the “Plainview Report,” alleging that Figure 6 from EXCEL showed one patient (Patient 14) with a ~300× increase and that that outlier was included in the 30‑fold chart; Nektar’s stock fell ~7% on that report.
- Two public pension funds sued under § 10(b)/Rule 10b‑5, alleging Nektar misled investors by relying on outlier data and misstating dosing schedules; the district court dismissed the Second Amended Complaint with prejudice.
- The Ninth Circuit affirmed: plaintiffs failed to plead falsity/materiality and loss causation under the heightened PSLRA/Rule 9(b) standards—complaint lacked specific allegations showing what EXCEL would have shown without the outlier, why that would be material, and that subsequent disclosures revealed the falsity.
- The court held the PIVOT announcement did not function as a corrective disclosure of manipulation in EXCEL (PIVOT tested a different regimen and endpoint), and the anonymous short‑seller report was not a plausible corrective disclosure given its authorship and disclaimers.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether EXCEL statements (30‑fold chart) were false or materially misleading because they included an outlier | Inclusion of Patient 14’s outlier inflated the average and the omission of that fact misled investors | EXCEL statements were not shown to be materially misleading because plaintiffs did not plead what results would be absent the outlier or why any difference would matter to investors | Dismissed — plaintiffs failed to plead falsity/materiality with the specificity required by PSLRA/Rule 9(b) |
| Whether misstated dosing frequency (3‑week vs. some 2‑week patients) rendered EXCEL misleading | Misstating dosing schedule concealed adverse context that would alter total mix | Plaintiffs did not allege why a one‑week difference in dosing would be material to investment decisions | Dismissed — no plausible allegation that dosing allegation was materially misleading |
| Whether PIVOT disclosure caused plaintiffs’ losses (loss causation) | PIVOT results revealed the falsity of EXCEL and therefore caused the stock drop | PIVOT tested a different regimen/endpoints; it did not correct or expose manipulation of EXCEL data | Dismissed — PIVOT was not a corrective disclosure that revealed prior falsity; it merely showed less promising results in a different trial |
| Whether the Plainview short‑seller report was a corrective disclosure causing the October stock drop | Plainview tied Figure 6 to the 30‑fold chart and revealed the manipulation, causing loss | Anonymous, self‑interested authors and disclaimers made it implausible the market would credit it as revealing falsity | Dismissed — short‑seller report not a plausible corrective disclosure under applicable precedent |
Key Cases Cited
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (consider complaint as whole when evaluating pleadings)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (pleading must be plausible)
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standard for plausibility and conclusory allegations)
- Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 981 (PSLRA and Rule 9(b) dual pleading requirements in securities suits)
- Metzler Inv. GMBH v. Corinthian Colls., Inc., 540 F.3d 1049 (PSLRA requires particularized reasons why statements are misleading)
- Retail Wholesale & Dep’t Store Union Loc. 338 Ret. Fund v. Hewlett‑Packard Co., 845 F.3d 1268 (omission materiality: effect on the total mix for reasonable investor)
- Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988 (when companies tout positive info they must not mislead by omitting adverse info)
- Mineworkers’ Pension Scheme v. First Solar Inc., 881 F.3d 750 (loss causation requires tracing losses to the very facts lied about)
- Halliburton Co. v. Erica P. John Fund, Inc., 573 U.S. 258 (corrective disclosure framework for loss causation)
- Houston Mun. Emps. Pension Sys. v. BofI Holding, Inc., 977 F.3d 781 (short‑seller reports and high bar for treating them as corrective disclosures)