Tongue v. Sanofi, 2016 U.S. App. LEXIS 4107

Background

Genzyme developed Lemtrada (alemtuzumab) for MS using primarily single-blind trials; the FDA repeatedly expressed concern and preferred double-blind pivotal trials but allowed Genzyme/Sanofi to proceed.
Sanofi acquired Genzyme in 2011; Genzyme stockholders received cash plus contingent value rights (CVRs) tied to FDA approval by March 31, 2014 and certain sales milestones.
Offering Materials incorporated Genzyme filings that projected high likelihood and timing of U.S. approval (e.g., 90% probability; approval anticipated in 2012).
After public statements touting Phase III results and optimism about approval, FDA advisory materials in Nov. 2013 revealed reviewers’ concerns about bias from lack of double-blinding; CVR value then fell substantially; FDA formally rejected the sBLA in Dec. 2013 and later approved Lemtrada in Nov. 2014 (after the CVR cutoff).
Plaintiffs filed consolidated securities suits alleging omissions of FDA feedback rendered issuer opinions and projections materially misleading (claims under Exchange Act §§10(b), 18, 20(a) and Securities Act §§11,12). The district court dismissed for failure to state a claim; plaintiffs appealed.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether defendants’ optimistic statements about likelihood/timing of FDA approval were misleading by omission of FDA feedback on single-blind trials	Omitted FDA critiques were material and made optimistic probability/timing statements misleading, inflating CVR value	Statements fairly aligned with information defendants had; FDA concerns did not conflict with optimism given large treatment effect; Omnicare does not require disclosure of every contrary fact	Affirmed: no actionable omission; no conflict between statements and FDA feedback; Omnicare not satisfied
Whether post‑tender statements about launch timing/confidence were misleading	Generalized optimism and timing assurances misled investors by omitting FDA concerns	Remarks were subjective, non‑factual, or accurate as to timing; did not convey a basis inconsistent with known FDA dialogue	Affirmed: statements not misleading; timing/optimism consistent with record
Whether statements praising trial results were misleading given FDA methodology concerns	Praising trial results omitted material FDA skepticism about reliability of single‑blind design	Statements about strong treatment effect were supported by data and foreign approvals; reasonable inquiry existed; disagreement with FDA is not dispositive	Affirmed: no omission rendering opinions misleading; interpretation dispute insufficient
Applicability of Omnicare (post‑district opinion) to opinions alleged misleading	Plaintiffs: Omnicare expands liability for opinion omissions and requires reconsideration	Defendants: Omnicare imposes a demanding showing and contextual analysis, which they satisfy here	Court applied Omnicare and held plaintiffs still failed to plead omissions that made opinions misleading

Key Cases Cited

Omnicare, Inc. v. Laborers Dist. Council Constr. Indus. Pension Fund, 135 S. Ct. 1318 (U.S. 2015) (opinion‑omission standard: must identify particular facts about the basis of an opinion whose omission makes it misleading)
Fait v. Regions Fin. Corp., 655 F.3d 105 (2d Cir. 2011) (opinion‑statements liability requires objective falsity and subjective disbelief under pre‑Omnicare standard)
Kleinman v. Elan Corp., 706 F.3d 145 (2d Cir. 2013) (courts should not convert reasonable interpretation disputes over data into securities fraud)
Va. Bankshares, Inc. v. Sandberg, 501 U.S. 1083 (U.S. 1991) (opinions and belief statements governed by securities law principles)
Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27 (U.S. 2011) (materiality standard: an omission is material if it would have significantly altered the total mix of information)
Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (plausibility standard for pleadings under Rule 12(b)(6))
Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (plausibility and Twombly/Iqbal pleading framework)