SM Merger/Arbitrage, L.P. v. Bristol-Myers Squibb CompanySM Merger/Arbitrage, L.P. v. Bristol-Myers Squibb Company
Case Information
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
-----------------------------------------------------------------------------x
IN RE: 21-CV-8255 (JMF) BRISTOL-MYERS SQUIBB COMPANY CVR SECURITIES OPINION AND ORDER LITIGATION -----------------------------------------------------------------------------x
JESSE M. FURMAN, United States District Judge:
A Contingent Value Right or “CVR” is “a security payable upon the occurrence of a specified future event.” ECF No. 95 (“Compl.”), ¶ 1. In 2019, as part of a merger, Bristol- Myers Squibb Company (“BMS”) issued CVRs that were contingent on approval of three drugs by the Food and Drug Administration (“FDA”) by specific deadlines. If the deadlines were met, BMS would have had to pay $6.4 billion to the holders of the CVRs. But the FDA approved one of the three drugs thirty-six days after its deadline. As a result, the CVRs expired worthless.
This litigation — a consolidated putative class action brought on behalf of those who purchased or otherwise acquired the BMS CVRs between November 20, 2019, and December 31, 2020 — followed. Plaintiffs allege that Defendants — BMS and a slew of current and former BMS executives and directors [1] — violated the Securities Act of 1933 (the “Securities Act”), the Securities Exchange Act of 1934 (the “Exchange Act”), and Securities and Exchange Commission (“SEC”) Rules promulgated thereunder by making various statements regarding the value of the CVRs and the likelihood of their being paid out. The premise of their claims is that Defendants intentionally delayed FDA approval to avoid the $6.4 billion payout.
Defendants now move, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, to dismiss the operative Consolidated Amended Class Action Complaint (the “Complaint”). For the reasons that follow, Defendants’ motion must be and is GRANTED.
BACKGROUND
The following facts, taken from the Complaint, documents it incorporates, and matters of
which the Court may take judicial notice, are construed in the light most favorable to Plaintiffs.
Kleinman v. Elan Corp., PLC
,
A. The BMS-Celgene Merger
BMS is a publicly traded global pharmaceutical company. Compl. ¶ 44. On January 2, 2019, BMS entered into a preliminary merger agreement with Celgene Corporation (“Celgene”), another pharmaceutical company, pursuant to which each share of Celgene common stock would be exchanged for one share of BMS common stock, fifty dollars in cash, and one CVR. ¶ 85; see ECF No. 101-1 (“Joint Proxy”), at 3. According to the agreement, the CVRs would trade on a stock exchange and would pay out nine dollars per CVR — $6.4 billion in total — but only if three drugs that Celgene had been developing, Liso-cel, Ide-cel, and Ozanimod (together, the “Milestone Drugs”), were approved by the FDA by certain deadlines: (1) Liso-cel by December 31, 2020; (2) Ozanimod by December 31, 2020; and (3) Ide-cel by March 31, 2021 (together, the “Milestone Deadlines”). Compl. ¶¶ 81, 87; see also Joint Proxy 4, 217-21. If even one Milestone Drug was approved one day late, the CVRs would expire worthless. See Compl. ¶ 81. Celgene’s shareholders voted to approve the merger on April 12, 2019. Id. ¶ 90. On November 20, 2019, the merger (the “Merger”) closed and the CVRs were issued. Id. ¶ 95.
B. BMS Misses the Milestone Deadline for Liso-Cel
Liso-cel is a “biologic drug,” see ECF No. 105 (“Pls.’ Opp’n”), at 4; Compl. ¶ 91, meaning it is composed of natural and biological substances (such as “sugars, proteins, [] nucleic acids[,] or . . . cells and tissues”), FDA, What Are “Biologics” Questions and Answers , available at https://www.fda.gov/about-fda/center-biologics-evaluation-and-research-cber/what- are-biologics-questions-and-answers. As a result, Liso-cel could be approved only after the FDA had “reviewed [its Biologics License Application (‘BLA’)], conducted facility inspections [of where it will be manufactured,] and concluded that [it] is efficacious, safe[,] and appropriately labeled.” Compl. ¶ 91. The BLA is the core of the application process and “must include, among other things, clinical data demonstrating the safety and efficacy of the therapy, information concerning the manufacturing and controls for production, a detailed description of the manufacturing facility[,] and the proposed product label.” Id.
Celgene submitted the initial portion of Liso-cel’s BLA to the FDA before the Merger. Id. On December 18, 2019, less than one month after the Merger, BMS submitted the final — and most important — portion of the BLA, titled “Chemistry, Manufacturing, and Controls” (“CMC”) to the FDA. Id. ¶ 96. The FDA requires this module to include “a full description of the [biologic drug’s] manufacturing process, including analytical procedures that demonstrate . . . prescribed standards of identity, quality, safety, purity, and potency and . . . substantiating data . . . [that] establish that the analytical procedures used in testing meet proper standards of accuracy, sensitivity, specificity, and reproducibility and are suitable for their intended purpose.” ¶ 20. On February 13, 2020, Liso-cel’s application was granted “Priority Review” by the FDA, which set its target approval date as August 17, 2020, about four-and-a-half months before the drug’s December 31, 2020 Milestone Deadline. Id. ¶¶ 97-98.
On March 23, 2020, shortly after the start of the COVID-19 pandemic, however, the FDA directed BMS to supplement its CMC submission with “basic data” regarding Liso-cel’s safeness and efficacy. Id. ¶¶ 99-100. BMS submitted an amended CMC to the FDA about three weeks later. Id. ¶ 100. After reviewing the submission, the FDA concluded that the supplemental information was a “Major Amendment” to Liso-cel’s BLA, automatically triggering a three- month extension of Liso-cel’s target approval date to November 16, 2020. Id. ¶¶ 101-02.
But that date was not to be either. Due to FDA scheduling issues and the Major Amendment designation, the FDA’s inspections of the two manufacturing facilities slated to produce Liso-cel were not completed until early December 2020, only weeks before the Liso-cel Milestone Deadline. Id. ¶¶ 103, 120. The FDA found multiple regulatory violations at both facilities, which required BMS to respond with remediation plans. Id. ¶¶ 107-12, 116-24. BMS fully responded by the FDA’s mandated deadline of December 23, 2020, id. ¶ 126; Pls.’ Opp’n 12, but FDA approval of Liso-cel did not come until February 5, 2021, roughly five weeks after the December 31, 2020 Milestone Deadline, Compl. ¶¶ 33, 128. Accordingly, and notwithstanding the timely approvals of both Ozanimod and Ide-cel, the CVRs expired worthless. ¶¶ 33, 128.
C. Plaintiffs’ Claims
Plaintiffs in this case bring securities fraud claims under Sections 10(b), 14(a), and 20(a) of the Exchange Act, 15 U.S.C. §§ 78j(b), 78n(a), 78t(a); SEC Rules 10b-5 (“Rule 10b-5”) and 14a-9 (“Rule 14a-9”), 17 C.F.R. §§ 240.10b-5, 240.14a-9; and Sections 11, 12(a)(2), and 15 of the Securities Act, 15 U.S.C. §§ 77k, 77 l (a)(2), 77o. [2] Their claims arise from two sets of statements by Defendants “concerning the ‘diligent’ efforts [BMS] would make to meet the Milestone[ Deadlines], the likelihood that the Milestone[ Deadlines] would be met, and the purported value of the CVRs,” Compl. ¶ 8: (1) statements made prior to the Merger (and thus before the CVRs were issued) in the February 22, 2019 Joint Proxy filed with the SEC, see id. ¶¶ 156-65, and a November 7, 2019 Guggenheim Partners analyst report about the Merger, see id. ¶¶ 166-67; [3] and (2) statements made after the Merger (and thus during the lifetime of the CVRs) in presentations, press releases, earnings calls, and SEC filings between December 8, 2019, and November 16, 2020, see Compl. ¶¶ 169-207. Plaintiffs’ claims are all premised on the same theory: that, “all [the] while,” Defendants “secretly slow-rolled the Liso-cel approval process so [BMS] could avoid the $6.4 billion CVR payout.” Pls.’ Opp’n 3.
LEGAL STANDARD
In reviewing a motion to dismiss pursuant to Rule 12(b)(6), a court must accept the
factual allegations set forth in the complaint as true and draw all reasonable inferences in favor
of the plaintiff.
See Giunta v. Dingman
,
DISCUSSION
As noted above, Plaintiffs bring claims under both the Exchange Act and the Securities Act. Defendants advance various arguments in support of dismissal of these claims, but the Court need only and does only address a few. First, the Court finds that Plaintiffs’ claim under Section 10(b) of the Exchange Act and Rule 10b-5 fail because the Complaint does not adequately allege scienter. Second, the Court concludes that Plaintiffs’ claims under the Securities Act, as well as their claims under Section 14(a) of the Exchange Act and Rule 14a-9, are shielded by the safe harbor provisions of the Private Securities Litigation Reform Act (the “PSLRA”), 15 U.S.C. § 77z-2(c) (Securities Act safe harbor); id. § 78u-5(c) (Exchange Act safe harbor). In the absence of a “primary” violation, it follows that Plaintiffs’ “controlling person” claims also fail. The Court will address each of these defects in turn.
A. Section 10(b) and Rule 10b-5 Claim
First, Plaintiffs bring a claim under Section 10(b) of the Exchange Act and Rule 10b-5
against BMS and the Executive Defendants in connection with their alleged post-Merger
misstatements.
See
Compl. ¶¶ 243-47. To state a claim under these provisions, a plaintiff must
allege “(1) a material misrepresentation or omission by the defendant; (2) scienter; (3) a
connection between the misrepresentation or omission and the purchase or sale of a security;
(4) reliance upon the misrepresentation or omission; (5) economic loss; and (6) loss causation.”
Matrixx Initiatives, Inc. v. Siracusano
,
Significantly, the PSLRA also requires that a plaintiff plead scienter — that is, the
defendant’s “intention to deceive, manipulate, or defraud” — with particularity.
Tellabs, Inc. v.
Makor Issues & Rts., Ltd.
,
In this Circuit, a plaintiff may satisfy the scienter pleading requirement in either of two
ways: “by alleging facts (1) showing that the defendants had both motive and opportunity to
commit the fraud or (2) constituting strong circumstantial evidence of conscious misbehavior or
recklessness.”
ATSI Commc’ns
,
Measured against these standards, Plaintiffs’ allegations of scienter fall short.
1. Motive and Opportunity
First, Plaintiffs’ arguments with respect to the motive-and-opportunity prong of the
scienter test fall short because they fail to allege that any of the Executive Defendants “benefitted
in some concrete and personal way from the purported fraud.”
ECA
,
Plaintiffs also argue that the Executive Defendants were motivated by the potential
“increases in the value of their millions of dollars’ worth of [BMS] common stock,” Pls.’ Opp’n
19;
see also
Compl. ¶¶ 151, 221, if BMS did not have to pay out the CVRs. But the
compensation packages at issue were announced
months
after the Merger and after the CVRs
were issued.
Compare
Compl. ¶ 95,
with id.
¶ 143. Moreover, “maintain[ing] a high stock price
in order to increase executive compensation” is a paradigmatic objective “generally possessed by
most corporate directors and insiders” and thus does not suffice.
S. Cherry St., LLC
, 573 F.3d at
109;
Kalnit
,
Finally, Plaintiffs point to the “atypical all-or-nothing CVR payout structure” and the fact
that BMS “refus[ed] to buy back any CVRs on the open market . . . [when] the CVRs were
trading well below the $9 payout.” Pls.’ Opp’n 18. But Plaintiffs do not allege that the merger
agreement between BMS and Celgene (which contained the CVR payout structure) was not
negotiated at arms-length or otherwise fraudulently induced. Instead, the parties to the
agreement, and their shareholders, knowingly agreed to the CVR payout structure. Compl.
¶¶ 87, 89. (Needless to say, Plaintiffs also had notice of the allegedly “atypical” payout structure
when they chose to keep or acquire the CVRs.) Meanwhile, Plaintiffs’ argument that BMS’s
refusal to buy back CVRs on the open market is indicative of scienter is unpersuasive. For one
thing, there are alternative explanations for the refusal that are arguably more “cogent” and
“compelling” than the inference Plaintiffs urge: that BMS was worried about the appearance of
impropriety given the asymmetrical information balance between the company and the CVR
holders,
see
ECF No. 100 (“Defs.’ Mem.”), at 32 n.15; and that BMS, even without the plot that
Plaintiffs allege, believed that the risks of buying back the CVRs outweighed any potential
benefits.
[5]
For another, Plaintiffs do not cite, and the Court has not found, any authority
supporting Plaintiffs’ argument — while there is authority rejecting it.
Tyler v. Liz
Claiborne, Inc.
,
Plaintiffs’ argument as to conscious misbehavior or recklessness is premised on BMS
having allegedly made ten missteps during the Liso-cel approval process, including delays in
filing and supplementing information with the FDA and not adequately preparing the two Liso-
cel manufacturing facilities for their inspections.
See
Pls.’ Opp’n 11-13. “[I]t is simply
implausible,” Plaintiffs contend, “that these ten events all happened in such a way as to delay the
FDA approval of Liso-cel just enough to save [BMS] $6.4 billion, accidentally.” Pls.’ Opp’n 13
(emphasis omitted). But that contention is a strawman argument. The relevant issue is not
whether the alleged missteps occurred or even whether they suggest a deliberate plan to miss the
Milestone Deadline for Lis-cel. Instead, the relevant question is whether the allegations in the
Complaint support an inference that the Executive Defendants
knew
(or should have known) of
the alleged missteps. They do not. In fact, Plaintiffs do not identify even
one
instance in which
an Executive Defendant is alleged to have knowledge of one of the purported missteps. ,
Defs.’ Mem. 34 (“There is no allegation that
any
of the defendants was aware of the alleged
operational issues at [the manufacturing facilities].”);
see also
Compl. ¶ 112 (explaining that
BMS “knew or should have known” of the alleged issues at the manufacturing facilities but
failing to attribute this knowledge to any Executive Defendant). All Plaintiffs can point to is a
single sentence in the Guggenheim Partners analyst report stating that “[BMS] Management
emphasized [to analysts at Guggenheim Partners] several points, including [that] oversight of the
CVR is a board-level responsibility.”
E.g.
, Compl. ¶ 92 (emphasis omitted);
see
Pls.’ Opp’n 20.
But “generalized allegations about . . . management [that do] not implicat[e] any of the named
Defendants . . . are insufficient to support an inference of scienter.”
City of Omaha Police &
Fire Ret. Sys.
,
Plaintiffs’ reliance on the opinions of an “FDA Biologics Expert,”
see, e.g.
, Compl.
¶¶ 20, 96, 100, 116;
see also id.
¶ 4 & n.1 (describing the FDA Biologics Expert), and
information from eight confidential witnesses,
see, e.g.
,
id.
¶¶ 101, 106, 120, 121, 123;
see also
id.
app. A (describing the confidential witnesses), does not get them across the line either.
[7]
The
confidential witnesses shed no light on the scienter of the Executive Defendants; indeed, none of
them are alleged to have ever interacted with any Executive Defendant regarding Liso-cel.
See
Long Miao v. Fanhua, Inc.
,
Finally, Plaintiffs rely on the assertion that FDA approval for the Target Drugs was
essential to BMS.
See
Pls.’ Opp’n 20-22. At bottom, that argument sounds in the “core
operations doctrine,” which “permits an inference that a company and its senior executives have
knowledge of information concerning the ‘core operations’ of a business” and, by extension,
knew or should have known whether statements concerning such “core operations” were false or
misleading.
Hensley v. IEC Elecs. Corp.
, No. 13-CV-4507 (JMF),
In any event, even if a plaintiff is able to make a showing of strong circumstantial
evidence, a court “must [then] ask . . . ‘[W]ould a reasonable person deem the inference of
scienter at least as strong as any opposing inference?’”
ECA
,
For the foregoing reasons, the Court concludes that Plaintiffs’ allegations fall short of
establishing that the Executive Defendants acted with the requisite scienter. The Court reaches
the same conclusion with respect to BMS itself. It is true that allegations of corporate scienter
may be sufficient even when a plaintiff is unable to specify individuals who knew of the facts
concealed.
Teamsters Loc. 445 Freight Div. Pension Fund v. Dynex Cap. Inc.
, 531
F.3d 190, 195 (2d Cir. 2008) (“[I]t is possible to raise the required inference with regard to a
corporate defendant without doing so with regard to a specific individual defendant.”). But here,
the Complaint “fail[s] to ‘create a strong inference either (1) that someone whose intent could be
imputed to [BMS] acted with the requisite scienter or (2) that the [alleged misstatements] would
have been approved by corporate officials sufficiently knowledgeable about [BMS] to know that
those statements were misleading.’”
Town of Davie Police Officers Ret. Sys. v. City of N. Mia.
Beach Police Officers’ & Firefighters’ Ret. Plan
, No. 21-909-CV,
Accordingly, Plaintiffs’ Section 10(b) and Rule 10b-5 claim must be and is dismissed for failure to adequately allege scienter.
B. Securities Act Claims
Plaintiffs’ primary Securities Act claims are brought against BMS, the Board Defendants,
the Former Executive Defendants, and Caforio under Sections 11 and 12(a)(2) of the Act.
See
Compl. ¶¶ 262-82. Section 11 provides that any signatory to a registration statement, director of
the issuer, or underwriter, may be held liable to purchasers of registered securities if the
registration statement is materially misleading.
See Tongue v. Sanofi
,
Significantly, the PSLRA contains a “safe harbor” that shields forward-looking
statements from liability under the Securities Act.
See
15 U.S.C. § 77z-2.
[8]
Under the safe
harbor provision, a “forward-looking statement” is defined to include “a statement containing a
projection of revenues . . . or other financial items,” “a statement of the plans and objectives of
management for future operations,” or “a statement of future economic performance.” §§ 77z-2(i)(1)(A)-(C);
see, e.g.
,
In re Barrick Gold Corp. Sec. Litig.
,
First, the alleged misstatements in the Joint Proxy are plainly forward-looking within the meaning of the PSLRA. For example, statements such as
• “Celgene’s key late-stage product candidates, which are expected to launch in 2019 and 2020 . . . ,” Joint Proxy 20, 82 (emphasis added); see also Compl. ¶ 158, • “[BMS] management provided an estimate of the probability of achieving the three FDA approvals . . . ,” Joint Proxy 157 (emphasis added); see also Compl. ¶ 158, • “Each CVR represents the right to receive a one-time cash payment . . . if the [FDA] . . . approves [the Target Drugs by the Milestone Deadlines],” Joint Proxy 4 (emphasis added); see also Compl. ¶ 160, and
• “[BMS]
has agreed to use
‘diligent efforts’ . . . to achieve the CVR milestone.” Joint
Proxy 52 (emphasis added);
see also id.
at 219; Compl. ¶ 161,
all concern either “future economic performance” or “the plans and objectives of management
for future operations,” 15 U.S.C. §§ 77z-2(i)(1)(B)-(C). Moreover, courts in this District have
consistently held that “statements about FDA approval” — many of statements at issue here —
“are classically forward-looking” because “they address what defendants expect to occur in the
future.”
In re Sanofi Sec. Litig.
,
Plaintiffs’ contention, made in passing, that the alleged misstatements are not forward-
looking because they “relate to then-existing facts and conditions,” Pls.’ Opp’n 31, can be
swiftly rejected. Plaintiffs’ sole contemporaneous “fact” is that Defendants, at the time the Joint
Proxy was issued, never intended for the FDA to approve Liso-cel by the Milestone Deadline.
Id.
But as Defendants argue in their reply brief, this argument “confuses the question of whether
Plaintiffs cannot bring a claim based on the report under the Securities Act.
In re
Morgan Stanley Info. Fund Sec. Litig.
,
a statement is forward-looking with the applicability of the safe harbor’s ‘actual knowledge’
prong.” Defs.’ Reply 2;
see, e.g.
,
In re NovaGold Res. Inc. Sec. Litig.
,
Second, the statements at issue are “identified and accompanied by meaningful
cautionary language.”
Slayton
,
Plaintiffs’ counterarguments are unpersuasive. They principally contend that the cautionary language was not meaningful because Defendants knew that the statements were false when they were made. See Pls.’ Opp’n 32 (“Defendants offer a long list of instances of purportedly meaningful cautionary language, but none of these [sic] indicate Defendants planned to deliberately delay the FDA application process, nor do they convey that the then-actual value of the CVRs was $0.”). In doing so, however, Plaintiffs once again conflate distinct provisions of the PSLRA’s safe harbor — this time, the actual knowledge and meaningful cautionary language prongs of the statute. It is well established that “[ e ] ither cautionary language or an absence of knowledge is alone sufficient to trigger the safe harbor.” Gray , 454 F. Supp. 3d at 395 (emphasis added). “If the Court were to accept” Plaintiffs’ argument, “an allegation of actual knowledge of falsity would suffice to deprive a forward-looking statement of the protections of safe harbor even if there were meaningful cautionary language otherwise. Such a result would be contrary to the disjunctive nature of the safe harbor elements.” at 394.
In sum, Plaintiffs fail to allege any misstatements that are actionable under the Securities Act. Thus, their Section 11 and 12(a)(2) claims must be and are dismissed.
C. Remaining Claims
Finally, Plaintiffs bring claims under Section 14(a) of the Exchange Act and Rule 14a-9,
as well as “controlling person” claims under Section 20(a) of the Exchange Act and Section 15
of the Securities Act. Compl. ¶¶ 248-71, 283-91. To the extent that Plaintiffs’ Section 14(a) and
Rule 14a-9 claims are based on the Joint Proxy, they fail for the reasons that doomed their
Securities Act claims, because, as noted above, the PSLRA contains a safe harbor provision that
applies to claims under the Exchange Act. To the extent that the Section 14(a) and Rule 14a-9
claims are based on the Guggenheim Partners analyst report, they fail because the report is
plainly not a “proxy statement.”
See Bond Opportunity Fund v. Unilab Corp.
,
CONCLUSION
For the foregoing reasons, Defendants’ motion to dismiss is GRANTED and Plaintiffs’
claims are dismissed. That leaves only the question of whether Plaintiffs should be granted leave
to amend the Complaint. Leave to amend a complaint should be freely given “when justice so
requires,” Fed. R. Civ. P. 15(a)(2), and complaints dismissed under the PSLRA “are almost
always dismissed with leave to amend,”
Pasternack v. Shrader
,
SO ORDERED. Dated: March 1, 2023 __________________________________
New York, New York JESSE M. FURMAN United States District Judge
Notes
[1] The individual Defendants are: Chief Executive Officer Giovanni Caforio, Chief Financial Officer David V. Elkins, and Chief Medical Officer Samit Hirawat (together, the “Executive Defendants”); Lead Independent Director Vicki L. Sato and Directors Peter J. Arduini, Robert Bertolini, Matthew W. Emmens, Michael Grobstein, Alan J. Lacy, Dinesh C. Paliwal, Theodore R. Samuels, Gerald L. Storch, and Karen H. Vousden (together, the “Board Defendants”); and former Chief Financial Officer Charles Bancroft and former Principal Accounting Officer Karen M. Santiago (together, the “Former Executive Defendants”).
[2] This is not the only case that arose from expiration of the BMS CVRs. In a related case, also pending before this Court, the CVR Agreement trustee sues BMS for breach of contract by failing to use “diligent efforts” to meet the Milestone Deadlines. See UMB Bank, N.A. v. Bristol- Myers Squibb Co. , No. 21-CV-4897 (JMF) (S.D.N.Y. filed June 3, 2021). And in another case, removed from state court to this Court and then remanded, a CVR holder sued BMS for making false and misleading statements in a Registration Statement filed with the SEC in connection with the CVRs. See Williams v. Bristol-Myers Squibb Co. , No. 21-CV-9998 (JMF), 2022 WL 4345564 (S.D.N.Y. Sept. 19, 2022).
[3] The Joint Proxy, filed with the SEC on February 22, 2019, was included in BMS’s Form S-4 Registration Statement, which was filed on February 1, 2019, and later amended on February 20, 2019. See Bristol-Myers Squibb Co., Registration Statement (Form S-4) (Feb. 1, 2019), available at https://www.sec.gov/Archives/edgar/data/14272/000114036119002181/s002620x1_ s4.htm; Bristol-Myers Squibb Co., Amendment No. 2 to the Registration Statement (Form S- 4/A) (Feb. 20, 2019), available at https://www.sec.gov/Archives/edgar/data/14272/00011403611 9003503/s002620x3_s4a.htm. For convenience, the Court refers to the Joint Proxy and Registration Statement together simply as “the Joint Proxy.”
[4] Like other courts, the court in Salix Pharmaceuticals considered the size of the fraud in connection with its analysis of the conscious misbehavior or recklessness theory of scienter, not motive and opportunity. Plaintiffs here, however, argue the point in relation to motive.
[5] When the CVRs were issued, BMS reported that the probability of the Milestone Deadlines being met was only 45% — which is to say that, at their inception , the probability of the CVRs expiring worthless was put at 55%. Joint Proxy 157.
[6] Plaintiffs argue that their “alleg[ations] that [BMS’s] top management repeatedly made false or misleading statements” is also probative of scienter. Pls.’ Opp’n 20-21. This circular argument is without merit. In re Lions Gate Ent. Corp. Sec. Litig. , 165 F. Supp. 3d at 24 (“[A]lleging that [statements] were incomplete or that they omitted material information[] is not enough to plead scienter based on conscious misbehavior or recklessness.”).
[7] The parties spill much ink on whether or to what extent the Court may consider the FDA Biologics Expert’s opinions or information from the confidential witnesses. Compare Defs.’ Mem. 17, and ECF No. 106 (“Defs.’ Reply”), at 13-14, with Pls.’ Opp’n 14-16 & n.11. The Court need not and does not resolve these disputes as it would not affect the Court’s analysis.
[8] The PSLRA contains a safe harbor applicable to claims under the Exchange Act that is
substantively identical.
Compare
15 U.S.C. § 77z-2(c) (Securities Act),
with id.
§ 78u-5(c)
(Exchange Act). In light of that, courts frequently consider the two safe harbors together.
See,
e.g. In re SunEdison, Inc. Sec. Litig.
,
[9] In their Complaint, Plaintiffs also rest their Securities Act claims on an analyst report
prepared by Guggenheim Partners.
See
Compl. ¶¶ 166-67. But as Defendants note, and
Plaintiffs do not dispute, an analyst report is neither a “registration statement” nor a
“prospectus.” Defs.’ Mem. 21 n.9; Defs.’ Reply 6. Nor is it an “oral communication[]” that
“relate[s] to a prospectus.”
Gustafson v. Alloyd Co.
,