In Re Columbia Laboratories, Inc., Securities Litigation , 602 F. App'x 80 ( 2015 )

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 13-4777
_____________
In re: COLUMBIA LABORATORIES, INC., SECURITIES LITIGATION
PAUL SOLL; JERRY STERN IRA;
JERRY STERN FAMILY TRUST DATED 5/11/94,
Appellants
_______________
On Appeal from the United States District Court
for the District of New Jersey
(D.C. No. 2-12-cv-00614)
District Judge: Honorable Faith S. Hochberg
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Argued: December 9, 2014
Before: FUENTES, FISHER, and KRAUSE, Circuit Judge
(Filed: March 10, 2015)
_______________
Bruce D. Greenberg, Esquire
Jeffrey A. Shooman, Esquire
Lite, De Palma, Greenberg
Two Gateway Center
12th Floor
Newark, NJ 07102
Jeremy A. Lieberman, Esquire (Argued)
Tamar A. Weinrib, Esquire
Pomerantz, Grossman, Hufford, Dahlstrom & Gross
600 Third Avenue
20th Floor
New York, NY 10016
Counsel for Appellants
C. Thomas Brown, Esquire
John D. Donovan, Jr., Esquire (Argued)
Ropes & Gray
800 Boylston Street
Prudential Tower
Boston, MA 02199
Counsel for Appellees, Columbia Laboratories, Inc.; Frank C. Condella, Jr., and
Lawrence A. Gyenes
Seth Aronson, Esquire
O’Melveny & Myers
400 South Hope Street
Room 1417
Los Angeles, CA 90071
Andrew J. Frackman, Esquire
Abby F. Rudzin, Esquire (Argued)
O’Melveny & Myers
7 Times Square Tower, 33rd Floor
New York, NY 10036
Counsel for Appellees, Watson Pharmaceuticals, Inc., G. Frederick Wilkinson, R.
Todd Joyce, and Paul M. Bisaro
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OPINION*
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KRAUSE, Circuit Judge
This is an appeal from a final judgment of the United States District Court for the
District of New Jersey dismissing a putative class action securities complaint for failing
*
This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7
does not constitute binding precedent.
2
to allege facts sufficient to plead scienter. For the reasons set forth below, we will
affirm.1
The Appellants, a putative class of investors, claimed that Columbia Laboratories,
Inc. (“Columbia”), Watson Pharmaceuticals, Inc. (“Watson”), and various Columbia and
Watson executives violated sections 10(b) and 20(a) of the Securities Exchange Act of
19342 and SEC Rule 10b-53 when they knowingly or recklessly misled investors about
the results of a clinical trial study (“Study 302”). Specifically, Appellants alleged in their
complaint that Columbia and Watson’s statements that Study 302 achieved “statistical
significance” and “topline results” were misleading because these parties either knew or
recklessly disregarded that the Food and Drug Administration (“FDA”) required Study
302: (1) to achieve a p-value of 0.01; (2) to attain statistical significance for the United
States subgroup alone; and (3) not to be driven by anomalous results from the two foreign
testing sites. Study 302, according to Appellants, did not meet these criteria.
A plaintiff claiming securities fraud must satisfy the heightened pleading rules of
the Private Securities Litigation Reform Act (“PSLRA”).4 To sufficiently plead scienter,
1
We have jurisdiction under 28 U.S.C § 1291. We review de novo the District
Court’s decision to grant the motion to dismiss. Ballentine v. United States, 486 F.3d
806, 808 (3d Cir. 2007). Because we write for the parties, we recite only those facts
necessary to our conclusion.
2
15 U.S.C. §§ 78j(b), 78t(a).
3
17 C.F.R. § 240.10b-5.
4
Rahman v. Kid Brands, Inc., 736 F.3d 237, 241 (3d Cir. 2013).
3
the complaint must state with particularity the facts constituting the alleged violation and
giving rise to a “strong inference” that the defendants acted with the required state of
mind,5 i.e. that the defendants intended to deceive, manipulate, or defraud.6 To qualify as
strong, the inference “must be more than merely plausible or reasonable—it must be
cogent and at least as compelling as any opposing inference of nonfraudulent intent.”7
And to make this determination, a court must review the complaint in its entirety,
considering “not only inferences urged by the plaintiff . . . but also competing inferences
rationally drawn from the facts alleged.”8
Here, the facts alleged by Appellants do not create a strong inference that
Columbia and Watson even knew that the alleged benchmarks would be required by the
FDA, let alone that these parties intended to deceive, manipulate, and defraud investors
by failing to disclose that Study 302 had not reached them.9 Appellants assert that
Columbia and Watson were “fully aware” that Study 302 would be required to achieve a
p-value of 0.01.10 Their only basis for that contention, however, is that the FDA
5
15 U.S.C. § 78u-4(b)(2)(A).
6
Rahman, 736 F.3d at 241-42 (citing Tellabs, Inc. v Makor Issues & Rights, Ltd.,
551 U.S. 308, 313 (2007)).
7
Tellabs, Inc., 551 U.S. at 314.
8
Id.
9
See id. at 313.
10
J.A. 138.
4
guidelines generally require that single-trial studies achieve “[s]tatistically very
persuasive finding[s],”11 and, two years earlier, the FDA recommended that a different
Prochieve single-trial study achieve a 0.01 p-value to meet that standard.12 Appellants do
not allege that the FDA ever recommended that Study 302 itself achieve a 0.01 p-value or
instructed Columbia and Watson to rely on the p-value suggested for the earlier study.
Moreover, the FDA guidelines for single-trial studies—incorporated by reference in the
complaint—do not require a 0.01 p-value for a new drug to be approved and do not
identify any particular p-value for “statistical significance.” On the contrary, as an
example of “statistical significance,” the FDA actually describes a single-trial study that
achieved only a 0.05 p-value.13
As for the subgroup data, Appellants do not allege that the FDA ever informed
Columbia or Watson that statistical significance, or any specific p-value, would be
required for the United States subgroup, and it is clear from the materials incorporated by
reference in the complaint that the FDA imposed no such requirement.14 Nothing in the
FDA guidelines requires that clinical trials meet statistical significance for subgroups
based on geographic location. Rather, the FDA guidelines recommend that a single-trial
study be “consisten[t] across key patient subsets” because large studies may involve
11
J.A. 695.
12
J.A. 66.
13
J.A. 692-96.
14
J.A. 261; 545-46.
5
many participants that may be diverse with regard to “important covariates” unrelated to
geographic location, “such as concomitant or prior therapy, disease stage, age, gender or
race.”15
Appellants’ arguments regarding subgroup data from the foreign test sites is
similarly unavailing. Appellants point out that Study 302 did not achieve statistical
significance when the results from South Africa and Belarus were excluded, but nothing
in either the FDA guidelines or the approved Statistical Analysis Plan indicated that
statistical significance would be required when those sites were excluded.16 Nor do
Appellants allege that the FDA ever informed Columbia or Watson that Study 302 would
be required to meet statistical significance for any subgroups.
The FDA guidelines do recommend that a single study site should not be “largely
responsible” for a clinical trial study’s “favorable effect.”17 However, there are no
allegations that the study sites in either South Africa or Belarus were, on their own,
largely responsible for Study 302’s favorable effect, and the documents referenced in the
complaint indicate that Study 302 achieved a favorable effect even when the allegedly
“suspect” results from the test sites in South Africa and Belarus were excluded.18
Moreover, the FDA’s concerns with the foreign test sites arose after Study 302 had been
15
J.A. 693.
16
J.A. 195-96; 692-96.
17
J.A. 693.
18
J.A. 381.
6
conducted.19 Appellants’ allegations about a requirement of achieving statistical
significance for the United States subgroup, or excluding the test sites in South Africa
and Belarus, thus do not support an inference of scienter.20
Finally, Appellants frame the issue in terms of FDA “requirements.” As the FDA
representative at the Advisory Panel explained, however, “[W]e don’t necessarily dictate.
We tell them our advice. It’s guidance. It’s not rules or regulations. It’s just
guidance.”21 Likewise, while Appellants point out the FDA guidelines identify
“statistical significance” among the five “characteristics” that may inform single-trial
studies, the guidelines then caution that none of the five characteristics is “necessarily
determinative.” Instead, “the presence of one or more in a study” can contribute to a
conclusion that a single-trial study would be sufficient to support an effectiveness
claim.22 Thus, these alleged benchmarks were, at the very most, FDA recommendations
and were not, as Appellants argue, either required or dispositive of Study 302’s success.
In sum, Appellants’ allegations do not raise a strong inference of scienter. Rather,
given the competing inferences rationally drawn from the complaint—including the
publication of Study 302 in a professional journal, the FDA’s decision to convene an
Advisory Panel to analyze Study 302, four members of the Advisory Panel voting to
19
See, e.g., J.A. 135-36; 294; 491-92.
20
Rahman, 736 F.3d at 241-42.
21
J.A. 408.
22
J.A. 693.
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approve Prochieve based on Study 302, and Columbia and Watson’s continued
investment in Study 302 and Prochieve—the District Court properly held that the more
compelling inference is that Columbia and Watson did not act with an intent to deceive,
manipulate, or defraud investors. Accordingly, we will affirm the judgment of the
District Court.
8