Pitman v. Immunovant, Inc.

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

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THERESA PITMAN, individually and on

behalf of all others similarly

situated,

Plaintiff,

-against-

IMMUNOVANT, INC. f/k/a HEALTH SCIENCES

ACQUISITIONS CORPORATION, RODERICK MEMORANDUM AND ORDER

WONG, PETER SALZMANN, FRANK M. TORTI, 21-cv-918 (KAM)(VMS)

ANDREW FROMKIN, DOUGLAS HUGHES, GEORGE

MIGAUSKY, ATUL PANDE, ERIC VENKER, SVB

LEERINK LLC, LIFESCI CAPITAL LLC,

CHARDAN CAPITAL MARKETS LLC, GUGGENHEIM

SECURITIES, LLC, ROBERT W. BAIRD & CO.

INCORPORATED, and ROIVANT SCIENCES

LTD.,

Defendants.

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MATSUMOTO, United States District Judge:

On February 19, 2021, Plaintiff Theresa Pitman (“Pitman”)

filed a class action suit on behalf of herself and other

purchasers of the securities of Defendant Immunovant, Inc.

f/k/a/ Health Sciences Acquisition Corporation (“Immunovant”)

alleging several violations of federal securities laws by

Defendant Immunovant; Immunovant’s Chief Executive Officer,

Peter Salzman (“Salzman”), Immunovant’s Chief Financial Officer,

Pamela Yanchik Connealy (“Connealy”), and Immunovant’s former

President and Chief Executive Officer, Roderick Wong (“Wong”).

(ECF No. 1, Complaint, “Compl.”)

In the operative Third Amended Complaint1, Lead Plaintiff

SEPTA Pension Plan Master Trust (“Plaintiff” or “SEPTA”)2 alleges

that Defendants3 made material misstatements and omissions

regarding the development, testing, and marketing of IMVT-1401,

a drug that was developed to treat autoimmune diseases (the

“Drug”), including with respect to the Fall 2020 Offering

Documents.4 (ECF No. 82, Third Amended Complaint, “TAC”.)

1 In its objections, Plaintiff refers to the operative pleading as the Second

Amended Complaint and in their responses, Defendants follow suit. It is not

clear to this Court why the parties would refer to the pleading as such. As

noted in the R&R, Pittman filed a Complaint on February 19, 2021 (ECF No. 1);

Plaintiff SEPTA Pension Plan Master Trust (“SEPTA” or “Plaintiff”) filed an

Amended Complaint on February 1, 2022, following Magistrate Judge Scanlon’s

appointment of SEPTA as lead Plaintiff (ECF No. 29); Plaintiff filed a Second

Amended Complaint on March 15, 2022 (ECF No. 44); and on March 17, 2023,

Plaintiff filed the operative Third Amended Complaint. (ECF No. 82.) The

fact that Plaintiff refers to its pleading as the “Second Amended Complaint”

does not make it a Second Amended Complaint. The Court has liberally granted

Plaintiff’ leave to amend the Complaint on three occasions. The operative

pleading is the Third Amended Complaint. (ECF No. 82.)

2 By the time the Third Amended Complaint was filed, Magistrate Judge Scanlon

had resolved competing motions by Immunovant investors Bucks County Employees

Retirement System, Erie County Employees’ Retirement System, and SEPTA

Pension Plan Master Trust (“SEPTA”) to be appointed as lead Plaintiff and to

have their respective counsel appointed as lead counsel for the class. The

Court granted SEPTA’s motion on December 29, 2021 and SEPTA was appointed

lead Plaintiff. (ECF No. 18.)

3 The Third Amended Complaint also included additional parties as named

defendants, including the Chairperson of the Immunovant Board of Directors,

Frank M. Torti (“Torti”) and members of the Immunovant Board of Directors,

Andrew Fromkin (“Fromkin”), Douglas Hughes (“Hughes”), George Migausky

(“Migausky”), Atul Pande (“Pande”), and Eric Venker (“Venker”) (together,

with Connealy, Wong, and Salzman, the “Individual Defendants” and all

together with Immunovant, the “Immunovant Defendants”). The Third Amended

Complaint also named as additional defendants SVB Securities LLC f/k/a SVB

Leerink LLC, LifeSci Capital LLC, Chardan Capital Markets LLC, Guggenheim

Securities, LLC, and Robert W. Baird & Co. Inc. (together, the “Underwriter

Defendants”). Finally, the Third Amended Complaint included Roivant Sciences

Ltd. (“Roivant”) as a defendant. On May 17, 2022, Connealy was dismissed by

stipulation of dismissal. (ECF No. 46.)

4 All capitalized terms not explicitly defined herein correspond to the

definitions set forth in Magistrate Judge Scanlon’s R&R.

Plaintiff further alleges that Defendants’ material

misstatements and omissions had the effect of inflating the

share price of Immunovant securities, which conferred benefits

upon Defendants at Plaintiff’s expense. Plaintiff contends that

Defendants’ conduct constitutes violations of Sections 11,

12(a)(2), and 15 of the Securities Act of 1933, 15 U.S.C. § 77a, et

seq. (“Securities Act”), and Sections 10(b) and 20(a) of the

Securities Exchange Act of 1934, 15 U.S.C. § 78a, et seq.

(“Exchange Act”), as amended by the Private Securities Litigation

Reform Act of 1995, 15 U.S.C. § 78u-4, et eq. (“PSLRA”) and Rule

10b-5 promulgated thereunder, 17 C.F.R. §240.10b-5 (“Rule 10b-5”).

(TAC ¶ 1.)

On June 30, 2023, the Immunovant Defendants moved to

dismiss the Third Amended Complaint pursuant to Federal Rule of

Civil Procedure 12(b)(6). (ECF No. 87, Immunovant Defendants’

Motion to Dismiss, “Immunovant Def. Mot.”) The Underwriter

Defendants also moved on June 30, 2023 to dismiss the Third

Amended Complaint pursuant to Fed. R. Civ. P. 12(b)(6). (ECF

No. 90, Underwriter Defendants’ Motion to Dismiss, “Underwriter

Def. Mot.”) The remaining Defendant, Riovant, moved to dismiss

the Third Amended Complaint pursuant to Fed. R. Civ. P. 12(b)(6)

on June 30, 2023 as well. (ECF No. 92, Defendant Riovant’s

Motion to Dismiss, “Riovant Def. Mot.”) Plaintiff opposed the

three motions to dismiss the Third Amended Complaint. (ECF No.

90, Plaintiff’s Opposition, “Ptf. Opp.”) By order dated July 5,

2023, this Court referred each of the three motions to dismiss

the Third Amended Complaint filed by the Immunovant Defendants,

the Underwriter Defendants, and Riovant respectively to

Magistrate Judge Vera M. Scanlon for a report and recommendation

pursuant to 28 U.S.C. § 636(b).

Presently before the Court is the Report and Recommendation

issued on February 25, 2024 by Magistrate Judge Scanlon,

recommending that this Court grant all three motions to dismiss

the Third Amended Complaint in it is entirety. (ECF No. 103,

“R&R” at 46.) The R&R recommends that leave to replead be

denied, given the four prior opportunities for Plaintiff to

state viable claims. (Id.) The R&R described “the overarching

issue pertaining to both the Securities Act and the Exchange Act

claims presented by Plaintiff’s allegations” as follows:

[W]hether Defendants’ challenged statements were

material misrepresentations or omissions because

the clinical trials for the Drug should have been

designed differently, such that cholesterol levels

should have been monitored in earlier phases of the

trials, and because the decision not to monitor

cholesterol in earlier phases of the trials should

be haven disclosed to investors, in view of, in

Plaintiff’s view, the clear link between the Drug

and decreased albumin levels . . . and elevated

cholesterol levels. The inquiry underlying both

related allegations is whether, together, the pre-

clinical monkey studies and the available

scientific literature, the scientific literature

indicating that thyroid eye disease affects

cholesterol level and the fact that [other

companies] monitored cholesterol levels when

developing similar compounds, demonstrate the

scientific fact that increased cholesterol levels

were a key potential risk of the Drug.

(R&R at 12-13.)

The R&R found that in addition to faulting the design of

Defendants’ clinical trials, “Plaintiff’s allegations against

Defendants are founded on a fundamental disagreement as to the

interpretation of scientific data,” including data from the

Drug’s clinical trials, and other scientific literature. (R&R

at 16.) In accordance with Second Circuit law, Magistrate Judge

Scanlon concluded that competing interpretations or analyses of

scientific data are not actionable under federal securities law

and, therefore, that Plaintiff had failed to allege adequate

facts to support a claim that Defendants’ statements constitute

material misrepresentations or omissions and failed to plead

scienter with respect to the Exchange Act claims. (R&R at 16.)

The R&R recommends that each of the Securities Act and Exchange

Act claims be dismissed on this basis.

The R&R also recommends that the Exchange Act claims be

dismissed because Plaintiff failed to allege adequate facts

showing scienter. Because the R&R recommends dismissal of the

primary violations alleged in connection with Section 11 and

Section 12(a)(2) of the Securities Act, the R&R also recommends

that any allegation of control person liability under Section 15

of the Securities Act be dismissed. Similarly, because the R&R

recommends dismissal of the primary violations alleged in

connection with Section 10 of the Exchange Act also and Rule

10b-5, the R&R also recommends that any allegation of control

person liability under Section 20(a) of the Exchange Act be

dismissed. Finally, the R&R recommended that “Plaintiff be

denied leave to replead” because “the significant pleading

deficiencies . . . are inextricably intertwined with Plaintiff’s

theory of the case and are therefore not curable.” (R&R at 46.)

The R&R also noted that Plaintiff was granted three

opportunities to amend the pleadings and persistently failed to

cure the defects of the original Complaint. (R&R at 46.)

Objections to the R&R were timely filed by Plaintiff on

March 11, 2024 (ECF No. 105, Plaintiff’s Objections, “Ptf.

Obj.”) and Defendants jointly responded to Plaintiff’s

Objections on March 25, 2024. (ECF No. 100, “Ptf. Resp.”) No

other party has filed any objections to Magistrate Judge

Scanlon’s R&R. For the reasons stated below, upon de novo

review and clear error review, the Court respectfully overrules

Plaintiff’s objections, and adopts and affirms Magistrate Judge

Scanlon’s meticulous and well-reasoned R&R in its entirety.

BACKGROUND

The Court assumes the parties’ familiarity with the

extensive facts thoroughly recounted in the R&R (R&R at 3-11),

and in Magistrate Judge Scanlon’s May 5, 2023 Memorandum and

Order. See generally (ECF No. 80.) The Court has reviewed the

facts de novo and adopts the detailed facts from the R&R and the

May 5, 2023 Memorandum and Order herein.

LEGAL STANDARD

In considering the recommendations of a Magistrate Judge,

as outlined in an R&R, the Court may “accept, reject, or modify

the recommended disposition; receive further evidence; or return

the matter to the magistrate judge with instructions.” Fed. R.

Civ. P. 72(b)(3); see also 28 U.S.C. § 636(b)(1). When a party

makes a timely objection to an R&R, the Court must review de

novo those recommendations in the R&R to which the party

objects. See Fed. R. Civ. P. 72(b)(3); United States v. Male

Juvenile, 121 F.3d 34, 38 (2d Cir. 1997). However, even on de

novo review, “a district [court] judge will [] ordinarily refuse

to consider arguments, case law and/or evidentiary material

which could have been, but [were] not, presented to the

magistrate judge in the first instance.” Kennedy v. Adamo, No.

02-cv-1776 (ENV), 2006 WL 3704784, at *1 (E.D.N.Y. Sep. 1,

2006), aff’d 323 F. App’x 34 (2d Cir. 2009) (quoting Haynes v.

Quality Markets, No. 02-cv-250 (KES), 2003 WL 23610575, at *3

(E.D.N.Y. Sep. 22, 2003).

As to the portions of the R&R to which no party objects,

the Court “need only satisfy itself that there is no clear error

on the face of the record.” Galvez v. Aspen Corp., 967 F. Supp.

2d 615, 617 (E.D.N.Y. 2013) (internal quotation marks and

citations omitted). If “the [objecting] party makes only

frivolous, conclusory or general objections, or simply

reiterates [] original arguments, the Court reviews the [R&R]

only for clear error.” Velez v. DNF Assocs., LLC, No. 19-CV-

11138 (GHW), 2020 WL 6946513, at *2 (S.D.N.Y. Nov. 25, 2020)

(internal citations omitted). Furthermore, “where the

objections are merely perfunctory responses, argued in an

attempt to engage the district court in a rehashing of the same

arguments set forth in the original petition, [district] courts

should review [the R&R] for clear error” only. Chen v. New

Trend Apparel, Inc., 8 F. Supp. 3d 406, 416 (S.D.N.Y. 2014)

(quoting Silva v. Peninsular Hotel, 509 F. Supp. 2d 364, 366

(S.D.N.Y. 2007)).

DISCUSSION

The Court finds that Plaintiff’s objections, “in toto, are

of a conclusory, and general nature thus triggering only clear

error review.” Kamden-Ouaffo v. Balchem Corp., No. 17-cv-2180

(PMH), 2021 WL 1101126, at *2 (S.D.N.Y. Mar. 23, 2021).

Plaintiff’s objections either largely restate Plaintiff’s

previously articulated arguments or make broad, perfunctory

allegations that the R&R is wrong. Indeed, several of

Plaintiff’s objections are no more than conclusory statements

that the recommendations in the R&R are wrong because

Plaintiff’s allegations are right. See e.g., (Ptf. Obj. at 19)

(Plaintiff “objects to the [] finding in the R&R that the

statements in the [Fall] 2020 Offering Documents were not

misleading because the [TAC] alleges facts . . . that those

statement were misleading.”) Objections of this nature trigger

the Court’s review of the R&R for clear error. See Barratt v.

Joie, No. 96-CV-0324(LTS), 2002 WL 335014, at *1 (S.D.N.Y. Mar.

4, 2002) (“[O]bjections stating the magistrate judge’s decisions

are wrong and unjust, and restating relief sought and facts upon

which complaint grounded, are conclusory”); Amaya v. Ballyshear

LLC, No. 17-cv-1596(JS), 2023 WL 2596031, at *3 (E.D.N.Y. Mar.

22, 2023) (“[W]here a party ‘makes only conclusory or general

objections, or simply reiterates the original arguments, the

Court reviews the [R&R] only for clear error.’”) (internal

citation omitted). Nevertheless, the Court applies both clear

error and de novo review to Plaintiff’s objections, and

respectfully overrules each objection in turn below.

I. Factual Inferences

Plaintiff first objects to the R&R insofar as it “fails to

draw inferences in Plaintiff’s favor, inappropriately draws

inferences in favor of Defendants, and inappropriately considers

facts not alleged in the [TAC] or properly in the record.”5

(Ptf. Obj. at 11, 22.) The Court considers this objection de

novo and overrules the objection.

A. The Summary of Overarching Issues

Plaintiff first alleges that the R&R “incorrectly describes

as an ‘overarching issue’ for both Plaintiff’s Securities Act and

Exchange Act claims whether Defendants’ statements were material

misrepresentations or omissions because the clinical trials should

have been designed differently.” (Ptf. Obj. at 12.) Plaintiff

contends that the Third Amended Complaint “does not allege how

Immunovant should have designed its clinical trials.” (Ptf. Obj.

at 12.) Plaintiff’s argument that the Third Amended Complaint

does not challenge the design of Immunovant’s clinical trials

was also raised before Magistrate Judge Scanlon in opposition to

the motions to dismiss. See (Ptf. Opp. at 64) (“This action

does not relate to a disagreement about [the] clinical trial

design.”) Because Plaintiff “simply reiterates [its] original

5 Plaintiff raises these same objections several times. First, Plaintiff

argues that the R&R “fails to draw inferences in Plaintiff’s favor,

inappropriately draws inferences in favor of Defendants, and inappropriately

considers facts not alleged in the [TAC] or properly in the record” in

connection with the R&R’s finding that Plaintiff fails to adequately allege

claims under the Securities Act. (Ptf. Obj. at 11.) Plaintiff again raises

this same objection–that the R&R “fails to draw inferences in Plaintiff’s

favor, inappropriately considers facts not properly before the Court, and

inappropriately draws inferences in Defendants’ favor” and specifically

references the identical objections “discussed [] in connection with

Plaintiff’s Securities Act claims.” (Ptf. Obj. at 21.) Because these

objections relate to the same core nucleus of facts that are applicable to

both the Securities Act claims and Exchange Act claims, the Court addresses

the substance of the objections together.

arguments,” the Court need not review this objection de novo.

Pall Corp. v. Entegris, Inc., 249 F.R.D. 48, 51 (E.D.N.Y. 2008).

In any event, upon de novo review, the Court overrules this

objection.

Plaintiff’s assertion that the Third Amended Complaint “does

not allege how Immunovant should have designed its clinical trials”

(Ptf. Obj. at 12), is difficult to reconcile with Plaintiff’s own

prior allegations in the Third Amended Complaint, including that

“Immunovant should have designed each of the phase 1 and 2

clinical trials so that each of the participants’ cholesterol

was tested and monitored.” (TAC ¶¶ 119, 304); see also (TAC ¶

91(d) (“elevated cholesterol levels . . . needed to be monitored

and assessed”); (TAC ¶ 98) (The Drug’s “clinical studies should

have monitored and assessed this risk”). The Court rejects

Plaintiff’s mistaken assertion that its pleadings did not allege

that “Defendants . . . should have designed its clinical trials

differently” because that characterization is “contradicted by

other matters asserted or relied upon . . . by [] [P]laintiff in

[] the [Third Amended Complaint].” Tsinberg v. City of New

York, 20-cv-719 (PAE), 2021 WL 1146942, at *4 (S.D.N.Y. Mar. 25,

2021).

Contradicting the allegations in the Third Amended

Complaint, Plaintiff now argues that “Immunovant was free to

design its trials as it wanted” and contends that the real focus of

the Third Amended Complaint is Defendants’ failure to “provide

complete and accurate disclosures” to investors about the decision

not to monitor patients’ cholesterol levels in early trials. See

(Ptf. Obj. at 13) (“Had Defendants simply advised investors that

they did not monitor cholesterol in the early clinical trials . . .

Plaintiff would not have alleged Defendants’ statements were

misleading.” (Ptf. Obj. At 13.) Magistrate Judge Scanlon aptly

addresses Plaintiff’s allegations regarding the disclosure of the

Drug’s clinical trial design as follows:

The Court views the overarching issue pertaining to both

the Securities Act and the Exchange Act claims presented

by Plaintiff’s allegations and, by extension, Defendants’

motions to dismiss, to be whether Defendants’ challenged

statements were material misrepresentations or omissions

because the clinical trials for the Drug should have been

designed differently, such that cholesterol levels should

have been monitored in earlier phases of the trials, and

because the decision not to monitor cholesterol in

earlier phases of the trials should have been disclosed

to investors, in view of, in Plaintiff’s view, the clear

link between the Drug and decreased albumin levels, as

well as between decreased albumin levels and elevated

cholesterol levels.

(R&R at 12-13)(emphasis added).

On de novo review, the Court finds that Plaintiff’s

objection that the R&R mischaracterizes the focus of its claims

contradicts Plaintiff’s own statements in Third Amended

Complaint. To the extent such contradictions comprise an effort

to amend the Third Amended Complaint, the Court declines to

permit further amendment of the Third Amended Complaint, as

described further below. See also Kleinman v. Elan Corp., PLC,

706 F.3d 145, 153 (2d Cir. 2013) (“[A] party may not amend

pleadings through a brief.”) Plaintiff’s attempt to distinguish

between Plaintiff’s opposition to the design of the clinical

trials, and Plaintiff’s opposition to the statements Defendants

made about the clinical trial because of Plaintiff’s opposition

to the trial design, is not supported by the law. Compare (Ptf.

Obj. at 58) (Defendants “statements were materially false

because Immunovant should have – but failed to – perform ongoing

surveillance of . . . elevated LDL and total cholesterol

levels”), with In re Keryx Biopharmaceuticals, Inc., Sec.

Litig., No. 13-cv-755 (KBK), 2014 WL 585658, at *10 (S.D.N.Y.

Feb. 14, 2014) (“[P]laintiffs assert that, given the extent of

the methodological flaws, defendants’ statements regarding the

[] results were actionable misstatements or half-truths.

Plaintiffs are incorrect; these allegations fail as a matter of

law.”). Either way, even on de novo review, Plaintiff’s

objection to Magistrate Judge Scanlon’s description of the

“overarching issue” of Plaintiff’s claims (R&R at 12), is

frivolous and is overruled. See Velez, 2020 WL 6946513, at *2

(If “‘the [objecting] party makes only frivolous, conclusory or

general objections . . . the Court [should] review[] the report

and recommendation only for clear error.’”)(internal citation

omitted).

B. Interpretation of Scientific Data

Plaintiff next objects to the R&R insofar as it

“incorrectly frames each of Plaintiff’s claims as being about a

dispute over the proper interpretation or analysis of scientific

data.” (Ptf. Obj. at 13) (citing R&R at 13.)6 By contrast,

Plaintiff insists that the Third Amended Complaint “alleges that

Defendant failed to disclose an important potential risk of [the

Drug]” and that “Defendants’ descriptions of the drug as safe

and well-tolerated were misleading.” (Ptf. Obj. at 13.)

Plaintiff alleges that these allegations constitute material

misstatements and omissions and are not simply opinion

statements, disagreements, or disputes about the proper

interpretation of scientific data.

Here too, this objection does not warrant de novo review

because it “recites the same argument[] presented to the

magistrate judge.” Emerson Electric Co. v. Holmes, 16-cv-1390

(PKC), 2020 WL 4592808, at *6 (E.D.N.Y. Aug. 11, 2020) (internal

citation omitted) (“[O]bjections that are merely perfunctory

responses argued in an attempt to engage the district court in a

6 Plaintiff makes this objection, both generally and as it relates to specific

allegations in the Third Amended Complaint, throughout its brief. See (Ptf.

Obj. at 17) (“[T]he R&R states that ‘Plaintiff’s allegations against

Defendants are founded on a fundamental disagreement as to the interpretation

of scientific data’ . . . Plaintiff objects to the R&R because it fails to

credit Plaintiff’s well pled allegations.”); (Ptf. Obj. at 24) (“The R&R . .

. states that a disagreement as to the interpretation of scientific data is

not a basis” for relief, but “not every statement Plaintiff challenges as

misleading can be classified as a disagreement.”); The Court addresses all

of Plaintiff’s objections that are based on the notion that the R&R

incorrectly regards Plaintiff’s alleged misstatements and omissions as

inactionable disagreements about the interpretation of scientific data all

together.

rehashing of the same arguments set forth in the original papers

will not suffice to invoke de novo review.”) Indeed, Plaintiff

presented this exact argument to Magistrate Judge Scanlon in

opposition to the motions to dismiss. See e.g., (Ptf. Opp. at

24) (“Defendants . . . erroneously [argue that] Plaintiff’s

claims relate to scientific disagreements over the

interpretation of data and clinical results.”); (ECF No. 95 at

58) (“Plaintiff is not disputing the interpretation or analysis

of clinical trial data.”); (Ptf. Opp. at 66) (“Plaintiff is not

disputing the interpretation of the reported results from [the

Drug’s] clinical trials.”); (Ptf. Opp. at 70) (“Plaintiff does

not dispute how Immunovant interpreted or described data.”).

Nevertheless, even on de novo review, Magistrate Judge

Scanlon’s finding in the R&R that “Plaintiff’s allegations

against Defendants are founded on a fundamental disagreement as

to the interpretation of scientific data” is an accurate

description of Plaintiff’s own allegations in the Third Amended

Complaint. (R&R at 16.) Plaintiff first cites its allegation

“that elevated cholesterol was an important risk of [the Drug],”

and argues that the R&R “incorrectly minimizes . . . studies

show[ing] 200 to 300 percent increases in cholesterol.” (Ptf.

Obj. at 17.) Plaintiff’s statement that the “studies show[ing]

200 to 300 percent increase in cholesterol” constitute evidence

of the importance of the risks posed by the Drug is, of course,

an interpretation of those studies. The R&R considered

Plaintiff’s allegations regarding the weight and importance of

“a) the pre-clinical monkey studies and the available scientific

literature about the monkey studies, b) scientific literature .

. . [regarding] thyroid eye disease . . . and c) [the fact] that

[other companies] monitored cholesterol levels when developing

similar compounds” and found that Plaintiff’s allegations about

the meaning of this data amounts to an interpretation of the

data. (R&R at 16.) In referring to Plaintiff’s allegations as

an interpretation of the scientific data, the R&R does not take

a position on the veracity or strength of the underlying data.

Nor does Magistrate Judge Scanlon’s acknowledgement in the R&R

that Defendants may reasonably disagree with Plaintiff’s

interpretation of that data minimize the data itself. This

Court agrees that “[a]t bottom, [Plaintiff’s] allegations

regarding Defendants' [statements] about the” clinical trial

design and scientific data “are little more than a dispute about

the proper interpretation of data.” Tongue v. Sanofi, 816 F.3d

199, 214 (2d Cir. 2016). Accordingly, Plaintiff’s objection is

overruled.

C. Interpretation of the Animal Studies Reports

Plaintiff next objects to the R&R insofar as the R&R

allegedly “gives undue weight to the indications in the summary

portion of the [animal studies] report that there were only

minor increases in cholesterol.” (Ptf. Obj. at 17.) As before,

Plaintiff “simply reiterates [its] original arguments,” such

that the Court need not review this objection de novo. Pall

Corp. v. Entegris, Inc., 249 F.R.D. 48, 51 (E.D.N.Y. 2008). See

(Ptf. Opp. at 36) (“the summary portion [of the report] was

wrong and false [], and not the result of a scientific

disagreement or difference of opinion.”)

Even on de novo review, however, the Court overrules

Plaintiff’s objection. Plaintiff argues that Magistrate Judge

Scanlon “should have accepted as true Plaintiff’s allegation

that the summary of the data was wrong for pleading purposes.”

(Ptf. Obj. at 20.) To the contrary, Magistrate Judge Scanlon

was under no such obligation to accept Plaintiff’s

interpretation of the data. Instead, the R&R identified

competing interpretations of data, which are not actionable.

See Fisk v. Letterman, 401 F. Supp. 2d 362, 368 (S.D.N.Y. 2005)

(The Court “is not obliged to reconcile plaintiff’s own

pleadings that are contradicted by other matters asserted or

relied upon or incorporated by reference by a plaintiff in []

the complaint.”) In any event, the R&R does not “give undue

weight” (Ptf. Obj. at 17), or any weight at all, to the summary

portion of the report. Rather, the R&R merely notes that there

is a “discrepancy” between the Former Employee’s conclusion as

to the data that the animals experienced significant increases

in cholesterol levels . . . [and] the summary of the data . . .

[which] concludes that cholesterol level increases were only

mild.” (R&R at 42) (Explaining that “the discrepancy . . .

indicate[s] [a] disagreement as to the interpretation of the

data.”) (R&R at 42.) The Third Amended Complaint describes the

discrepancy, but Plaintiff now takes issue with the R&R’s

“descri[ption] [of] the discrepancy . . . as a disagreement.”

This is a distinction without meaning. Magistrate Judge Scanlon

accurately describes the discrepancy as a disagreement in

reliance on Plaintiff’s own factual allegations in the Third

Amended Complaint. Accordingly, Plaintiff’s objection is

overruled.

D. Reasonable Investor

Plaintiff also objects to the R&R’s “conclu[sion] that the

omitted facts from the [Fall] 2020 Offering Documents would not

substantially undermine the conclusion of a reasonable

investor.” (Ptf. Obj. at 19.)7 Plaintiff contends that “it

cannot be seriously disputed that the eventual reported

elevations in cholesterol were material facts, as shown by the

7 Plaintiff also argues that “for the same reasons Plaintiff objects to the

R&R’s recommendations regarding the misrepresentations and omissions in the

[Fall] 2020 Offering Documents, Plaintiff objects to the R&R with respect to

its rejection of Plaintiff’s Item 303 and 105 claims.” (Ptf. Obj. at 21.)

The Court respectfully overrules Plaintiff’s objections to the R&R’s findings

and recommendations regarding the Fall 2020 Offering Documents and,

accordingly, overrules Plaintiff’s objections to the R&R’s findings regarding

the Item 303 and 105 claims because Plaintiff’s objections to those claims

are based on the same arguments made in connection with the Fall 2020

Offering Documents, which the Court has overruled. (Id.)

halting of the [] study . . . [such that] [a]n inference should

therefore be drawn in favor of Plaintiff that the failure to

disclose [the] elevations in cholesterol were an important

potential risk was also material.” (Ptf. Obj. at 19-20.) This

is exactly the sort of argument that courts within the Second

Circuit routinely reject as impermissible hindsight. See

Rubinstein v. Credit Suisse Group AG, 457 F. Supp. 3d 289, 295

(S.D.N.Y. 2020) (“A plaintiff may not plead a Section 11 claim

‘with the benefit of 20/20 hindsight’ or base the claim on a

‘backward-looking assessment’ of the registration statement.”)

Moreover, Plaintiff’s objection “to the [] finding in the R&R

that the statements in the [Fall] 2020 Offering Documents were

not misleading” on the basis that “the [TAC] alleges facts

raising a plausible inference that those statement were

misleading” (Ptf. Obj. at 19), amounts to an argument that the

R&R is incorrect because Plaintiff is correct. As previously

noted, objections that merely argue a magistrate judge’s

decision is “wrong” are conclusory and do not warrant de novo

review. Barratt, 2002 WL 335014, at *1. Even on de novo review

however, Plaintiff’s objection is overruled because Plaintiff

cannot impermissibly rely on hindsight regarding the eventual

halting of the clinical trials to support its claims.

E. Reasonableness of Defendants’ Interpretations

In the alternative, Plaintiff states that “even if some of

[its] claims are properly considered a scientific dispute, as

opposed to simply factual or opinion statements, the R&R

incorrectly determines that Defendants’ interpretations were

reasonable” and in doing so, draws factual inferences in favor

of Defendants. (Ptf. Obj. at 14.) Putting aside the flawed

premise that “opinion statements” can form the basis for any of

Plaintiff’s claims, Plaintiff provides no legal authority for

the assertion that the finding that Defendants’ interpretations

are “reasonable” constitutes an impermissible inference in

Defendants’ favor. To the contrary, the Second Circuit held, in

the very case cited by Plaintiff, Kleinman v. Elan Corp., plc,

706 F.3d 145 (2d Cir. 2013), that “where a defendant’s competing

analysis or interpretation of data is itself reasonable, there

is no false statement” and affirmed a district court’s dismissal

of the plaintiff’s amended complaint as a result. Kleinman, 706

F.3d at 154. In describing this objection, Plaintiff cites page

13 of the R&R, which simply sets forth the legal standard for

the Court’s consideration of “competing analys[es] or

interpretation[s] of data” in the securities fraud context on a

motion to dismiss. (Ptf. Obj. at 13.) To the extent Plaintiff

objects to any of the statements in this section of the R&R, all

of which appear to be descriptions of or quotes from Second

Circuit cases, Plaintiff’s objection must be overruled as

contrary to Second Circuit law.

In any event, Magistrate Judge Scanlon did not credit

Defendants’ interpretations and analyses as true. Nor does the

R&R find that Plaintiff’s interpretations and analyses are

false. The R&R applies the governing standard for assessing

competing interpretations of scientific data and correctly finds

that “reasonable scientific disagreement between Plaintiff and

Defendants is not the permissible subject of a securities fraud

action.” (R&R at 17.) Accordingly, Plaintiff’s objections are

overruled.

F. Compliance with Good Clinical Practices (GCP)

Plaintiff next alleges that “there are no facts in the

record from which one can draw the conclusion that the FDA

reviewed whether the early clinical trials were conducted in

accordance with GCP.” (Ptf. Obj. at 16.) Plaintiff alleges in

the Third Amended Complaint that Defendants stated in the

September 2020 Offering Documents that “the FDA drug approval

process requires the ‘performance of adequate and well-

controlled human clinical trials in accordance with . . . GCP.

And other . . . regulations and guidance.” (TAC ¶ 151.)

Plaintiff contends that this statement “created the untrue

perception that Immunovant’s clinical trials complied with

[GCP],” but that “[c]ontrary to those statements, [the] clinical

trials failed to comply with [GCP] because they had not

monitored or assessed the key potential risk of elevated LDL or

cholesterol levels.” (TAC ¶ 151.)

Notably, the R&R does not conclude that Defendants complied

with GCP. To the contrary, the R&R simply finds that Defendants

statements suggesting that it complies with GCP is, under Second

Circuit law, a statement of opinion and is not actionable. See

Philip Morris, 89 F.4th at 419 (“Defendants’ statements

regarding GCP compliance are necessarily statements of

opinion.”)

Finally, Plaintiff’s statement that “the R&R should have

viewed all of Plaintiff’s allegations together, instead of in

isolation” (Ptf. Obj. at 18), is undermined by the fact that the

R&R did, in fact, view Plaintiff’s allegations all together, in

addition to examining each alleged misstatement or omission

individually. See (R&R at 12-13) (“The inquiry . . . is whether,

together, the pre-clinical monkey studies and the available

scientific literature, the scientific literature indicating that

thyroid eye disease affects cholesterol levels and the fact that

Harbour and Argenx SE monitored cholesterol levels when developing

similar compounds, demonstrate the scientific fact that increased

cholesterol levels were a key potential risk of the Drug.”)

Accordingly, this objection is respectfully overruled.

II. Relevant Case Law

Plaintiff objects to the R&R’s reference to the Second

Circuit’s recent decision in Philip Morris Int’l Inc. Sec.

Litig., 89 F.4th 408 (2d Cir. 2023). Plaintiff argues that

because the Second Circuit’s decision in Philip Morris was

issued “on December 26, 2023, months after Defendants’ motions

to dismiss had been fully briefed. . . . the Court should review

its application de novo.” (Ptf. Obj. at 14.) Plaintiff further

argues that the factual circumstances underlying Philip Morris,

and, therefore, the legal reasoning extrapolated form those

factual circumstances, are distinguishable from and inapplicable

to the facts in the instant action.8 The Court reviews

Plaintiff’s objections that relate to alleged distinctions

between the instant case and the circumstances underlying Philip

Morris de novo. Upon de novo review, however, the Court agrees

with the R&R’s interpretation of the reasoning and applicability

of the Second Circuit’s decision in Philip Morris and, thus,

respectfully overrules Plaintiff’s objections.

8 Plaintiff raises this objection twice. First, Plaintiff raises this

objection in connection with its discussion of the Securities Act claims.

(Ptf. Obj. at 14) (“The R&R relies on Philip Morris to reach the conclusion

that it was reasonable for Defendants to not view elevated cholesterol as a

potential risk.”) Later, in connection with the R&R’s findings regarding the

Exchange At claims, Plaintiff states “for the reasons discussed above [in

connection with the Securities Act claims], Plaintiff’s claims are

distinguishable from Philip Morris.” (Ptf. Obj. at 22.) The Court reviews

each of the objections related to the alleged distinctions between the

instant case and Philip Morris together.

Plaintiff notes that Philip Morris involved challenged

statements about “scientific data that [were] ultimately

endorsed by the Food and Drug Administration . . . such [that

the challenged] statements [were proven] per se reasonable.”

Philip Morris, 89 F.4th at 414. Plaintiff argues that “[u]nlike

in Philip Morris, the FDA did not review or analyze [the Drug]

in the context of Defendants’ statement about [its] safety . . .

and nothing that Plaintiff alleges to be misleading or omitted

was endorsed by the FDA.” (Ptf. Obj. at 15.) Accordingly,

“Plaintiff objects to the R&R’s determination that the

reasonableness of Defendants’ position is supported by the FDA

review of the design of the . . . clinical trial” at Phase 1.

(Ptf. Obj. at 16.)

As noted by Defendants in response to Plaintiff’s

Objections, the Second Circuit explicitly stated in Philip

Morris that “defendants’ statements about the implications of

their data cannot be misleading merely because a regulatory body

disagreed with defendants’ conclusion.” Philip Morris, 89 F.4th

at 421; see also (Def. Resp. at 14.) Although the rule set

forth in Philip Morris that “interpretation of [] data” which

“the FDA eventually accepts” is “per se reasonable as a matter

of law,” the R&R does state that Defendants’ interpretation of

the scientific data was per se reasonable as a result of FDA

acceptance of Defendants’ interpretations or analysis. Philip

Morris, 89 F.4th at 421. The R&R merely notes that “[i]f the

issues with cholesterol levels tied to the Drug were as obvious

and critical as Plaintiff claims, the FDA would not have

permitted the clinical trials to proceed without cholesterol

monitoring.” (R&R at 17.) Moreover, the R&R does not rely on

the FDA approval of the design of the clinical trial to make any

findings or conclusions about the veracity of Defendants’

“statements which Plaintiff challenged.” (Ptf. Obj. at 16.)

Rather, FDA approval of the clinical trial design supports the

reasonableness of the Defendants decision to design the clinical

trials without cholesterol monitoring. (R&R at 16-17.)9

Plaintiff’s objection to the R&R citing and analyzing the Philip

Morris decision is overruled.

III. Pleading Standard for the Securities Act Claims

Plaintiff states that “the R&R ignores that the [TAC]

separates the Securities Act and Exchange Act claims,” and

“incorrectly applied Rule 9(b) instead of Rule 8 as the pleading

standard for [Plaintiff’s] Securities Act claims.” (Ptf. Obj.

at 18.) Plaintiff argues that, in fact, “Rule 8 should apply”

to the Securities Act claims. In support of this argument,

9 Plaintiff again notes here that “Plaintiff does not allege that Immunovant

was required to monitor cholesterol in early clinical trials or that there

were flaws in the design of the early clinical trials.” (Ptf. Obj. at 16.)

As set forth previously, the notion that Plaintiff does not take issue with

the design of the clinical trial directly contradicts Plaintiff’s own

statements in the Third Amended Complaint about how the clinical trials

“should have been” designed. (TAC ¶¶ 119, 304.)

Plaintiff points to the fact that the heightened pleading

standard of Rule 9(b) applies to claims premised on allegations

of fraud. Because “a plaintiff need allege no more than

negligence to [state] a claim,” pursuant to the Securities Act,

Plaintiff argues that “Rule 8 should apply” to their Securities

Act claims.

First, this objection does not warrant de novo review

because it “recites the same argument[] presented to the

magistrate judge.” Emerson Electric Co. v. Holmes, 16-cv-1390

(PKC), 2020 WL 4592808, at *6 (E.D.N.Y. Aug. 11, 2020) (internal

citation omitted) (“[O]bjections that are merely perfunctory

responses argued in an attempt to engage the district court in a

rehashing of the same arguments set forth in the original papers

will not suffice to invoke de novo review.”) Indeed, Plaintiff

presented this exact argument to Magistrate Judge Scanlon in

opposition to the motions to dismiss. See (Ptf. Opp. at 98-99)

(Plaintiff argues that “[t]he Securities Act Claims, which sound

in strict liability and negligence, are only subject to the

notice pleading standard of Rule 8.”)

Second, Plaintiff’s objection is based on the statement in

the R&R that Plaintiff’s analysis “fails to meet this Circuit’s

heightened fraud standard in the Securities Act context.” (R&R

at 21.) However, it is clear from the face of the R&R that

Magistrate Judge Scanlon found that the Third Amended Complaint

failed to state a claim for Securities Act violations under both

Rule 8 and Rule 9(b).

Nevertheless, the Court reviews Plaintiff’s objection de

novo and respectfully overrules it. The very case Plaintiff

cites, Saskatchewan Healthcare Employees Pension Plan v. KE

Holdings Inc., No. 21-cv-11196 (GHW), 2024 WL 775195 (S.D.N.Y.

Feb. 26, 2024), rejects any attempt to draw a bright line rule

regarding the applicable pleading standard for Securities Act

claims. The Second Circuit has repeatedly ruled that “the

heightened pleading standard applies to claims brought under the

Securities Act if they sound in fraud.” Saskatchewan, 2024 WL

775195, at *31; In re Synchrony Financial Securities Litigation,

988 F.3d 157, 173 (2d Cir. 2021) (“[W]here allegations

underlying Securities Act claims are premised on fraud, the

heightened pleading standard of [] Rule 9(b) applies.”).

Specifically, “[t]he heightened pleading standard of Rule 9(b)

applies to Section 11 and Section 12(a)(2) claims insofar as the

claims are premised on allegations of fraud.” Saskatchewan,

2024 WL 775195, at *31. To determine whether a Securities Act

claim is premised on allegations of fraud, courts consider

whether “(1) the complaint contains merely a blanket disclaimer

that the plaintiffs do not allege fraud for the purposes of the

Securities Act claims; (2) the allegations themselves include

classic fraud language; (3) the complaint does not show any

basis for the claims that is non-fraudulent; and (4) the

plaintiffs do not separate the factual allegations supporting

the fraud claims and negligence claims, but rather require the

courts to parse the complaints.” Rombach v. Chang, 355 F.3d

164, 171-172 (2d Cir. 2004). Here, the Third Amended Complaint

“in substance [] charge[s] fraud.” In re Fuwei Films Sec.

Litig., 634 F. Supp. 2d 419, 436 (S.D.N.Y. 2009).

The Third Amended Complaint contains a blanket statement

that “Plaintiff does not claim for purposes of [the Securities

Act claims] that Defendants . . . acted with scienter or

fraudulent intent.” (TAC ¶¶ 196, 204, 213.) Plaintiff’s

assertion that the Securities Act claims do not sound in fraud,

in the face of “wording and imputations . . . that are

classically associated with fraud,” reflects “little, if any,

effort to differentiate [the] asserted negligence claims from

the fraud claims.” Rombach, 355 F.3d at 172; In re Refco, Inc.

Sec. Litig., 503 F. Supp. 2d 611, 633 (S.D.N.Y. 2007) (“[T]he

language at the beginning of each Securities Act claim

disclaiming any intent to allege fraud is by itself insufficient

to protect those claims from Rule 9(b)’s stringent

requirements.”) The Court need not credit Plaintiff’s efforts

to apply a negligence label to its Securities Act claims when

“the gravamen of the complaint is plainly fraud.” Rombach, 355

F.3d at 172 (citing In re Stac Elecs. Sec. Litig., 89 F.3d 1399,

1045 n.2 (9th Cir. 1996)).

Plaintiff also separates the claims under the Exchange Act

from those under the Securities Act into different sections in

the Third Amended Complaint. “But these formalisms do not

require the Court to apply Rule 8’s more liberal standard.”

City of Omaha Police and Fire Retirement System v. Evoqua Water

Technologies Corp., 450 F. Supp 3d 379, 402 (S.D.N.Y. 2020).

The factual allegations in the first 73 pages of the Third

Amended Complaint, including the “Substantive Allegations”

section, operate as the same nucleus of operative facts for both

the Securities Act and Exchange Act claims. Plaintiff

incorporates “each and every allegation” from the “Substantive

Allegations” section of the Third Amended Complaint, into Count

I, which alleges violations of Section 11 of the Securities Act;

Count II, which alleges violations of Section 12(a)(2) of the

Securities Act; and Count III, which alleges violations of

Section 15 of the Securities Act. See (TAC ¶¶ 195, 203, 212.)

(“Plaintiff repeats and realleges each and every allegation

contained above as if fully set forth herein.”)

In the “Substantive Allegations” section of the Third Amended

Complaint, Plaintiff alleges that “Immunovant monitored and

assessed the cholesterol levels of the animals” in early clinical

trials, that the assessments “clearly showed substantial elevations

in cholesterol” such that “[t]he clear and unambiguous results from

the [] animal studies established that the elevated cholesterol

levels were a potential risk” for humans as well, that the

Immunovant Defendants “should have monitored and assessed this

risk” in later clinical trials involving humans in light of “the

substantial risk” revealed by the assessments, and that, instead,

the Immunovant Defendants “never disclosed that elevated

cholesterol was a potential risk” or that the “Phase 2b trial was

different from other clinical trials.” (TAC ¶¶ 92-100.) Plaintiff

further alleges that Defendants minimized potential risks in

representations to investors. See e.g., (TAC ¶ 114) (the

Immunovant Defendants “minimized any adverse events from the phase

1 study”) (TAC ¶ 146) (the Immunovant Defendants’ statements

“minimized the negative implications of the albumin reductions”),

(TAC ¶ 147) (the Immunovant Defendants “minimized the impact of

albumin reductions”), (TAC ¶ 148) (Defendants “minimized the

potential negative consequences of albumin reductions.”).

Importantly, Plaintiff alleges that “[t]he increase in cholesterol

levels in animals [and] the fact that it was an anticipated risk

that [the Drug] would increase cholesterol levels in patients . . .

were known events” (TAC ¶153), but that ultimately, these

“undisclosed safety issues . . . threatened to delay and/or disrupt

[the Drug’s] prospects for commercial viability and profitability.”

(TAC ¶ 157.)

These same allegations are presented as the factual predicate

for Plaintiff’s scienter allegation in connection with its Exchange

Act claims. See e.g., (TAC ¶ 217) (Defendants “knew, or recklessly

disregarded, that elevated LDL and cholesterol levels were

potential risks of [the Drug].”); (TAC ¶ 219) (It was “known to

Defendants or recklessly disregarded . . . [that] [t]here was a

potential risk and anticipated risk [the Drug] would substantially

increase LDL and total cholesterol levels because, among other

reasons: [] Immunovant’s animal studies for [the Drug] revealed a

substantial increase in cholesterol for animals”). “Though

plaintiff[] separate[s] [its] claims under the Securities Act and

the Exchange Act and disclaim[s] fraud as a basis for [its]

Securities Act claims, the[] claims rest on the same theory – that

defendants knew” of information they were purportedly required to

disclose. In re HEXO Corp. Sec. Litig., 524 F. Supp. 3d 283, 299

n.17 (S.D.N.Y. Mar. 8, 2021). Accordingly, the Third Amended

Complaint’s repeated and incorporated factual “allegations

underlying the Section 11 claim[s] are ‘substantially intertwined’

with the Exchange Act claims” and Rule 9(b) applies. In re Meta

Inc. Securities Litigation, No. 21-cv-7203 (CBA), 2023 WL 6385563,

at *10 (E.D.N.Y. Sep. 29, 2023).

Finally, even assuming, arguendo, that the Rule 8 pleading

standard applies, Magistrate Judge Scanlon found that Plaintiff

failed to state a claim under Section 11, 12(a)(2) and Section

15 because Plaintiff’s “allegations against Defendants are

founded on a fundamental disagreement as to the interpretation

of scientific data,” which is not actionable under the

Securities Act. (R&R at 16.) Accordingly, Magistrate Judge

Scanlon found that Plaintiff failed to “allege[] sufficient facts

to support the conclusion that Defendants misleadingly interpreted

the available scientific material-namely the animal studies,

literature in the field, diseases to be treated and other

companies’ trial designs.” (R&R at 16.) Plaintiff’s failure to

“allege[] misrepresentations or omissions for securities law

purposes” (R&R at 16) cannot be saved by the application of Rule

8. Under either pleading standard, Plaintiff must allege

sufficient facts to support an inference that Defendants made

material misstatements and/or omissions. Upon de novo review of

Magistrate Judge Scanlon’s R&R, this Court agrees that

Plaintiff’s Third Amended Complaint fails to state a claim and

must be dismissed. Accordingly, Plaintiff’s objection that

Magistrate Judge Scanlon applied the wrong pleading standard to

Plaintiff’s Securities Act claim is respectfully overruled.

IV. Scienter for the Exchange Act Claims

Plaintiff argues that “[t]he R&R’s scienter recommendations

should be rejected because the R&R fails to recognize the

strength of the underlying facts and because it does not

consider the [TAC’s] scienter allegations holistically.” (Ptf.

Obj. at 23.) This objection is conclusory and amounts to an

overbroad statement that Magistrate Judge Scanlon’s decision is

“wrong.” Barratt, 2002 WL 335014, at *1. With respect to

motive, Plaintiff also raises a new argument for the first time,

which does not warrant de novo review. See Kennedy, 2006 WL

3704784, at *1 (“a district [court] judge will [] ordinarily

refuse to consider arguments, case law and/or evidentiary

material which could have been, but [were] not, presented to the

magistrate judge in the first instance.”) With respect to

recklessness, Plaintiff reiterates the same objection to the

R&R’s finding that Plaintiff’s allegations comprise an

interpretation of scientific data, which the Court has

overruled.

A. Motive

In support of its objections regarding the R&R’s scienter

findings, Plaintiff first argues that “the [TAC] alleges

Defendants [Roivant and Wong] . . . were motivated to

artificially inflate the price of Immunovant shares and delay

disclosing [the risk of elevated cholesterol levels] to

investors . . . until after they received their lucrative

earnout shares.” (Ptf. Obj. at 23.) Plaintiff contends that

Magistrate Judge Scanlon “inappropriately dismissed” this

allegation “as simply ‘a generalized motive for incentive

compensation.’” (Ptf. Obj. at 23) (quoting R&R at 35.)

This argument ignores the R&R’s explanation that not only

does the Third Amended Complaint allege “a generalized motive

for incentive compensation,” with respect to the allegation that

“Mr. Wong and Roivant benefited from Immunovant’s artificially

inflated stock price by receiving earnout shares” (R&R at 35),

the Third Amended Complaint also fails to plead that Defendants

Roivant and Wong “[sold] such shares during the Putative Class

Period” or that they received any actual benefit. (R&R at 34.)

As noted by Defendants, “mere ownership in the absence of

profit-taking does not establish a motive that would support a

strong inference” of scienter. In re Initial Pub. Offering Sec.

Litig., 241 F. Supp. 2d 281, 367 (S.D.N.Y. 2003). Accordingly,

Plaintiff’s objection to the finding in the R&R that Plaintiff

failed to allege adequate facts showing motive is overruled.

B. Recklessness

Plaintiff’s arguments regarding scienter depend on the same

interpretation of the scientific data addressed previously.

Plaintiff alleges that “each of the Exchange Act Defendants had

access to . . . (i) the results of the [] animal studies revealing

substantial elevations in cholesterol; (ii) the medical studies and

literature indicating albumin reductions and [] elevate[d]

cholesterol levels; (iii) information . . . that early clinical

trials failed to monitor cholesterol; and (iv) information

concerning the testing procedures of other companies developing

[similar] compounds.” (Ptf. Obj. at 24.) Plaintiff alleges that

in light of Defendants’ access to this information, Defendants

should have known cholesterol elevations were an important

potential risk. (Id.) As noted previously however, even

accepting as true the allegation that Defendants had access to

this information, Plaintiff’s allegations regarding the

“important potential risk” that should have been extrapolated

from this data are rooted in Plaintiff’s “interpretation of

scientific data.” (R&R at 40-41.) The Second Circuit has made

clear that a plaintiff’s interpretation of the scientific data

is “not a basis upon which scienter can be sufficiently pled.”

(R&R at 40-41) (citing Philip Morris, 89 F.4th at 420). Because

the Court has overruled Plaintiff’s objections regarding whether

this information constitutes an “interpretation of scientific

data,” the Court also overrules Plaintiff’s objection to the

R&R’s finding that the interpretation of the data cannot form

the basis for an allegation of recklessness.

C. Statements by Defendants Salzmann and Wong

Plaintiff also points to statements by Defendant Salzmann

and Defendant Wong as evidence of scienter. First, Plaintiff

notes that Defendant Salzman asserted, at one point, that “it’s

pretty hard to find any published literature or expert opinion

on what the sequelae . . . of a mild albumin reduction would

be.” (Ptf. Obj. at 25.) Plaintiff argues that “whether

literature on a particular topic exists is a fact and not a

disagreement.” (Id.) Defendant Salzmann did not assert, in the

quoted statement, that “literature on [the relevant] topic” does

not “exist,” only that “it’s pretty hard to find” published

literature. (Id.) That literature on a topic is “hard to find”

is, of course, a statement of opinion.

Plaintiff also points to a statement by Defendant Wong that

“people in the literature are generally asymptotic,” which

Plaintiff argues is “minimizing the impact of albumin reduction

. . . by pointing to a lack of symptoms . . . even though those

were two separate things.” (Id.) The Court, on de novo review,

agrees with the R&R’s conclusion that “[a]t most, [] this

allegation evidences disagreement as to the conclusions to be drawn

from scientific studies.” (R&R at 40 n.14.) As noted in the R&R

and as instructed by the Second Circuit in Philip Morris, “a

statement is ‘misleading and actionable’ only ‘when the omitted

contrary facts substantially undermine the conclusion that a

reasonable investor would reach from the statement.’” (R&R at

21) (citing Philip Morris, 89 F.4th at 423 (emphasis in

original)). Plaintiff does not allege adequate facts to support

the conclusion that either Defendant Salzmann’s or Defendant

Wong’s respective statements rise to the level of a material

misstatement or omission or that either statement can form a

basis for any argument of individual scienter. Accordingly,

this objection is overruled.

V. Control Person Liability

Finally, Plaintiff objects to the recommendation in the R&R

that the Court dismiss Count III, which alleges violations of

Section 15 of the Securities Act, and Count V, which alleges

violations of Section 20(a) of the Exchange Act. As Plaintiff

acknowledges, both Count III and Count V depend on the existence

of a “primary violation” underlying any “control person

liability.” (Ptf. Obj. at 21, 26.) Plaintiff does not appear

to object to the dismissal of these claims in the event that no

primary violation is found. Nor could Plaintiff make such an

objection because it would be contrary to the plain text of the

statutes. Instead, Plaintiff argues that “[s]ince Plaintiff

adequately alleges the underlying . . . claims, Plaintiff

objects to the R&R’s recommendation that” the Section 15 and

Section 20(a) claim “be dismissed. (Ptf. Obj. at 21, 26.) As

set forth previously, each of Plaintiff’s objections with

respect to the claims alleging primary violations of the

Securities Act and Exchange Act are respectfully overruled.

Accordingly, Plaintiff’s objection to the dismissal of Counts

III and V must be overruled as well.

CONCLUSION

For the foregoing reasons, on de novo and clear error

review, the Court respectfully overrules Plaintiff’s objections

and adopts and affir s the well-reasoned and thorough R&R issued

m

by Magistrate Judge Scanlon in its entirety. Defendants’

motions to dismiss the Third Amended Complaint GRANTED.

are

The Third Amended Complaint DISMISSED in its entirety with

is

prejudice.

Federal Rule of Civil Procedure 15(a) counsels that leave

to amend a complaint shall be freely given “when justice so

requires.” Although the Second Circuit has advised that “the

usual practice upon granting a motion to dismiss [is] to allow

leave to replead,” Cortec Indus., Inc. v. Sum Holding L.P., 949

F.2d 42, 48 (2d Cir. 1991), Plaintiff has already been granted

leave to amend its Complaint three times. See Ruotolo v. City

of New York, 514 F.3d 184, 191 (2d Cir. 2008) (“leave to amend,

though liberally granted, may properly be denied for . . .

failure to cure deficiencies by amendments previously allowed”)

(internal citations omitted). Moreover, Plaintiff “can plead no

facts that would overcome the [] deficiencies discussed above.”

Johnson v. Maximus Services LLC, No. 22-cv-2935 (AMD), 2023 WL

5612826, at *6 (E.D.N.Y. Aug. 30, 2023). As such, the Court

will not grant further leave to amend.

The Clerk of Court is respectfully requested to enter

Judgment in favor of Defendants and to close this case.

SO ORDERED.

Dated: March 29, 2024

Brooklyn, New York b =

y oye et bee

KIYO°A. MATSUMOTO

United States District Judge

Bastern District of New York

39