City of Edinburgh Council as A v. Pfizer Inc

PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

___________

No. 13-2314

___________

CITY OF EDINBURGH COUNCIL AS ADMINISTERING

AUTHORITY FOR THE LOTHIAN PENSION FUND;

ARCA S.G.R.S.P.A,

Appellant

v.

PFIZER, INC., as successor in interest to WYETH, a

Delaware Corporation; ROBERT ESSNER; BERNARD

POUSSOT; KENNETH J. MARTIN; ROBERT R.

RUFFOLO; WYETH

_______________________

On Appeal from the United States District Court

for the District of New Jersey

D.C. Civil Action No. 2-10-cv-03105

(Honorable Susan D. Wigenton)

______________

Argued: January 8, 2014

Before: SMITH, SHWARTZ, and SCIRICA, Circuit Judges.

(Filed: June 6, 2014)

Jeffrey A. Almeida, Esq.

Grant & Eisenhofer

123 Justison Street

Wilmington, DE 19801

Daniel L. Berger, Esq. [ARGUED]

Deborah A. Elman, Esq.

Grant & Eisenhofer

485 Lexington Avenue

29th Floor

New York, NY 10017

Gregory M. Castaldo, Esq.

Joshua E. D'Ancona, Esq.

Michael K. Yarnoff, Esq.

Kessler, Topaz, Meltzer & Check

280 King of Prussia Road

Radnor, PA 19087

Counsel for Appellants

John Villa, Esq. [ARGUED]

George A. Borden, Esq.

David R.J. Riskin, Esq.

Williams & Connolly

725 12th Street, N.W.

Washington, DC 20005

Stephen C. Matthews, Esq.

Porzio, Bromberg & Newman

100 Southgate Parkway

Morristown, NJ 07962

Counsel for Appellees

2

_________________

OPINION OF THE COURT

_________________

SCIRICA, Circuit Judge

In this private securities fraud class action under the

Private Securities Litigation Reform Act of 1995 (“PSLRA”),

two institutional investors allege a pharmaceutical company

and its executives made materially false and misleading

statements in violation of the Securities Exchange Act of

1934 (the “Exchange Act”) regarding interim clinical trial

data related to the development of an experimental

Alzheimer’s drug. The District Court granted defendants’

motion to dismiss for failure to state a claim under Rule

12(b)(6) of the Federal Rules of Civil Procedure. We will

affirm. 1

I.

Plaintiffs-appellants City of Edinburgh Council as

Administering Authority for the Lothian Pension Fund and

Arca S.G.R. S.p.A. (the “Funds”) 2 bring suit on behalf of a

class of investors who purchased Wyeth, Inc. common stock

1

The District Court had jurisdiction under 28 U.S.C. § 1331

and 15 U.S.C. § 78aa. We have jurisdiction under 28 U.S.C.

§ 1291.

2

Security Police and Fire Professionals of America

Retirement Fund, a lead plaintiff below, is not a party to this

appeal.

3

between May 21, 2007, and July 29, 2008 (the “Class

Period”). The Funds allege Wyeth and four former Wyeth

executives—defendants Robert Essner, Bernard Poussot, Jr.,

Kenneth J. Martin, and Robert R. Ruffolo, Jr.—made

materially false and misleading statements regarding the

development of the experimental Alzheimer’s drug

bapineuzumab. Defendant Pfizer Inc. is the successor-in-

interest to Wyeth, which it acquired in 2009.

The Funds bring three claims: (1) securities fraud

under section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b),

and Securities and Exchange Commission (“SEC”) Rule 10b-

5; (2) control person liability under section 20a of the

Exchange Act, 15 U.S.C. § 78t; and (3) insider trading under

section 20A of the Exchange Act, 15 U.S.C. § 78t-1(a). 3

A.

Approximately 5 million Americans and 26 million

people worldwide suffer from Alzheimer’s disease. Wyeth

and Elan Corporation, plc (“Elan”), 4 an Ireland-based

pharmaceutical company, embarked on a joint venture to

3

Because the District Court granted defendants’ Rule

12(b)(6) motion to dismiss, we assume the Funds’ well-

pleaded, nonconclusory factual allegations to be true. See

Ashcroft v. Iqbal, 556 U.S. 662, 678–79 (2009). We may

consider documents incorporated into the complaint,

Institutional Investors Grp. v. Avaya, Inc., 564 F.3d 242, 252

(3d Cir. 2009), and take judicial notice of SEC filings, Oran

v. Stafford, 226 F.3d 275, 289 (3d Cir. 2000).

4

Perrigo Company plc acquired Elan in 2013.

4

develop an Alzheimer’s treatment that, unlike other drugs

then on the market, would target the underlying causes of the

disease. This joint venture produced bapineuzumab, which is

designed to treat mild to moderate Alzheimer’s. As required

by Food and Drug Administration (“FDA”) regulations,

Wyeth and Elan launched clinical trials to assess the efficacy

and safety of bapineuzumab in treating Alzheimer’s. 5 In

2006, Wyeth and Elan completed Phase 1 trials of

bapineuzumab and received Fast Track status from the FDA. 6

Before announcing Phase 1 results, Wyeth and Elan began the

5

FDA regulations require three phases of clinical trials—

which may overlap—to assess the efficacy and safety of

potential new treatments. 21 C.F.R. § 312.21. Phase 1 tests

the drug’s efficacy and safety on a small number of patients.

Phase 2 is a controlled clinical study in which various doses

of the drug are tested on groups of up to several hundred

patients to evaluate preliminary indicia of the drug’s efficacy

and safety. Phase 3 studies—randomized, multicenter trials

on large patient groups over an extended period—aim to

provide sufficient evidence of efficacy and safety to support

FDA approval to market the drug.

6

Fast Track status entitled the companies to priority oversight

from the FDA, including an accelerated path to approval and

more frequent communications with the FDA. See Fast

Track, Breakthrough Therapy, Accelerated Approval and

Priority Review, FDA,

http://www.fda.gov/forconsumers/byaudience/forpatientadvo

cates/speedingaccesstoimportantnewtherapies/ucm128291.ht

m (last visited June 4, 2014). Only drugs intended to treat

serious or life-threatening diseases for which there is a

significant unmet medical need qualify for Fast Track status.

5

Phase 2 trial, a controlled, double-blind study designed to

measure the efficacy of bapineuzumab compared to a

placebo. The companies measured bapineuzumab’s efficacy

using two tests, the Alzheimer’s Disease Assessment Scale-

Cognitive (“ADAS-cog”) and the Disability Assessment

Scale for Dementia (“DAD”).

The Phase 2 trial was not scheduled for completion

until 2008, and Wyeth and Elan said they did not expect to

release any Phase 2 trial data until that time. The focus of the

Funds’ complaint is a joint press release issued on May 21,

2007 (the “May 2007 Release”), announcing the companies’

decision to initiate a Phase 3 clinical trial, subject to FDA

approval, in the second half of 2007. The May 2007 Release

stated (emphasis added):

Elan . . . and Wyeth . . . today announce the

decision to initiate a Phase 3 clinical program

of . . . Bapineuzumab. . . . This decision was

based on the seriousness of the disease and the

totality of what the companies have learned

from their immunotherapy programs, including

a scheduled Interim look at data from an

ongoing Phase 2 study, which remains blinded.

No conclusion about the Phase 2 study can be

drawn until the study is completed and the final

data are analyzed and released in 2008. Phase

3 clinical trial design will be finalized with

regulatory agencies, and subject to regulatory

approval, it is intended for the trial to begin in

the second half of 2007.

The Funds contend that at the time Wyeth issued the May

6

2007 Release the company knew—but did not disclose—that

the Phase 2 interim results did not support the decision to

initiate the Phase 3 trial. 7 The Funds’ two confidential

witnesses 8 allege the interim results showed bapineuzumab

had failed pre-specified criteria for efficacy and revealed

serious adverse safety risks. Wyeth disputes this allegation,

arguing the Phase 2 results showed “statistically significant

and clinically meaningful benefits” among an important

patient subgroup—non-carriers of the Apolipoprotein E4

(“ApoE4”) gene who are believed to make up 40 to 70

percent of Alzheimer’s patients, or approximately 2 to 3.5

million Americans. Further, Wyeth contends CW1’s

statements confirm its interpretation of the subgroup data—

CW1 noted the Phase 2 interim results were “interesting” and

“warranted further testing” with regard to non-carriers of the

ApoE4 gene but only as an additional Phase 2 trial, not as a

Phase 3 trial. And Wyeth notes it had to obtain FDA

7

The Funds also allege defendants Martin and Ruffolo

profited from the concealment of the poor Phase 2 interim

results by exercising and selling stock options on May 22,

2007.

8

The Funds’ confidential witnesses are former high-ranking

Wyeth executives who performed extensive work related to

the development of bapineuzumab during the Class Period.

Confidential witness 1 (“CW1”) was a member of Wyeth’s

Neuroscience Steering Committee and Bapineuzumab

Steering Committee. Confidential witness 2 (“CW2”) was a

member of Wyeth’s Research and Development (“R&D”)

Committee. The confidential witnesses provided their

evidence through affidavits.

7

approval to initiate the Phase 3 trial, 9 on which the companies

spent “millions of dollars of their own assets.”

The Funds also argue the May 2007 Release was

misleading in light of a prior statement made on October 5,

2006, by defendant Ruffolo, Wyeth’s head of research, at the

company’s annual meeting for securities analysts. Ruffolo

stated orally that the companies planned to conduct an interim

review of the Phase 2 results at the end of 2006 in order to

determine whether and how to proceed to a Phase 3 trial:

Now, again, we don’t have any results from this

[Phase 2] study at all, but we have a planned

interim look at the data at the end of the year.

And, based on this interim look, we could do

two things. One, depending on the data, we

could advance directly into Phase III in the first

half of 2007, but the results would have to be

spectacular. We don’t know what results we’re

going to get. Alternatively, we could complete

the study and then move to the next interim

look, which would be in the first half of 2007.

9

The FDA approves a Phase 3 trial, which typically includes

far more subjects than a Phase 1 or Phase 2 trial, where there

is “preliminary evidence suggesting effectiveness.” 21 C.F.R.

§ 312.21(c). But the FDA retains the ability to suspend a

clinical trial through a clinical hold, id. § 312.42, or to

terminate a clinical trial if there is “convincing evidence that

the drug is not effective for the purpose for which it is being

investigated” or the trial poses “an unreasonable and

significant risk of illness or injury,” id. §§ 312.44(b)(1)(i),

(b)(2)(i), (b)(2)(iii).

8

Despite defendants’ explicit warning in the May 2007

Release that “[n]o conclusion about the Phase 2 study can be

drawn” and that initiation of Phase 3 would be “subject to

regulatory approval,” the Funds allege Ruffolo’s remarks led

them to interpret the May 2007 Release’s statement that the

Phase 3 trial would commence early based in part on the

Phase 2 interim results to mean those results were

“spectacular.”

On June 17, 2008, Wyeth and Elan issued a press

release (the “June 2008 Release”) disclosing “preliminary

findings” from the Phase 2 study. The June 2008 Release

reported that the Phase 2 trial failed to meet its objectives as

to the entire study population and reported serious adverse

events among both placebo- and bapineuzumab-treated

patients. But it noted that based on “[p]ost-hoc analyses,”

bapineuzumab showed “statistically significant and clinically

meaningful benefits” among non-carriers of the ApoE4 gene

who are believed to make up 40 to 70 percent of Alzheimer’s

patients. Accordingly, the June 2008 Release announced the

companies’ conclusion that the results of the Phase 2 trial, as

well as its safety findings, supported the decision to proceed

with the Phase 3 trial. 10

On July 29, 2008, Wyeth and Elan revealed the Phase

2 results through a joint press release, conference

10

The Funds also alleged Wyeth and Elan committed

securities fraud through factual omissions in the June 2008

Release. The District Court held the June 2008 Release was

not actionable because defendants had no duty to disclose the

allegedly omitted information, and the Funds do not challenge

that determination on appeal.

9

presentation, and investor conference call. Despite the

disclosure in the June 2008 Release that the Phase 2 trial had

failed to meet its overall objectives, the Funds contend

investors only learned for the first time on July 29 that the

Phase 2 trial was nearly a complete failure—the results

showed no efficacy and revealed serious safety concerns.

According to CW1, the final Phase 2 results did not differ

significantly from the Phase 2 interim results referenced in

the May 2007 Release.

B.

The District Court granted defendants’ first motion to

dismiss on February 10, 2012, holding the Funds had not

adequately alleged defendants made any materially false or

misleading statements and defendants had no duty to disclose

allegedly omitted details. On December 21, 2012, the District

Court granted the Funds leave to file a second amended

complaint. On April 22, 2013, the District Court again

dismissed the Funds’ claims, holding (1) the Funds failed to

adequately allege defendants made any affirmatively false or

misleading statements, (2) defendants had no duty to disclose

additional information about the Phase 2 interim results, and

(3) the Funds failed to sufficiently plead a predicate Exchange

Act violation required to maintain their control person

liability and insider trading claims.

On appeal, the Funds contend the District Court erred

in dismissing their section 10(b) and Rule 10b-5 claims for

failure to adequately plead falsity. The Funds also argue

defendants’ statements and actions triggered a duty to

disclose full and complete material information to investors

about the Phase 2 interim results. And the Funds challenge

10

the District Court’s dismissal of their control person liability

and insider trading claims.

We review de novo the District Court’s decision to

grant defendants’ Rule 12(b)(6) motion to dismiss. See In re

Aetna, Inc. Sec. Litig., 617 F.3d 272, 277 (3d Cir. 2010). We

also exercise plenary review over the dismissal of a complaint

for failure to satisfy the heightened pleading standards of the

PSLRA and over the District Court’s interpretation of federal

securities laws. Institutional Investors Grp. v. Avaya, Inc.,

564 F.3d 242, 251 (3d Cir. 2009). The PSLRA’s heightened

pleading standards require a private securities fraud complaint

alleging false or misleading statements to “specify each

statement alleged to have been misleading, the reason or

reasons why the statement is misleading, and, if an

allegation . . . is made on information and belief, . . . state

with particularity all facts on which that belief is formed.” 15

U.S.C. § 78u-4(b)(1); see Tellabs, Inc. v. Makor Issues &

Rights, Ltd., 551 U.S. 308, 321 (2007). “This standard

requires plaintiffs to plead the who, what, when, where, and

how: the first paragraph of any newspaper story.”

Institutional Investors Grp., 564 F.3d at 253 (internal

quotation marks and citation omitted). A complaint must also

“state with particularity facts giving rise to a strong inference

that the defendant acted with the required state of mind.” 15

U.S.C. § 78u-4(b)(2); Tellabs, 551 U.S. at 321. We must

evaluate “the complaint in its entirety, as well as other

sources courts ordinarily examine when ruling on Rule

12(b)(6) motions to dismiss,” including documents

incorporated into the complaint by reference and matters of

which we may take judicial notice. Tellabs, 551 U.S. at 322

(citation omitted).

11

C.

This is not the first case in which the federal courts

have adjudicated securities fraud allegations arising out the

development of bapineuzumab. Three federal courts have

considered and dismissed claims similar to those at issue in

this case. See Kleinman v. Elan Corp., plc, 706 F.3d 145 (2d

Cir. 2013); In re Elan Corp. Sec. Litig., No. 08-cv-8761

(S.D.N.Y. June 23, 2011); Philco Invs., Ltd. v. Martin, No.

10-02785, 2011 WL 500694 (N.D. Cal. Feb. 9, 2010).

In Kleinman, the Second Circuit affirmed the Rule

12(b)(6) dismissal of a suit against Elan, Pfizer, and two Elan

executives for failure to allege any actionable false statements

or omissions and failure to plead a predicate Exchange Act

violation. Kleinman, 706 F.3d at 147. The plaintiff in

Kleinman alleged the June 2008 Release misrepresented the

Phase 2 results as “[e]ncouraging” and omitted key

information about the lack of a dose response and analysis of

the Phase 2 data. But the Second Circuit rejected those

contentions, holding the June 2008 Release clearly stated the

“[e]ncouraging” results were subgroup results and finding

words like “encouraging” to be puffery. Id. at 153. And the

court found the omitted information claim was not actionable

because, although possibly of interest to a reasonable

investor, its omission did not render the June 2008 Release

false or misleading. Id. at 154–55.

In In re Elan, a district court dismissed claims against

Elan for failure to allege any actionable false statements or

omissions. The case challenged many of the same statements

at issue in this case, including the May 2007 Release. The

court rejected the allegation that the May 2007 Release was

12

false based on Ruffolo’s “spectacular” statement. Transcript

of Argument at 10:9–13, In re Elan, Corp. Sec. Litig., No. 08-

cv-8761 (“There’s nothing about [the May 2007 Release]

that says it’s going to be spectacular. Everyone knows that in

this business it’s extraordinarily risky and . . . expensive, and

lots of drugs have been stopped in phase 3, even though they

had high hopes in phase 2.”). The court described Ruffolo’s

“spectacular” statement as “puffery” and noted that the law

does not provide that “an early puffery, if not corrected,

continues to be a false statement every day of the year that

follows.” Id. at 15:20–23. And the court said Elan and

Wyeth would not have agreed to proceed to Phase 3, given

the millions of dollars the companies spent, unless Phase 2

showed at least some promising data. Id. at 18:5–19.

Finally, in Philco Investments, a district court

dismissed claims against Elan and three of its executives for

failure to adequately allege falsity and to plead a predicate

Exchange Act violation. Philco Invs., 2011 WL 500694, at

*1. Plaintiffs challenged both the May 2007 Release and the

June 2008 Release. The court found plaintiffs failed to allege

Elan disclosed criteria by which it would judge the Phase 2

interim results, and, accordingly, plaintiffs failed to

adequately allege the May 2007 Release was false. Id. at *6–

7. The court also concluded plaintiffs failed to allege the

June 2008 Release was false because, although it may not

have included all the information a reasonable investor would

have liked to have, it did not contain false or misleading

information. Id. at *7–9.

II.

Section 10(b) of the Exchange Act prohibits the “use

13

or employ[ment], in connection with the purchase or sale of

any security . . . [, of] any manipulative or deceptive device or

contrivance in contravention of such rules and regulations as

the [SEC] may prescribe.” 15 U.S.C. § 78j(b). SEC Rule

10b-5 implements this provision by making it unlawful to,

among other things, “make any untrue statement of a material

fact or to omit to state a material fact necessary in order to

make the statements made, in the light of the circumstances

under which they were made, not misleading.” 17 C.F.R.

§ 240.10b-5(b). The Supreme Court has implied a private

cause of action from the text and purpose of section 10(b).

Matrixx Initiatives, Inc. v. Siracusano, 131 S. Ct. 1309, 1317

(2011).

To state a claim for securities fraud, plaintiffs must

allege (1) a material misrepresentation or omission,

(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. Id. at 1317–18; In re Aetna, Inc. Sec.

Litig., 617 F.3d 272, 277 (3d Cir. 2010).

The primary issue in this appeal is the first element,

whether the Funds have adequately alleged defendants made

a material misrepresentation or omission. The District Court

concluded the Funds had failed to do so. But the Funds

contend that conclusion was incorrect because the May 2007

Release contained affirmatively false and misleading

statements about the Phase 2 interim results, and defendants’

post-May 21 statements were also false or misleading. We

agree with the District Court.

14

A.

We first analyze whether the May 2007 Release

contained any affirmative false statements, and then we

consider whether the May 2007 Release was misleading in

light of defendant Ruffolo’s October 2006 “spectacular”

statement.

1.

Specifically, the Funds allege one statement in the

May 2007 Release was affirmatively false—the decision to

initiate the Phase 3 trial “was based on the seriousness of the

disease and the totality of what the companies have learned

from their immunotherapy programs, including a scheduled

Interim look at data from an ongoing Phase 2 study, which

remains blinded.” This statement was affirmatively false, the

Funds contend, because Wyeth’s decision to move to Phase 3

was not “based on” the Phase 2 interim results—it was made

in spite of those results, which the Funds characterize as

abysmal. Because their confidential witness statements

demonstrate bapineuzumab failed the interim review, the

Funds argue the Phase 2 interim results did not support

defendants’ decision to initiate Phase 3. 11

11

We apply the PSLRA’s heightened pleading requirements

to confidential witness allegations “by evaluating ‘the detail

provided by the confidential sources, the sources’ basis of

knowledge, the reliability of the sources, the corroborative

nature of other facts alleged, including from other sources, the

coherence and plausibility of the allegations, and similar

indicia.’” Institutional Investors Grp., 564 F.3d at 263

15

We agree with the District Court, however, that the

Funds’ allegations are insufficient to maintain a plausible

claim of falsity regarding the May 2007 Release statement

under the “[e]xacting pleading requirements” of the PSLRA.

See Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S.

308, 313 (2007); Institutional Investors Grp. v. Avaya, Inc.,

564 F.3d 242, 263 (3d Cir. 2009) (“The PSLRA imposes a

particularity requirement on all allegations, whether they are

offered in support of a statement’s falsity or of a defendant’s

scienter.” (citation omitted)).

The Funds’ own pleading demonstrates the accuracy of

defendants’ statement that the initiation of Phase 3 was based

in part on the Phase 2 interim results. See Cal. Pub. Emps.’

Ret. Sys. v. Chubb Corp., 394 F.3d 126, 156–58 (3d Cir.

2004) (finding plaintiffs failed to adequately plead falsity

where information provided by their confidential witnesses

was generally consistent with defendants’ allegedly false and

misleading public statements). Analyzing the phrase “based

on” in the May 2007 Release under the PSLRA’s heightened

pleading standards, the Funds have failed “to specify . . . the

reason or reasons why the statement is misleading” because

the most cogent interpretation of that phrase is that defendants

considered the Phase 2 interim results as one factor in their

decision to initiate the Phase 3 trial. See Tellabs, 551 U.S. at

322. The Funds’ confidential witness statements indicate

defendants did analyze and consider those results in deciding

whether to initiate Phase 3.

Moreover, the Funds’ argument that the May 2007

(quoting Cal. Pub. Emps.’ Ret. Sys. v. Chubb Corp., 394 F.3d

126, 147 (3d Cir. 2004)).

16

Release falsely conveyed that the Phase 2 interim results

justified the initiation of Phase 3 fails because it is based on a

selective reading of that document. See id. (instructing courts

to consider complaints under the PSLRA in their entirety,

including documents incorporated by reference). The May

2007 Release made no statement about the strength of the

interim results. Instead, the May 2007 Release provided three

bases for the move to Phase 3: (1) the seriousness of

Alzheimer’s disease, (2) the totality of what the companies

learned from their immunotherapy programs, and (3) the

Phase 2 interim results. A full reading of the May 2007

Release under the PSLRA’s heightened pleading

requirements, therefore, bolsters the District Court’s

conclusion that it contained no false statements. See id.; In re

Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d

Cir. 1997) (noting we are to examine statements in the full

context of the documents of which they are part). Most

importantly, the May 2007 Release explicitly cautioned

investors that “[n]o conclusion” could be drawn about the

Phase 2 interim results until the completion of Phase 2.

A comparison with the Second Circuit’s decision in

Kleinman is instructive. In that case, plaintiff challenged

allegedly false statements in the June 2008 Release. The June

2008 Release, unlike the May 2007 Release, did make

affirmative characterizations about the Phase 2 results—it

described the Phase 2 results as supportive of the decision to

initiate Phase 3 because of the “statistically significant and

clinically meaningful benefits” shown for the ApoE4 non-

carrier subgroup. But the Second Circuit concluded plaintiff

had not alleged anything in the June 2008 Release was

literally false because the references to “[e]ncouraging”

results could not have meant anything other than the positive

17

subgroup results. Kleinman v. Elan Corp., plc, 706 F.3d 145,

153 (2d Cir. 2013). Moreover, the Second Circuit held

expressions such as “encouraging” constituted puffery. Id.

Because the May 2007 Release offers no affirmative

characterization of the Phase 2 interim results, Kleinman

supports defendants’ position that the May 2007 Release was

not affirmatively false.

Even reading the May 2007 Release as conveying the

message that the interim results supported the move to Phase

3 and assuming the truth of the Funds’ confidential witness

allegations, the Funds’ allegations still fail to establish that

defendants’ May 2007 Release statement was affirmatively

false. See Institutional Investors Grp., 564 F.3d at 263 n.33

(noting that confidential witness allegations may be found

adequately particularized under the PSLRA but may still “fail

either to establish the falsity of a statement, or to give rise to a

strong inference of scienter”). The Funds’ confidential

witnesses allege bapineuzumab failed the interim review

because it did not achieve pre-defined p-values 12 Wyeth used

to assess the statistical significance of bapineuzumab versus a

placebo under the ADAS-cog and DAD tests. Specifically,

CW2 alleges that unless the Phase 2 interim review met these

specified p-values, Wyeth and Elan had agreed they would

not proceed to Phase 3 based on the interim review. CW1

contends the Phase 2 interim results did not reveal any

statistically significant difference between bapineuzumab-

treated patients and placebo-treated patients with respect to

12

A p-value, or probability value, is a measure of statistical

significance. Relevant to the Funds’ allegations, the

companies did not disclose that achievement of any particular

p-values were necessary to initiate a Phase 3 trial.

18

any of the pre-specified efficacy endpoints measured by the

ADAS-cog and DAD tests. Nor did bapineuzumab show any

“dose response,” meaning higher doses of the drug were not

associated with better results. Furthermore, the Phase 2

interim results showed serious safety concerns with

bapineuzumab, including numerous side effects and three

deaths (compared to no deaths in patients treated with

placebo).

But the Funds point to no public disclosure by

defendants of the specific p-values bapineuzumab was

expected to achieve under the ADAS-cog and DAD tests, no

public statements regarding a “dose response” or whether one

would be expected, see Kleinman, 706 F.3d at 153–54, and no

public comments about the safety metrics, including

anticipated side effects, through which bapineuzumab would

be evaluated. Because defendants never told investors

bapineuzumab would only pass the interim review if specific

p-values, dose responses, or safety metrics were achieved, the

Funds’ confidential witness allegations fail to establish with

sufficient specificity that the challenged May 2007 Release

statement—that the decision to initiate Phase 3 was based in

part on the Phase 2 interim review—was false.

Moreover, CW1 noted that the results showed

“circumstantial evidence of efficacy” for an important patient

subgroup—non-carriers of the ApoE4 gene—consisting of

approximately 40 to 70 percent of Alzheimer’s patients.

CW1 also stated that one of his superiors was upset about the

decision to initiate Phase 3 testing and that the subgroup

results justified further investigation through a Phase 2

“exploratory” trial, not a large scale Phase 3 “confirmatory”

trial.

19

These allegations show a difference of opinion within

Wyeth about whether the Phase 2 interim results—together

with the seriousness of Alzheimer’s disease and the totality of

what the companies had learned from their immunotherapy

programs—justified initiating a Phase 3 trial. Interpretations

of clinical trial data are considered opinions. See Kleinman,

706 F.3d at 153; In re Adolor Corp. Sec. Litig., 616 F. Supp.

2d 551, 567 (E.D. Pa. 2009). Opinions are only actionable

under the securities laws if they are not honestly believed and

lack a reasonable basis. In re Merck & Co., Inc. Sec.,

Derivative & “ERISA” Litig., 543 F.3d 150, 166 (3d Cir.

2008); Kleinman, 706 F.3d at 153.

The Funds have failed to adequately allege defendants

did not honestly believe their interpretation of the interim

results or that it lacked a reasonable basis. A company’s

failure to accurately disclose clinical trial data may be

actionable under the securities laws, but the cases the Funds

cite are distinguishable because they involve plausible

allegations of affirmative false statements about a drug’s

efficacy and safety. See, e.g., In re Viropharma, Inc. Sec.

Litig., No 02-1627, 2003 WL 1824914, at *6, *9 (E.D. Pa.

Apr. 7, 2003); In re Transkaryotic Therapies, Inc. Sec. Litig.,

319 F. Supp. 2d 152, 160 (D. Mass. 2004). In contrast, the

May 2007 Release contains no affirmative statement about

bapineuzumab’s efficacy or safety. Moreover, the initiation

of Phase 3 cost millions of dollars and required FDA

approval, rendering it improbable that defendants would have

continued if they did not believe their interpretation of the

interim results or if they thought the drug a complete failure.

See Kleinman, 706 F.3d at 153.

Moreover, because the Phase 2 interim results showed

20

“circumstantial evidence of efficacy” for one important

patient subgroup, the disagreement of some Wyeth employees

with the company’s interpretation of the interim results is not

sufficient to show defendants’ interpretation lacked a

reasonable basis. The Funds present three pieces of evidence

showing disagreement among Wyeth’s employees about the

decision to initiate Phase 3. CW2 noted that after

presentation of the Phase 2 interim results to the company’s

four-member Elan Alliance Committee and approximately

100-member R&D Committee, he and two other members of

the R&D Committee “expressed skepticism” at the decision

to proceed with Phase 3 based on the interim results. CW1

revealed that one of his superiors was upset Wyeth decided to

proceed, at Ruffolo’s urging, with a “massive” Phase 3 study.

And CW1 noted his own belief that Wyeth should have

conducted another Phase 2 study to investigate the subgroup

results, not a Phase 3 trial. But the disagreement of five

employees within a large pharmaceutical company about the

interpretation of clinical trial data and the critical strategic

decision of initiating an expensive Phase 3 trial does not

render defendants’ decisions unreasonable or their statements

false. See Kleinman, 706 F.3d at 153 (finding no basis for

inferring defendants did not honestly believe their statements

because the initiation of Phase 3 could only be made “after

there have been positive Phase 2 results sufficient to satisfy

both business and regulatory interests”); In re Adolor, 616 F.

Supp. 2d at 567 (holding disagreements about the proper

methodology and conduct of clinical studies are insufficient

to establish falsity). At bottom, the Funds fail to plead

sufficient facts to show defendants did not honestly believe

initiating Phase 3 was appropriate or that defendants lacked a

reasonable basis for that decision.

21

2.

We next evaluate whether the District Court correctly

determined that the May 2007 Release was not misleading in

light of defendants’ prior statements. The Funds contend the

May 2007 Release was misleading because defendant Ruffolo

had assured investors in October 2006 that Wyeth would not

commence Phase 3 early unless the Phase 2 interim results

were “spectacular” in meeting specific efficacy criteria. 13 By

telling investors they were moving to Phase 3 early based in

part on the Phase 2 interim results, the Funds contend

defendants misled the market by failing to disclose those poor

results, leaving the impression they must have been

“spectacular” or at least positive. The Funds argue this

failure to disclose in fact misled the market, and they cite

statements by stock analysts and point to the increase in

Wyeth’s stock price following issuance of the May 2007

Release.

We agree with the District Court that defendants’

statements, taken in context, were not misleading. The May

2007 Release did not characterize or discuss the strength of

the Phase 2 interim results. It only listed those results as one

factor among three in the decision to initiate Phase 3, and it

expressly cautioned investors not to draw conclusions about

the Phase 2 study until its completion. The Funds’ attempt to

differentiate between conclusions regarding the interim and

final results is unavailing in light of the May 2007 Release’s

13

Pre-class period statements may be used to ascertain the

falsity and materiality of the challenged statements. In re

Merck & Co., Inc. Sec. Litig., 432 F.3d 261, 272 (3d Cir.

2005).

22

plain language. Defendants’ explicit caution against drawing

conclusions about the “Phase 2 study” by definition includes

the interim results, which were part of the Phase 2 study.

The Funds also appear to misread Ruffolo’s October

2006 statement. They interpret it to mean Wyeth would not

commence Phase 3 early unless the Phase 2 interim results

were “spectacular” in meeting specific efficacy criteria. But

Ruffolo’s statement was more narrow. He noted the

companies “could advance directly into Phase III in the first

half of 2007” if the results were “spectacular” or could

complete the study and then move to the next interim look in

the first half of 2007. As defendants correctly point out, the

course of events Ruffolo envisioned in the “spectacular”

scenario did not come to pass—the companies did not

advance to Phase 3 in the first half of 2007. Instead, the May

2007 Release announced the initiation of Phase 3 in the

second half of 2007. Accordingly, the May 2007 Release

should have superseded any lingering impression left by the

“spectacular” statement in the minds of reasonable investors.

See United States v. Schiff, 602 F.3d 152, 170 (3d Cir. 2010);

Oran v. Stafford, 226 F.3d 275, 286 (3d Cir. 2000).

Bolstering our conclusion is the nature of Ruffolo’s

prior statement. Ruffolo’s 2006 “spectacular” statement was

a forward-looking statement about a course of events that, as

it turned out, did not come to pass. By using the conditional

“could,” Ruffolo did not bind the company to any particular

course of action. Nor could he, because at the time he spoke

initiation of Phase 3 still required FDA approval. Moreover,

the adjective “spectacular” is the kind of “vague and general

statement[] of optimism” that “constitute[s] no more than

puffery and [is] understood by reasonable investors as such.”

23

In re Advanta Corp. Sec. Litig., 180 F.3d 525, 538 (3d Cir.

1999), abrogated on other grounds by Tellabs, Inc. v. Makor

Issues & Rights, Ltd., 551 U.S. 308 (2007), as recognized in

Institutional Investors Grp. v. Avaya, Inc., 564 F.3d 242, 276

(3d Cir. 2009); see also Transcript of Argument at 15, In re

Elan Corp. Sec. Litig., No. 08-cv-8761 (S.D.N.Y. June 23,

2011); Philco Invs., Ltd. v. Martin, No. 10-02785, 2011 WL

500694, at *6 (N.D. Cal. Feb. 9, 2011). Furthermore,

although the May 2007 Release did not offer any specific

characterization of the Phase 2 interim results, it did caution

that no conclusion could be drawn about the Phase 2 data

until the completion of the study. Had the interim results

been “spectacular,” it is reasonable to assume the companies

would have trumpeted that fact in the May 2007 Release—or

at least given some indication the data were positive.

Moreover, Ruffolo never said bapineuzumab was

required to meet specific efficacy criteria to advance to Phase

3. That remark was made by Elan’s CEO at a January 9,

2007, healthcare conference. Defendants cannot be held

responsible for statements they did not make. See Schiff, 602

F.3d at 168, 170–71. Although the Funds’ confidential

witnesses stated that bapineuzumab was required (and failed)

to achieve certain p-values in Phase 2 and showed no dose

response and numerous safety concerns, the Funds fail to

allege any public statements by defendants regarding specific

p-values, dose responses, or safety metrics bapineuzumab

would be expected to achieve in order to advance to Phase 3.

Accordingly, we conclude the District Court correctly

determined the Funds failed to adequately allege defendants

made any affirmatively false or misleading statements in the

May 2007 Release.

24

B.

The Funds also contend defendants made six false or

misleading public statements following issuance of the May

2007 Release. The Funds allege these statements failed to

disclose the efficacy and safety problems revealed in the

Phase 2 study, as well as that the Phase 2 interim results

showed bapineuzumab did not meet pre-established criteria

and Phase 2 testing was nearly a complete failure. We concur

with the District Court and reject these allegations.

The Funds first challenge defendant Ruffolo’s May 22,

2007, remarks at the Citigroup Healthcare Conference. When

asked to discuss which aspects of the Phase 2 interim review

justified the early initiation of the Phase 3 trial, Ruffolo said

he “cannot comment and will not comment on the Interim

look” because he “cannot do anything to destroy the blind in

that study.” Because Ruffolo only referred attendees to the

May 2007 Release and refused to comment on how the

interim review justified the initiation of Phase 3, he made no

false or misleading statement.

Next, the Funds contend statements made by Wyeth

investor relations representative Justin Victoria and defendant

Poussot during earnings calls on July 19, 2007, and April 22,

2008, that described the Phase 2 interim results as one factor

in the “composite decision” to move to Phase 3 were false

and misleading. But those statements are consistent with the

May 2007 Release and accurately convey that the interim

results were one factor defendants considered in deciding to

initiate Phase 3. Moreover, Victoria confirmed to investors

and analysts on the April 22, 2008, call that Wyeth had not

yet disclosed the strength of the Phase 2 results and needed to

25

complete the analysis of the Phase 2 data to make that

determination. As a result, we find the July 19 and April 22

statements were not false or misleading.

The Funds also challenge statements made by Wyeth

executives Dr. Joseph Camardo and Joseph M. Mahady. At

the January 8, 2008, J.P. Morgan Healthcare Conference,

Camardo described bapineuzumab as a potential

“breakthrough” drug for Alzheimer’s, and at the March 19,

2008, Lehman Brothers Global Healthcare Conference

Mahady mentioned bapineuzumab as an example of a drug

offering “opportunities for transformational growth of the

company.” But these statements are not actionable because

they are vague, non-specific, and forward-looking. See In re

Advanta, 180 F.3d at 538; Philco Invs., 2011 WL 500694, at

*6. Both speakers were also cautious—Camardo noted the

companies still faced risks establishing bapineuzumab’s

efficacy and safety, and Mahady reminded the audience that

the final results of the Phase 2 study were not yet available.

Furthermore, Camardo’s statement that Wyeth and Elan

“learned a lot in Phase II” is true based on the statements

from the Funds’ own confidential witnesses. Accordingly,

the Funds’ allegations that these statements were false or

misleading lack merit.

Finally, the Funds allege defendant Poussot’s

statements on Wyeth’s July 23, 2008, 8-K and earnings call

were false and misleading because he described the Phase 2

results as “encouraging and supportive of our prior decision

to initiate Phase 3.” Unlike the other post-May 21 statements,

Poussot did characterize the final Phase 2 results as positive.

But he only repeated conclusions Wyeth had disclosed six

days before in the June 2008 Release. The District Court held

26

the June 2008 Release was not actionable because defendants

were under no duty to disclose information the Funds alleged

was omitted from that document, and the Funds do not

challenge that determination on appeal. Accordingly, we

concur with the District Court that because the June 2008

Release is not false or misleading, Poussot’s statements

cannot be the basis of liability here.

Based on the foregoing analysis, we hold the District

Court correctly determined the Funds failed to sufficiently

allege defendants’ post-May 21 statements were false or

misleading.

III.

In addition to alleging defendants’ statements were

affirmatively false or misleading, the Funds contend those

statements triggered a duty to disclose full and complete

material information regarding the Phase 2 interim results. A

duty to disclose under federal securities laws may arise when

a statute requires disclosure, insider trading occurs, or there is

an inaccurate, incomplete, or misleading prior disclosure.

Oran v. Stafford, 226 F.3d 275, 285–86 (3d Cir. 2000). The

Funds urge us to impose a duty to disclose on each of these

grounds because (1) defendants chose to speak about a

material subject to investors, (2) defendants Ruffolo and

Martin allegedly engaged in insider trading, and (3)

disclosure was necessary to make defendants’ prior

statements not misleading. We agree with the District Court

that defendants were under no duty to disclose the allegedly

omitted information.

27

A.

The Funds first argue defendants had a duty to speak

fully and truthfully about the Phase 2 interim results because

they put the subject “in play” by discussing those results

publicly. Instead of concealing material information about

the poor Phase 2 interim results, the Funds allege defendants

should have either disclosed those poor results or admitted

they had changed their criteria for initiating the Phase 3 trial.

Section 10(b) and Rule 10b-5 “do not create an

affirmative duty to disclose any and all material information.”

Matrixx Initiatives, Inc. v. Siracusano, 131 S. Ct. 1309, 1321

(2011). “Disclosure is required . . . only when necessary ‘to

make . . . statements made, in the light of the circumstances

under which they were made, not misleading.’” Id. (quoting

17 C.F.R. § 240.10b-5(b)). “Silence, absent a duty to

disclose, is not misleading under Rule 10b-5.” Basic Inc. v.

Levinson, 485 U.S. 224, 239 n.17 (1988). “[C]ompanies can

control what they have to disclose under these provisions by

controlling what they say to the market.” Matrixx, 131 S. Ct.

at 1322.

The May 2007 Release made no affirmative statement

about the strength of the Phase 2 interim results nor

characterized those results in any manner. See Oran, 226

F.3d at 285 (finding no material misrepresentation or

omission where defendants did not make any “affirmative

characterization” that FDA approval was based on a complete

review of all relevant medical information as alleged by

plaintiffs). Accordingly, Wyeth did not place the strength or

nature of the Phase 2 interim results “in play,” so it was under

no duty to provide additional details about those results.

28

Wyeth was also not obligated to disclose whether it had

changed its criteria for initiating Phase 3, since that fact was

likewise not “in play.” Significantly, Wyeth never disclosed

that particular p-values would have to be met in order to

commence Phase 3. Nor did it ever reveal the specific

rationale or formula it was using to decide whether to initiate

Phase 3.

The Funds’ attempt to analogize this case to Matrixx is

unavailing. In Matrixx, the Supreme Court evaluated whether

a drug company’s failure to disclose reports of a possible link

between its product and anosmia, the loss of the sense of

smell, rendered the company’s statements relating to revenues

and product safety misleading. Matrixx, 131 S. Ct. at 1313–

14. The company stated, among other things, that reports

linking its product to anosmia were “completely unfounded

and misleading” and that the safety and efficacy of the drug

were well established. Id. at 1323. The evidence showed,

however, that the company had documentation of a biological

link between the drug and anosmia and had conducted no

studies of its own to disprove that connection. Id. In finding

the company’s actions rendered its statements misleading, the

Court determined it was substantially likely a reasonable

investor would regard the omitted information as material.

Id.

Here, by contrast, the central issue is whether the

Funds have adequately alleged falsity, not materiality. And,

unlike Matrixx, the challenged statements in this case do not

characterize or make affirmative claims about the Phase 2

interim results. The May 2007 Release noted only that Wyeth

and Elan decided to initiate the Phase 3 trial “based on the

seriousness of the disease and the totality of what the

29

companies have learned from their immunotherapy programs,

including a scheduled Interim look at data from an ongoing

Phase 2 study, which remains blinded.” Subsequent

statements only reiterated the May 2007 Release statement,

discussed bapineuzumab’s potential to be a “breakthrough”

drug for Alzheimer’s, and noted bapineuzumab as an example

of a drug offering “opportunities for transformational growth”

of Wyeth. None of these statements characterized or made

affirmative claims about the Phase 2 interim results. 14

Accordingly, Matrixx is inapposite to this case, and

defendants did not have a duty to disclose additional

information because they mentioned the Phase 2 interim

results as one factor in their decision to initiate Phase 3.

B.

The Funds next argue defendants were under a duty to

disclose because defendants Ruffolo and Martin allegedly

engaged in insider trading. 15 “[A] corporate insider must

14

Defendant Poussot’s July 23, 2008, statement describing

the Phase 2 results as “encouraging and supportive” of the

decision to initiate Phase 3 did characterize the final Phase 2

results. But, as noted previously, this statement only repeated

conclusions Wyeth had previously disclosed in the June 2008

Release, which the District Court found was not actionable—

a determination the Funds do not challenge on appeal.

15

Specifically, the Funds contend that on May 22, 2007,

Ruffolo exercised options and sold 130,436 Wyeth shares at

$58.33 per share, for a net gain of approximately $2.36

million. The same day, Martin sold 200,500 shares at $57.97

per share, for a net gain of approximately $283,000. By May

30

abstain from trading in the shares of his corporation unless he

has first disclosed all material information known to him.”

Chiarella v. United States, 445 U.S. 222, 227 (1980);

Deutschman v. Beneficial Corp., 841 F.2d 502, 506 (3d Cir.

1988). The Funds’ theory is Ruffolo and Martin knew the

negative Phase 2 interim results, concealed them from

investors, and reaped the benefit of that concealment by

trading on Wyeth’s artificially inflated stock.

But the Funds have failed to adequately plead an

insider trading violation under section 20A of the Exchange

Act because they have failed to adequately plead a predicate

section 10(b) violation. See In re Advanta Corp. Sec. Litig.,

180 F.3d 525, 541 (3d Cir. 1999), abrogated on other

grounds by Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551

U.S. 308 (2007), as recognized in Institutional Investors Grp.

v. Avaya, Inc., 564 F.3d 242, 276 (3d Cir. 2009). Section

20A, which provides an express private cause of action for

insider trading against contemporaneous traders, requires the

alleged insider trader to have committed an independent

violation of the Exchange Act or SEC rules and regulations

promulgated under that law. 15 U.S.C. § 78t-1(a). The

Funds have not adequately alleged that Martin and Ruffolo

committed such an independent violation.

Nor are the Funds’ insider trading allegations

sufficient to meet the heightened pleading standards for

scienter under the PSLRA. The PSLRA requires the Funds to

allege facts giving rise to a “strong inference” of scienter,

which “must be more than merely plausible or reasonable—it

22, 2007, Martin had exercised every profitable option

available to him.

31

must be cogent and at least as compelling as any opposing

inference of nonfraudulent intent.” Tellabs, Inc. v. Makor

Issues & Rights, Ltd., 551 U.S. 308, 314 (2007). The mere

fact that Martin and Ruffolo sold stock is insufficient to

establish scienter. See In re Alpharma Inc. Sec. Litig., 372

F.3d 137, 152 (3d Cir. 2004), abrogated on other grounds by

Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308

(2007), as recognized in Belmont v. MB Inv. Partners, Inc.,

708 F.3d 470, 484 (3d Cir. 2012).

For these reasons, there is no duty to disclose based on

alleged insider trading.

C.

The Funds also allege defendants had an ongoing duty

to disclose throughout the Class Period each time they spoke

about the Phase 2 interim results or the decision to initiate the

Phase 3 trial to avoid misleading disclosures. See Oran, 226

F.3d at 285–86. The Funds contend because defendants

previously told the market the interim results would need to

be “spectacular” to justify early initiation of Phase 3,

defendants had an ongoing duty to disclose that the interim

results were not supportive of the move to Phase 3. We

conclude the District Court properly refused to find

defendants had an ongoing duty to disclose.

As noted above, the course of events outlined in

Ruffolo’s October 2006 “spectacular” statement did not come

to pass. The companies only advanced to Phase 3 in the

second half of 2007, not in the first half of 2007 as Ruffolo

had said they might if the interim results proved to be

“spectacular.” Accordingly, defendants had no duty to update

32

the “spectacular” statement. See United States v. Schiff, 602

F.3d 152, 170 (3d Cir. 2010); Oran, 226 F.3d at 286.

Moreover, we have held that a duty to update applies only in

“narrow circumstances” involving more fundamental

corporate changes such as mergers, takeovers, or liquidations,

as well as when subsequent events produce an “extreme” or

“radical change” in the continuing validity of the original

statement. See Schiff, 602 F.3d at 170 (citing In re Burlington

Coat Factory Sec. Litig., 114 F.3d 1410, 1433–34 (3d Cir.

1997)). Those elements are not present here. Furthermore,

there is no duty to update vague and general statements such

as “spectacular.” See In re Advanta, 180 F.3d at 538

(“[V]ague and general statements of optimism constitute no

more than puffery and are understood by reasonable investors

as such.” (internal quotation marks and citations omitted));

Philco Invs., Ltd. v. Martin, No. 10-02785, 2011 WL 500694,

at *6 (N.D. Cal. Feb. 9, 2011).

Even if we determined defendants had a duty to update

the October 2006 “spectacular” statement, the May 2007

Release would have cut off any such duty. Its explicit caution

that investors should draw no conclusion about the Phase 2

interim results tempered any impression made by the

“spectacular” statement. Had the Phase 2 interim results been

spectacular, it is reasonable to assume Wyeth would have

trumpeted that fact.

Accordingly, defendants were under no duty to

disclose the allegedly omitted information.

IV.

The Funds also appeal the District Court’s dismissal of

33

their control person liability and insider trading claims. We

conclude the District Court correctly dismissed those claims

for failure to adequately plead a predicate Exchange Act

violation.

Section 20(a) of the Exchange Act creates a cause of

action against individuals who exercise control over a

“controlled person,” including a corporation, who has

committed a section 10(b) violation. 15 U.S.C. § 78t(a); see

also Institutional Investors Grp. v. Avaya, Inc., 564 F.3d 242,

252 (3d Cir. 2009). Because the Funds have failed to

adequately plead a predicate section 10(b) violation, their

section 20(a) claim must be dismissed. See Rahman v. Kid

Brands, Inc., 736 F.3d 237, 247 (3d Cir. 2013) (citing

Institutional Investors Grp., 564 F.3d at 252).

Similarly, section 20A of the Exchange Act provides

that a corporate insider who trades stock “while in possession

of material, nonpublic information” is liable to any person

who traded contemporaneously with the insider, provided

there is an independent Exchange Act violation. 15 U.S.C. §

78t-1(a). Because the Funds have failed to adequately plead a

predicate Exchange Act violation, their section 20A claim

must also be dismissed. See In re Advanta, 180 F.3d at 541

(citations omitted); In re Cendant Corp. Litig., 60 F. Supp. 2d

354, 378 (D.N.J. 1999). 16

16

The Funds also allege the District Court erred in relying on

two other bases to dismiss their section 10(b) claims—the

May 2007 Release’s use of cautionary language and the

District Court’s purported finding that the May 2007 Release

statement was immaterial. The Funds contend the District

Court misapplied either the PSLRA Safe Harbor provision, 15

34

V.

For the foregoing reasons, we will affirm the judgment

of the District Court granting defendants’ Rule 12(b)(6)

motion to dismiss.

U.S.C. § 78u-5(c), or the “bespeaks caution” doctrine, EP

Medsystems, Inc. v. EchoCath, Inc., 235 F.3d 865, 873 (3d

Cir. 2010), in finding the May 2007 Release statement to be

cautious. But the District Court applied neither doctrine and

only invoked defendants’ use of cautionary language in

analyzing whether the plain language of the May 2007

Release was false or misleading. Nor did the District Court

make any findings on materiality—the court based its ruling

on the Funds’ failure to plead falsity, not on the materiality of

the statements. Accordingly, the Funds’ contentions the

District Court erred in relying on the May 2007 Release’s

cautionary language and in making materiality determinations

lack merit.

35