Virginia Lawyers Weekly VA Lawyers Weekly
Where plaintiffs suing a biopharmaceutical company for alleged misstatements failed to sufficiently allege any actionable misrepresentations or omissions that would give rise to a duty to disclose, and certain statements amounted to puffery or inactionable opinion or were sufficiently hedged with cautionary statements and risk warnings, the lawsuit was dismissed.
Background
Plaintiffs initiated this action against MacroGenics Inc., its CEO and its CFO for alleged violations of sections 10(b) and 20(a) of the Securities Exchange Act of 1934, Securities and Exchange Commission Rule 10b-5, and sections 11, 12(a) and 15 of the Securities Act of 1933.
In their amended complaint, plaintiffs alleged that after purchasing MacroGenics’ stock, they experienced economic harm proximately caused by defendants’ material misrepresentations, misleading statements or omissions concerning MacroGenics’ clinical trial drug, Margetuximab. The district court granted defendants’ motion to dismiss after concluding that plaintiffs had failed to sufficiently allege any actionable misrepresentations or omissions that would give rise to defendants’ duty to disclose, and that most of defendants’ statements were also immunized from suit.
Analysis
In order for plaintiffs’ claims to prevail under § 10(b) and Rule 10b-5, they must sufficiently allege: “(1) a material misrepresentation or omission by the defendant; (2) scienter; (3) a connection between the misrepresentation or omission and the purchase or sale of a security; (4) reliance upon the misrepresentation or omission; (5) economic loss; (6) and loss causation.” For a fact to be considered material, there must be a “substantial likelihood that a reasonable purchaser or seller of a security (1) would consider the fact important in deciding whether to buy or sell the security or (2) would have viewed the total mix of information made available to be significantly altered by disclosure of the fact.”
Plaintiffs first argue that defendants’ February 2019 written statements referencing Margetuximab’s phase 3 clinical trial, named “SOPHIA,” results put the study’s interim overall survival, or OS, results “in play,” and their subsequent oral and written statements that positively characterized SOPHIA’s OS data triggered a duty to disclose because they contained either materially false and misleading statements or omissions. In analyzing the “total mix of information” available to investors, the district court determined that MacroGenics’ release of the progression free survival, or PFS, data did not address the interim OS results, and that a reasonable investor could not have received from MacroGenics’ statements the mistaken impression that the interim OS results would inevitably satisfy the OS endpoint based solely on the PFS results.
Plaintiffs posit that the district court erroneously narrowed defendants’ written statements to the PFS data, rather than SOPHIA trial’s overall progress. Plaintiffs also contend defendants’ positive oral statements concerning the interim OS results unambiguously put the data in play. Finding these arguments unpersuasive, this court agrees with the district court.
Second, plaintiffs posit that none of defendants’ statements contained immaterial puffery, inactionable opinion or risk warnings which would immunize them from liability. This court disagrees. Instead, it agrees with the district court that a handful of defendants’ statements are also inactionable as a matter of law because they amount only to puffery or inactionable opinion, warrant protection under the safe harbor provision of the Private Securities Litigation Reform Act or are sufficiently hedged with cautionary statements and risk warnings.
Finally, with respect to plaintiffs’ claims arising under §§ 11, 12(a) and 15 of the Securities Act and Items 303 and 1055 of SEC Regulation S-K, the district court determined that plaintiffs failed to plead sufficient facts showing that defendants made materially false or misleading statements or omissions. On appeal, plaintiffs narrowly argue that defendants violated the Securities Act by “breaching their independent ‘duty to speak’ under Items 303 and 105 of SEC Regulation S-K.” Finding plaintiffs’ arguments unpersuasive, this court affirms the district court’s decision dismissing their Securities Act claims.
Affirmed.
Employees’ Retirement System of the City of Baton Rouge and Parish of East Baton Rouge v. MacroGenics Inc., Case No. 21-2238, March 2, 2023. 4th Cir. (Gregory), from DMD at Greenbelt (Hazel). William C. Fredericks for Appellant. Nina Fran Locker for Appellees. VLW 023-2-065. 30 pp.
