15-588-cv, 15-623-cv In re Sanofi Sec. Litig., AG Funds, L.P v. Sanofi In the 1 United States Court of Appeals 2 for the Second Circuit 3 4 5…

15‐588‐cv, 15‐623‐cv
In re Sanofi Sec. Litig., AG Funds, L.P. v. Sanofi
In the 1
United States Court of Appeals 2
for the Second Circuit 3
________ 4
5
August Term, 2015 6
7
No. 15‐588‐cv 8
9
G EN . PARTNER G LENN TONGUE , DEERHAVEN CAPITAL MANAGEMENT, 10
11
Plaintiffs‐Appellants, 12
13
J OHN SOLAK , individually and on behalf of all others similarly 14
situated, 15
16
Plaintiff, 17
18
V INCENT STASIULEWICZ, individually and on behalf of all others 19
similarly situated, 20
21
Consolidated Plaintiff, 22
23
v. 24
25
SANOFI, 26
27
Defendant‐Appellee, 28
29
CHRISTOPHER V IEHBACHER , DAVID MEEKER , J EROME CONTAMINE , 30
31
Defendants‐Consolidated Defendants‐Appellees, 32
33
SANOFI PHARMACEUTICALS, I NC ., 34
35
Consolidated Defendant. 36

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________ 1
2
No. 15‐623‐cv 3
4
AG FUNDS , L.P., AG MM, L.P., AG SUPER FUND I NTERNATIONAL, L.P., 5
AG PRINCESS , L.P., N UTMEG PARTNERS , L.P., AG SUPER FUND , L.P., 6
ARISTEIA H ORIZONS , L.P., W INDERMERE I RELAND FUND PLC , COMPASS 7
ESMA, L.P., COMPASS TSMA, L.P., XEROPOLIS L.L.C., OZ ELS MASTER 8
FUND , L TD ., O Z MASTER FUND , L TD ., O Z E UREKA FUND , L.P., G ORDEL 9
CAPITAL L IMITED, OZ E UROPE MASTER FUND , L TD ., OZ G LOBAL 10
SPECIAL I NVESTMENTS MASTER FUND , L.P., OZ SELECT MASTER FUND , 11
L TD ., OZ G LOBAL E QUITY O PPORTUNITIES MASTER FUND , OZ 12
E NHANCED MASTER FUND , L TD ., SAPELO LLC, W HITEBOX 13
CONCENTRATED CONVERTIBLE ARBITRAGE PARTNERS , L.P., WHITEBOX 14
CREDIT ARBITRAGE PARTNERS , L.P., W HITEBOX ASYMMETRIC PARTNERS , 15
L.P., WHITEBOX MULTISTRATEGY PARTNERS , L.P., PANDORA SELECT 16
PARTNERS , L.P., WHITEBOX I NSTITUTIONAL PARTNERS , L.P., WHITEBOX 17
SPECIAL O PPORTUNITIES FUND SERIES B PARTNERS , L.P., WHITEBOX 18
SPECIAL O PPORTUNITIES FUND , SERIES O, 19
20
Plaintiffs‐Appellants, 21
22
G OLDMAN SACHS PROFIT SHARING MASTER TRUST , MERRILL L YNCH 23
I NVESTMENT SOLUTIONS O CH‐ZIFF E UROPEAN MULTI‐STRATEGY UCITS 24
FUND , OZEA, L.P., 25
26
Plaintiffs, 27
28
v. 29
30
SANOFI, G ENZYME CORPORATION , CHRISTOPHER V IEHBACHER , DAVID 31
MEEKER , J EROME CONTAMINE , 32
33
Defendants‐Appellees. 34
________ 35
2

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In re Sanofi Sec. Litig., AG Funds, L.P. v. Sanofi
1
Appeal from the United States District Court 2
for the Southern District of New York. 3
Nos. 13 Civ. 8806 (PAE), 14 Civ. 2211 (PAE) ― Paul A. Engelmayer, 4
District Judge. 5
________ 6
7
Argued: October 7, 2015 8
Decided: March 4, 2016 9
________ 10
Before: PARKER , L OHIER , and CARNEY, Circuit Judges. 11
________ 12
In these related cases, Plaintiffs appeal from a judgment of the 13
United States District Court for the Southern District of New York 14
(Engelmayer, Paul A., J.) granting Defendants’ motion to dismiss the 15
complaints for failure to state a claim upon which relief may be 16
granted. In re Sanofi Sec. Litig., 87 F. Supp. 3d 510 (S.D.N.Y. 2015). 17
Plaintiffs allege that Defendants made materially false or misleading 18
statements or omissions regarding the clinical testing of Defendants’ 19
drug, Lemtrada. Specifically, Plaintiffs allege that Defendants 20
misled investors by failing to disclose that the FDA had expressed 21
concern regarding the use of single‐blind (as opposed to double‐ 22
blind) clinical studies. We affirm the decision of the district court. 23
We write here primarily to examine the impact of the Supreme 24
Court’s intervening decision in Omnicare, Inc. v. Laborers District 25
Council Construction Industry Pension Fund, 135 S. Ct. 1318 (2015). We 26
conclude that even under the Supreme Court’s revised approach to 27
allegations of materially misleading opinions, Plaintiffs have failed 28
to meet the standards applicable under Fed. R. Civ. P. 12(b)(6). 29
Affirmed. 30
________ 31
32
3

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CHRISTOPHER L. N ELSON (James M. Ficaro, Brett D. 1
Stecker, on the brief), The Weiser Law Firm, P.C., 2
Berwyn, PA, Daniella Quitt, Harwood Feffer LLP, 3
New York, NY, on the brief, for Plaintiffs‐Appellants 4
Gen. Partner Glenn Tongue, Deerhaven Capital 5
Management. 6
J OHN B. O RENSTEIN (Harry N. Niska, on the brief), 7
Ross Orenstein & Baudry LLC, Minneapolis, MN, 8
for Plaintiffs‐Appellants AG Funds, L.P. et al. 9
J OHN N EUWIRTH (Joshua S. Amsel, Caroline 10
Hickey Zalka, Justin D. D’Aloia, on the brief), Weil, 11
Gotshal & Manges LLP, New York, NY, for 12
Defendants‐Appellees. 13
________ 14
B ARRINGTON D. PARKER , Circuit Judge 15
________ 16
In these related cases, Plaintiffs allege that the pharmaceutical 17
company Sanofi, along with its predecessor and three company 18
executives, made materially false or misleading statements 19
regarding its breakthrough drug, Lemtrada, designed to treat 20
multiple sclerosis (“MS”). Plaintiffs allege that while Lemtrada was 21
undergoing Phase III clinical trials prior to FDA approval, Sanofi 22
misled investors by failing to disclose that the FDA had repeatedly 23
expressed concern with Sanofi’s use of single‐blind studies and had 24
encouraged Sanofi to use double‐blind studies in its clinical trials. 25
Plaintiffs allege that these omissions misled investors and artificially 26
inflated the value of Plaintiffs’ contingent value rights (“CVRs”), 27
specialized financial instruments whose value is tied to the 28
achievement of certain “milestones.” 29
4

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Plaintiffs’ allegations are predicated on §§ 10(b), 18, and 20(a) 1
of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78a et seq. (the 2
“Exchange Act”); §§ 11 and 12 of the Securities Act of 1933, 15 U.S.C. 3
§§ 77a et seq. (the “Securities Act”); and state blue sky laws. Before 4
the Court is Plaintiffs’ appeal from the district court’s grant of 5
Defendants’ motion to dismiss under Fed. R. Civ. P. 12(b)(6) for 6
failure to state a claim. Because we agree with the district court’s 7
reasoning and holding, we write principally to examine the impact 8
of the Supreme Court’s decision in Omnicare, Inc. v. Laborers District 9
Council Construction Industry Pension Fund, 135 S. Ct. 1318 (2015), 10
decided after the district court rendered its decision. 11
BACKGROUND 12
A. Development of Lemtrada 13
Prior to 2011, Defendant Genzyme Corporation (“Genzyme”) 14
was the owner of a promising drug called Lemtrada. Lemtrada had 15
not yet been approved by the FDA, but had shown potential as a 16
treatment for victims of MS. The advantage of Lemtrada comes 17
partially from its unique treatment cycle. While traditional MS 18
treatments require a daily or weekly dosing regimen, Lemtrada only 19
requires two annual treatment courses. 20
In part because of Lemtrada’s unique treatment design, 21
Genzyme used a single‐blind study in its early clinical trials. In a 22
single‐blind study, either the researcher or the patient does not know 23
which drug was administered. By contrast, in a double‐blind study, 24
neither the patient nor the investigator knows which drug was 25
administered. Lemtrada’s biannual treatment regimen effectively 26
precluded the use of double‐blind studies, as patients would realize 27
they were being required to undergo treatment far less frequently 28
than under their normal drug. In what appears to have been among 29
its earliest public reports on its Lemtrada clinical studies, Genzyme 30
stated in the New England Journal of Medicine in 2008 that it was 31
relying solely on single‐blind studies for the trials. 32
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At least as far back as 2002, the FDA expressed concern about 1
the use of single‐blind studies for Lemtrada, telling ILEX (the then‐ 2
owner of Lemtrada that was acquired by Genzyme in 2004) in a 3
teleconference that the use of single‐blind studies in Lemtrada’s 4
early clinical trials would “not provide substantial support for a 5
BLA.”1 Joint App’x at 43. In 2004, the FDA again informed ILEX in 6
another teleconference that “[b]ecause of study design issues (open‐ 7
label, small sample size) the [clinical trial] is unlikely to provide 8
substantial support for an sBLA.”2 Id. After Genzyme acquired 9
ILEX, the FDA reiterated in a telephone call that the early clinical 10
trial “will not be a pivotal study to support a license application.” Id. 11
In 2006, the FDA expressed more optimism for the drug’s 12
approval based on the single‐blind studies, saying that “a rater 13
blinded (but patient not blinded) study may be adequate if the effect 14
is large,” though the FDA again noted that it would “prefer double‐ 15
blinded, controlled studies, especially for the pivotal trials.” Id. at 16
78. In 2007, the FDA sent a letter “strongly recommend[ing]” that 17
Genzyme “use a double‐dummy placebo control in your pivotal 18
trials,” adding that “[t]he acceptability of your rater‐blinded study 19
will be a matter of review. If your study results reveal an extremely 20
large effect, then FDA may potentially accept this rater‐blinded 21
design for the pivotal trials.” Id. Notwithstanding this feedback, the 22
FDA permitted Genzyme to enroll patients in Phase III clinical trials 23
that were only single‐blind studies. (Phase III is the final phase of 24
trials prior to submission of the drug for FDA approval for public 25
usage.) 26
1 Biologics License Application. According to the FDA, a BLA “is a request for permission to introduce, or
deliver for introduction, a biologic product into interstate commerce.” FDA, Biologics License Applications
(BLA) Process (CBER),
http://www.fda.gov/BiologicsBloodVaccines/DevelopmentApprovalProcess/BiologicsLicenseApplications
BLAProcess/default.htm (last visited Mar. 1, 2016).
2 Supplemental Biologics License Application.
6

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The FDA’s concerns regarding the use of single‐blind studies 1
continued and were expressed to Genzyme during the Phase III 2
trials. According to the FDA’s minutes of a meeting with Genzyme, 3
the FDA expressed in March 2010 that it “was concerned by the 4
potential bias introduced by the absence of blinding of patients,” and 5
that “the bias introduced by unblinding physicians and patients 6
remains a significant problem which will cause serious difficulties in 7
interpreting the results of the trial.” Id. at 43. And in 2011, the FDA 8
reiterated in a meeting with Genzyme that “the lack of double‐ 9
blinding has consistently concerned us. The lack of blinding remains 10
a major concern.” Id. at 43–44. The FDA added that “despite these 11
previous concerns that have been communicated to you, there was 12
little discussion of the unblinded design of the trials in the meeting 13
material.” Id. at 44. 14
B. Sanofi Acquires Genzyme 15
Defendant Sanofi is a global pharmaceutical company 16
engaged in the research, development, manufacturing, and 17
marketing of healthcare products. In 2010, Sanofi began an effort to 18
acquire Genzyme. At the time, Lemtrada’s market worth was 19
estimated at $14 billion worldwide. Genzyme initially rejected 20
Sanofi’s offers, arguing that Sanofi undervalued Lemtrada’s business 21
potential. Partially as a result of this contention, Genzyme and 22
Sanofi began to negotiate a deal whereby Genzyme’s stockholders 23
would be partially compensated by a financial instrument tied to the 24
value of Lemtrada. The two parties eventually agreed that each 25
shareholder would receive a cash payment of $74 per share, plus one 26
CVR per share. The parties agreed to the terms of the acquisition 27
and executed a Merger Agreement on February 16, 2011. 28
Each CVR entitled the holder to cash payouts upon 29
achievement of certain “milestones” connected to the success of 30
Lemtrada. The first milestone, called the “Approval Milestone,” 31
entitled CVR holders to $1 per CVR if the FDA approved Lemtrada 32
for treatment of MS by March 31, 2014. The four other milestones, 33
7

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called the “Product Sales Milestones,” entitled CVR holders to 1
similar cash payments if Lemtrada achieved certain levels of global 2
net sales. In addition, the second Product Sales Milestone, if met, 3
compensated CVR holders an additional $1 per CVR if Lemtrada 4
had failed to meet the Approval Milestone. The CVRs also 5
contained a $1 per share payout for production milestones related to 6
other drugs. 7
Sanofi initiated a tender offer on April 1, 2011, consisting of 8
the $74 per share and one CVR per share. The tender offer was 9
followed by a short‐form merger on April 8, 2011. The offer and 10
merger were conducted pursuant to a Form F‐4 Registration 11
Statement and a 424B3 Prospecture (together, the “Offering 12
Materials”). The Offering Materials incorporated, by reference, a 13
number of Genzyme’s prior SEC filings containing statements 14
regarding Lemtrada, its clinical results, and its potential approval by 15
the FDA. Specifically: 16
1) 14D‐9 (filed March 7, 2011) 17
• Estimated a 90% probability that Lemtrada would 18
achieve the Approval Milestone. Id. at 45. 19
• “The Approval Milestone is designed to trigger a 20
payment to CVR holders in the event that the 21
Company receives FDA approval of 22
alemtuzumab3 for treatment of MS by March 31, 23
2014. Company management currently 24
anticipates product approval in the United States 25
in the second half of 2012.” Id. 26
2) Form 10‐K (filed March 1, 2011) 27
• “We are currently developing alemtuzumab for 28
the treatment of Relapsing‐Remitting MS, or 29
3 “Alemtuzumab” is the scientific name for Lemtrada.
8

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RRMS, the most common form of MS. . . . We 1
have completed enrollment in two phase 3 clinical 2
trials of alemtuzumab vs. Rebif® (a standard of 3
care therapy) for the treatment of RRMS, from 4
which we expect to obtain results in 2011. Five‐ 5
year follow up data from our phase 2 study 6
continues to show durable treatment benefit. In 7
2010, the FDA granted alemtuzumab ‘fast track’ 8
status for the treatment of RRMS. We anticipate 9
product approval in the United States in the 10
second half of 2012.” Id. at 46. 11
3) Form 8‐K (filed January 11, 2011) 12
• “Within Genzyme’s late‐stage product pipeline, 13
three product approvals are expected by the end 14
of 2013 [including] alemtuzumab for multiple 15
sclerosis . . . .” Id. 16
4) Form 8‐K (filed February 16, 2011) 17
• “Based on promising phase 2 data, alemtuzumab 18
has the potential to become a new standard of 19
care for multiple sclerosis treatment, a market 20
that is expected to reach $13 billion by 2012. Two 21
phase 3 trials are fully enrolled; results of the trial 22
in treatment‐naïve patients are expected mid‐ 23
year, and results of the trial in treatment‐ 24
experienced patients are expected during the 25
second half of this year. Genzyme anticipates 26
U.S. approval of the treatment in the second half 27
of 2012.” Id. at 47. 28
C. Sanofi’s Statements Following the Acquisition 29
Following its acquisition of Genzyme, Sanofi continued to 30
speak optimistically about Lemtrada. In its November 14, 2011 Form 31
9

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6‐K filing, Sanofi announced its “Successful Phase III Results for 1
Alemtuzumab (LEMTRADA™) in Multiple Sclerosis.” Id. The CEO 2
of Genzyme added that “[w]e are very pleased with the results of the 3
[Phase III clinical trials] which are unprecedented . . . . Based on 4
these positive results, we are on track to submit LEMTRADA™ for 5
review to US and EU regulatory authorities in the first quarter of 6
2012.” Id. at 47–48. Sanofi later averred, in its March 5, 2012 Form 7
20‐F: 8
The two Phase III studies demonstrating the safety and 9
efficacy of alemtuzumab were completed in 2011. The 10
first study . . . demonstrated strong and robust 11
treatment effect on the relapse rate co‐primary endpoint 12
vs Rebif. . . . The second study . . . demonstrated that 13
relapse rate and SAD4 were significantly reduced in MS 14
patients receiving alemtuzumab as compared with 15
Rebif. In both cases, safety results were consistent with 16
previous alemtuzumab use in MS and adverse events 17
continued to be manageable. The dossier is scheduled 18
to be submitted to FDA review in the second quarter of 19
2012. 20
Id. at 48, 936. 21
Sanofi continued to make similar statements endorsing the 22
effectiveness of Lemtrada, saying that patients taking Lemtrada 23
“were more than twice as likely to experience a sustained reduction 24
in disability over two years,” id. at 49, and “two pivotal Phase III 25
studies demonstrating the safety and efficacy of alemtuzumab were 26
completed in 2011,” id. at 50. In a conference call with analysts on 27
April 27, 2012, Sanofi’s CEO noted that with regard to Lemtrada, 28
“the data are nothing short of stunning.” Id. at 87. In another 29
conference call with analysts on October 25, 2012, Sanofi’s CFO 30
stated that “this will continue and probably somewhat amplify in the 31
4 “Sustained accumulation of disability.” Joint App’x at 981.
10

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coming quarters as we prepare for the launch of Lyxumia, thereafter 1
for the launch of Lemtrada,” and Sanofi’s CEO added, “look at 2
Lemtrada . . . . I would say I’m actually very satisfied with where 3
the progress is going.” Id. at 90. 4
On January 28, 2013, Sanofi announced that the FDA had 5
accepted its sBLA filing seeking approval of Lemtrada. Shortly 6
thereafter, on February 7, 2013, Sanofi’s CEO told analysts: 7
So I think it augurs well because this also says that we 8
have a team, that should be in good position to launch 9
Lemtrada. It is obviously a huge opportunity that we 10
have to be able to put 2 significant new medicines into 11
an important area like MS. This is a market of some $14 12
billion worldwide. 13
Id. at 1099. On October 30, 2013, Sanofi’s CEO told analysts: “But 14
quite honestly, I’m feeling pretty, pretty relaxed because if I look at 15
our Phase III pipeline, there’s an awful lot of really good stuff in 16
there . . . . We’ve got Aubagio and Lemtrada rolling out.” 5 Id. at 98. 17
D. The FDA Rejects Lemtrada’s Initial Application 18
On October 16, 2013, the FDA announced it would conduct a 19
hearing on November 13, 2013 regarding Lemtrada’s application. 20
On November 8, 2013, the FDA Advisory Committee on Peripheral 21
and Central Nervous System Drugs released the materials for the 22
November 13 hearing (the “Briefing Materials”).6 The three 23
5 We do not attempt here to recite each and every allegedly false or misleading statement identified by
Plaintiffs in their respective complaints, but the statements above provide an adequate sampling.
6 Plaintiffs in the consolidated class action allege that a separate “Background Package” was released on
November 13, detailing the FDA’s past comments to Genzyme and Sanofi regarding the use of single‐
blind trials. A review of the documents themselves reflects that these comments were, in fact, included in
the original Briefing Materials, released on November 8, as alleged by the plaintiffs in the AG Funds
action. Where a document is referenced in a complaint, “the documents control and this Court need not
accept as true the allegations in the amended complaint.” Rapoport v. Asia Elecs. Holding Co., 88 F. Supp.
2d 179, 184 (S.D.N.Y. 2000). In any event, the timing of the disclosure is immaterial for purposes of this
appeal.
11

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physicians reviewing Lemtrada’s application in advance of the 1
hearing all expressed concerns regarding Lemtrada, and two of them 2
referenced the failure to use double‐blind studies: 3
In particular, Dr. Marler has grave concerns that the 4
failure to blind patients and treating physicians in the 5
open‐label design of the trials introduced bias that 6
confounds interpretation of their ostensible results. 7
Because of these issues, Dr. Marler finds that the 8
applicant has not submitted evidence from adequate 9
and well‐controlled studies to support the effectiveness 10
of alemtuzumab for treating multiple sclerosis. . . . 11
. . . Dr. Yan also feels that troublesome design 12
issues and the presence of bias in trials prevents reliance 13
on their results, and that a valid, accurate, and 14
interpretable effect on the two main clinical outcomes of 15
interest, relapse rate and sustained accumulation of 16
disability, has not been established. Dr. Yan finds, like 17
Dr. Marler, that the applicant has not provided evidence 18
from adequate and well‐controlled studies in this 19
application and that such studies still need to be 20
conducted to establish the effectiveness of alemtuzumab 21
for the treatment of patients with multiple sclerosis. 22
Id. at 53–54.7 The Briefing Materials also detailed the FDA’s 23
communications with Genzyme and Sanofi regarding the use of 24
single‐blind clinical trials. 25
Upon release of the Briefing Materials on November 8, the 26
value of the CVRs dropped from $2.00 per share to $0.77 share, or 27
more than 62%. 28
7 The third physician was primarily concerned with the safety of the drug, and did not discuss the
reliability of the clinical trials. As Plaintiffs’ claims relating to the safety of Lemtrada have been
abandoned on appeal, we need not consider the impact of his statements here.
12

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On December 30, 2013, Sanofi announced that it had received 1
formal rejection of Lemtrada from the FDA and acknowledged that 2
it did “not anticipate that the CVR milestone of U.S. approval of 3
Lemtrada by March 31, 2014 will be met.” Id. at 54. The value of the 4
CVRs dropped further on the news, falling to $0.32 per share. 5
Sanofi’s CEO said in a January 23, 2014 interview that the 6
rejection “wasn’t a total surprise,” but added, “[t]hat having been 7
said, this is a drug that’s been approved by 30 countries in the world. 8
We’re seeing patients who have gone five years without a relapse. 9
So we believe that the drug actually is working and it’s important for 10
patients.” Id. at 1235. 11
In April of 2014, Sanofi announced that it was engaged in 12
discussions with the FDA regarding Lemtrada’s application, and on 13
May 30, 2014, Sanofi announced that the FDA had accepted 14
Lemtrada for resubmission.8 On November 14, 2014, the FDA 15
approved Lemtrada for treatment of MS, well after the deadline for 16
the Approval Milestone had passed. 17
E. Procedural History 18
Two class action complaints were filed against Defendants in 19
December 2013. The complaints were consolidated in February 2014, 20
and a Consolidated Amended Complaint was filed on April 28, 2014 21
(the “CAC”). The putative class comprised all persons, other than 22
Defendants, who purchased CVRs between March 6, 2012 and 23
November 7, 2013. The CAC alleged violations of § 10(b) (and SEC 24
Rule 10b‐5 promulgated thereunder) against all defendants, and 25
§ 20(a) of the Exchange Act against the individual defendants. 26
On March 28, 2014, 32 corporations filed a separate complaint 27
(the AG Funds Complaint, or “AGC”) alleging claims arising out of 28
the same set of facts. These plaintiffs had either opted out of the 29
class action or had acquired CVRs outside the class period. In 30
8 At oral argument, counsel for all parties agreed that the record did not reflect what amendments were
made to the submission, but that Sanofi did not conduct new Phase III trials for Lemtrada.
13

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addition to violations under §§ 10(b) and 20(a) of the Exchange Act, 1
the AGC alleges violations under § 18 of the Exchange Act, §§ 11 and 2
12(a)(2) of the Securities Act, and state blue sky laws. For purposes 3
of this appeal, the operative differences between the complaints are: 4
(1) The CAC only alleges violations of the Exchange Act, 5
requiring a showing of scienter, and 6
(2) The AGC’s Securities Act claims encompass statements 7
made by Genzyme and Sanofi in the Offering Materials. 8
Both complaints allege, among other things, that by failing to 9
disclose the feedback from the FDA regarding the use of single‐blind 10
studies, Defendants misled investors as to the likelihood of meeting 11
the Approval Milestone, upon which the CVRs’ value partially 12
depended, thereby artificially inflating the value of the CVRs.9 The 13
district court accepted these cases as related.10
14
On June 27, 2014, Defendants moved to dismiss both 15
complaints for failing to state a claim, arguing that the complaints 16
did not allege any materially false or misleading statements, there 17
were no sufficient allegations of scienter, and their statements were 18
protected as forward‐looking statements. On January 28, 2015, the 19
district court granted Defendants’ motion. 20
F. The Opinion Below 21
The district court (Engelmayer, J.) held in a thorough and 22
thoughtful opinion that Plaintiffs had failed to allege false or 23
materially misleading statements. In re Sanofi Sec. Litig., 87 F. Supp. 24
3d 510 (S.D.N.Y. 2015). With regard to the allegedly false or 25
misleading statements of opinion, the court held, invoking the 26
standard in Fait v. Regions Financial Corp., 655 F.3d 105 (2d Cir. 2011), 27
that Plaintiffs had failed to allege any facts suggesting that 28
9 The CVRs are publicly traded on the NASDAQ exchange.
10 Though each complaint sets out slightly different allegations, we address the complaints together and
refer to Plaintiffs collectively.
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Defendants “did not genuinely believe what they were saying at the 1
time they said it,” and that there similarly had been no showing of 2
objective falsity. 87 F. Supp. 3d at 531–33. The court came to the 3
same conclusion for each group of allegedly false or misleading 4
statements of opinion. See id. at 537–47. 5
The court additionally held that, insofar as it was required, 6
Plaintiffs had failed to adequately allege scienter, saying that “[a]t all 7
relevant times, and without the benefit of hindsight, Sanofi did not 8
have reason to know that its public statements omitted or 9
misrepresented material facts.” Id. at 545. The court also held that, 10
in any event, Defendants’ forward‐looking statements were 11
protected by the Private Securities Litigation Reform Act Safe 12
Harbor provision, as they were accompanied by cautionary language 13
and not made with actual knowledge of falsity. See, e.g., id. at 14
535–36.11
15
After dismissing Plaintiffs’ federal claims, the court declined 16
to exercise its discretionary jurisdiction over Plaintiffs’ remaining 17
claims under state blue sky laws. Id. at 548. Finally, the court denied 18
Plaintiffs’ motion for leave to amend the complaint, noting that the 19
deficiencies in the complaints were substantive and would not likely 20
be cured upon amendment. Id. at 548–49. Judgment was entered 21
against Plaintiffs on January 30, 2015. This appeal followed. 22
DISCUSSION 23
We review a district court’s dismissal of a complaint under 24
Fed. R. Civ. P. 12(b)(6) de novo, “accepting all factual allegations in 25
11 The court also discussed materiality with regard to Defendants’ statements about the Lemtrada clinical
trials, holding that the omissions were not material because there was no credible allegation that
disclosure of the FDA’s interim, nondispositive feedback would have “significantly altered the total mix
of information made available” to investors. Sanofi, 87 F. Supp. 3d at 540–41 (internal quotation marks
omitted) (quoting Matrixx Initiatives, Inc. v. Siracusano, 131 S. Ct. 1309, 1318 (2011)). Because we affirm on
the grounds that Plaintiffs failed to allege materially misleading omissions, we need not confront
Plaintiffs’ concern that the district court endorsed a bright‐line test absolving issuers from any duty to
disclose interim FDA feedback.
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the complaint as true and drawing all reasonable inferences in the 1
plaintiff’s favor.” Fait, 655 F.3d at 109. The Court must examine the 2
complaint for “facial plausibility,” considering whether the “factual 3
content” “allows the court to draw the reasonable inference that the 4
defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 5
U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 6
(2007)). The Court may also “consider any written instrument 7
attached to the complaint, statements or documents incorporated 8
into the complaint by reference, legally required public disclosure 9
documents filed with the SEC, and documents possessed by or 10
known to the plaintiff upon which it relied in bringing the suit.” 11
ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007). 12
Plaintiffs’ claims under § 10(b) of the Exchange Act (and Rule 13
10b‐5 promulgated thereunder) require a showing of scienter. 14
Kleinman v. Elan Corp., 706 F.3d 145, 152 (2d Cir. 2013).12 By contrast, 15
Plaintiffs’ claims under §§ 11 and 12(a)(2) of the Securities Act do not 16
require a showing of scienter, reliance, or loss causation, and require 17
Plaintiffs to show only that Defendants issued or signed a 18
registration statement containing “an untrue statement of a material 19
fact or omitted to state a material fact required to be stated therein or 20
necessary to make the statements therein not misleading.” 15 U.S.C. 21
§ 77k(a); see also Fait, 655 F.3d at 109. Claims under § 18 of the 22
Exchange Act likewise need not allege scienter. Ross v. A. H. Robins 23
Co., 607 F.2d 545, 556 (2d Cir. 1979). 24
We see no reason to disturb the conclusions of the district 25
court. However, after the district court’s opinion, the Supreme 26
Court decided Omnicare, which refined the standard for analyzing 27
whether a statement of opinion is materially misleading. Plaintiffs 28
have urged us to reconsider the district court’s ruling in light of 29
Omnicare. We do so here, but conclude that even under Omnicare’s 30
12 Because § 20(a) of the Exchange Act imposes derivative liability on parties controlling persons who
commit Exchange Act violations, scienter is also required for Plaintiffs’ § 20(a) claim to succeed. See SEC
v. First Jersey Sec., Inc., 101 F.3d 1450, 1472 (2d Cir. 1996).
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standard, Plaintiffs have failed to allege that Defendants made 1
materially misleading statements of opinion. 2
A. Omnicare 3
In Omnicare, the Supreme Court held that where an investor 4
has alleged that an issuer omitted stating material information and 5
thereby rendered a statement of opinion misleading, 6
[t]he investor must identify particular (and material) 7
facts going to the basis for the issuer’s opinion—facts 8
about the inquiry the issuer did or did not conduct or 9
the knowledge it did or did not have—whose omission 10
makes the opinion statement at issue misleading to a 11
reasonable person reading the statement fairly and in 12
context. 13
135 S. Ct. at 1332. This holding altered the standard announced by 14
this Court in Fait, where we held that “when a plaintiff asserts a 15
claim . . . based upon a belief or opinion alleged to have been 16
communicated by a defendant, liability lies only to the extent the 17
statement was both objectively false and disbelieved by the 18
defendant at the time it was expressed.” 655 F.3d at 110 (citing Va. 19
Bankshares, Inc. v. Sandberg, 501 U.S. 1083, 1095–96 (1991)). Omnicare 20
affirmed that liability for making a false statement of opinion may lie 21
if either “the speaker did not hold the belief she professed” or “the 22
supporting fact she supplied were untrue.” 135 S. Ct. at 1327. But 23
Omnicare went on to hold that opinions, though sincerely held and 24
otherwise true as a matter of fact, may nonetheless be actionable if 25
the speaker omits information whose omission makes the statement 26
misleading to a reasonable investor. Id. at 1332. 27
The Supreme Court emphasized that meeting the standard 28
under Omnicare “is no small task for an investor,” id., and also 29
provided guidance for applying its ruling. The Court noted that a 30
reasonable investor, upon hearing a statement of opinion from an 31
issuer, “expects not just that the issuer believes the opinion (however 32
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irrationally), but that it fairly aligns with the information in the 1
issuer’s possession at a time.” Id. at 1329. The Court provided an 2
example: if an issuer tells investors that “We believe our conduct is 3
lawful,” an investor in such a situation “likely expects such an 4
assertion to rest on some meaningful inquiry—rather than, say, on 5
mere intuition.” Id. at 1328. The core inquiry is whether the omitted 6
facts would “conflict with what a reasonable investor would take 7
from the statement itself.” Id. at 1329. 8
The Court, however, cautioned against an overly expansive 9
reading of this standard, noting that “[r]easonable investors 10
understand that opinions sometimes rest on a weighing of 11
competing facts,” and adding that “[a] reasonable investor does not 12
expect that every fact known to an issuer supports its opinion 13
statement.” Id. The Court went on to say that a statement of opinion 14
“is not necessarily misleading when an issuer knows, but fails to 15
disclose, some fact cutting the other way.” Id. 16
The Court also recognized the unique context in which 17
securities claims arise. Acknowledging the formality and legal 18
weight of documents filed with the SEC, the Court noted that 19
“[i]nvestors do not, and are right not to, expect opinions contained in 20
those statements to reflect baseless, off‐the‐cuff judgments”; “[a]t the 21
same time, an investor reads each statement within such a document 22
. . . in light of all its surrounding text, including hedges, disclaimers, 23
and apparently conflicting information.” Id. at 1330. The Court 24
further stated that “the investor takes into account the customs and 25
practices of the relevant industry,” and instructed that “an omission 26
that renders misleading a statement of opinion when viewed in a 27
vacuum may not do so once that statement is considered, as is 28
appropriate, in a broader frame.” Id. 29
B. Allegedly Materially Misleading Statements of 30
Opinion 31
As the district court recognized, some of the statements at 32
issue are not ones of opinion, and thus Omnicare does not impact the 33
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court’s analysis with regard to those statements. 13 The district court 1
analyzed three groups of statements of opinion: 2
(1) Six statements in the Offering Materials related to 3
Sanofi’s expectation that the FDA would approve 4
Lemtrada prior to March 31, 2014, the cutoff date for the 5
Approval Milestone; 6
(2) A subset of statements made after the tender offer 7
regarding the launch of Lemtrada, such as that 8
Defendants were “very satisfied with where the 9
progress is going,” they “expect[ed] a decision on 10
Lemtrada by the end of the year,” and they were 11
“feeling pretty, pretty relaxed”; and 12
(3) A subset of statements regarding Lemtrada’s clinical 13
trial results, such as that Lemtrada demonstrated 14
“strong and robust treatment effect,” the test results 15
“underscore[d] the tremendous promise that Lemtrada 16
holds,” and “[w]e are very pleased with the results of 17
the [Phase III] study.” 18
We analyze each group of statements in turn. 19
1. Expected Timing of FDA Approval 20
The first set of statements is found exclusively in the Offering 21
Materials. Plaintiffs argue that by failing to disclose the FDA’s 22
repeated statements of concern about the use of single‐blind studies, 23
statements from Defendants estimating a 90% likelihood of 24
achieving the Approval Milestone and projecting FDA approval in 25
late 2012 were materially misleading. 26
Two points from Omnicare are important here. First, the 27
omitted facts must “conflict with what a reasonable investor would 28
take from the statement itself.” 135 S. Ct. at 1329. There is no 29
13 Plaintiffs do not argue that the district court incorrectly categorized any statements as opinions.
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plausible allegation that the FDA’s interim feedback conflicted with 1
any reasonable interpretation of Defendants’ statements about FDA 2
approval. Though the FDA had expressed concern about 3
Defendants’ testing methodology, it had also stated that any 4
deficiency could be overcome if the results showed an “extremely 5
large effect.” The record reflects, and the parties do not dispute, that 6
Lemtrada’s treatment effect was, in fact, large. There can be no 7
conflict inferred from a statement of optimism consistent with the 8
FDA’s instructions as to the treatment results necessary for approval. 9
Moreover, the Supreme Court emphasized the need to 10
examine the context of an allegedly misleading opinion, id. at 1330, 11
and context is instructive here. Plaintiffs are sophisticated investors, 12
no doubt aware that projections provided by issuers are synthesized 13
from a wide variety of information, and that some of the underlying 14
facts may be in tension with the ultimate projection set forth by the 15
issuer. These investors are similarly aware, as the district court 16
recognized, that “[c]ontinuous dialogue between the FDA and the 17
proponent of a new drug is the essence of the product license 18
application process.” Sanofi, 87 F. Supp. 3d at 542 (internal quotation 19
marks omitted) (quoting In re Medimmune, Inc. Sec. Litig., 873 F. 20
Supp. 953, 966 (D. Md. 1995)). These sophisticated investors, well 21
accustomed to the “customs and practices of the relevant industry,” 22
would fully expect that Defendants and the FDA were engaged in a 23
dialogue, as they were here, about the sufficiency of various aspects 24
of the clinical trials and that inherent in the nature of a dialogue are 25
differing views. 26
That such a dialogue was ongoing did not prevent Defendants 27
from expressing optimism, even exceptional optimism, about the 28
likelihood of drug approval. Furthermore, the Offering Materials 29
themselves made numerous caveats to the reliability of the 30
projections, and a reasonable investor, especially one dealing in a 31
complex financial instrument like the CVRs here, would have 32
considered the statements “in light of all [the] surrounding text, 33
including hedges, disclaimers, and apparently conflicting 34
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information.” Omnicare, 135 S. Ct. at 1330. While a layperson, 1
unaccustomed to the subtleties and intricacies of the pharmaceutical 2
industry and registration statements, may have misinterpreted 3
Defendants’ statements as evincing assurance of success, Plaintiffs 4
here can claim no such ignorance. 5
Thus, fatal to Plaintiffs’ case is the absence of any serious 6
conflict between the FDA’s interim, albeit repeated, concerns about 7
methodology and Defendants’ optimism about FDA approval. As 8
the Supreme Court noted, “a statement of opinion is not misleading 9
just because external facts show the opinion to be incorrect.” Id. at 10
1328. 11
Second, the Supreme Court noted that “[a]n opinion 12
statement, however, is not necessarily misleading when an issuer 13
knows, but fails to disclose, some fact cutting the other way.” Id. at 14
1329. Plaintiffs’ case essentially boils down to an allegation that the 15
statements were misleading for failure to include a fact that would 16
have potentially undermined Defendants’ optimistic projections. 17
But Omnicare imposes no such disclosure requirements on issuers. 18
Defendants were only tasked with making statements that “fairly 19
align[ed] with the information in the issuer’s possession at the time.” 20
Id. Defendants need not have disclosed the FDA feedback merely 21
because it tended to cut against their projections—Plaintiffs were not 22
entitled to so much information as might have been desired to make 23
their own determination about the likelihood of FDA approval by a 24
particular date. Certainly, Plaintiffs would have been interested in 25
knowing about the FDA feedback, and perhaps would have acted 26
otherwise had the feedback been disclosed, but Omnicare does not 27
impose liability merely because an issuer failed to disclose 28
information that ran counter to an opinion expressed in the 29
registration statement. 30
Counsel for Plaintiffs urged at oral argument that the test is 31
whether Defendants failed to disclose a risk above and beyond the 32
normal risks associated with drug approval. No plain reading of 33
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Omnicare supports this interpretation. Such a test eschews the more 1
taxing question of whether an issuer’s statement is misleading, and 2
instead seeks to impose a bright‐line disclosure rule, regardless of 3
the nature of the statements actually made by the issuer. But even if 4
Omnicare did impose such a standard, Plaintiffs’ case would still 5
falter. As counsel acknowledged at oral argument, nowhere in the 6
complaints do Plaintiffs allege that the risks arising out of the FDA 7
feedback were out of the ordinary, or presented a special challenge 8
not of the kind normally confronted by pharmaceutical companies 9
seeking FDA approval for their drugs. 10
Plaintiffs’ argument here is further belied by the fact that the 11
FDA has long made public its preference for double‐blind trials, 12
telling pharmaceutical companies that “[t]he double‐blind trial is the 13
optimal approach.” Guidance on Statistical Principles for Clinical 14
Trials, 63 Fed. Reg. 49583, 49587 (Dep’t of Health & Human Servs. 15
Sept. 16, 1998).14 Defendants admitted they were relying on single‐ 16
blind trials, and even alluded at times to the desirability of double‐ 17
blind trials.15 Sophisticated investors, aware of the FDA’s strong 18
preference for double‐blind trials, cannot claim surprise when it is 19
revealed that the FDA meant what it said. Especially where a 20
complex financial instrument whose value is tied to FDA approval is 21
involved, investors may be expected to keep themselves apprised of 22
the FDA’s public positions on testing methodology. 23
Thus, even with the benefit of Omnicare’s expanded standard 24
for liability, Plaintiffs have not stated a claim with regard to the 25
statements regarding the likelihood of FDA approval. 26
14 See also Sanofi, 87 F. Supp. 3d at 539–40 (citing 21 C.F.R. §§ 314.126(b)(2)(iv), 314.126(b)(5), 352.72(e),
514.117(b)(7), 860.7(f)).
15 See Joint App’x at 685 (“The infusion‐related syndrome associated with alemtuzumab precluded
double‐blinding.”); id. at 801 (“[M]asking of patients and treating clinicians to treatment assignment was
not feasible. Several steps were undertaken to lessen the risk of bias.”); id. at 807 (“Because both study
drugs had adverse effects that precluded double‐blinding, . . . clinical data integrity was secured by
stringent rater‐masking and independent adjudication of relapses.”).
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2. Timing of Launch of Lemtrada 1
Plaintiffs’ next challenge is to statements made by Defendants 2
relating to the anticipated launch date of Lemtrada. As the district 3
court recognized, these statements fail to support a claim for many 4
of the same reasons as the statements pertaining to FDA approval in 5
the Offering Materials. 6
First, it can hardly be said that the FDA’s critique of Sanofi’s 7
testing methodology conflicted with Defendants’ statements that 8
they were feeling “relaxed” or “satisfied.” Such a generalized 9
statement of subjective optimism arguably does not even “convey 10
facts about how the speaker has formed the opinion.” Omnicare, 135 11
S. Ct. at 1328. But whatever the implication of such a statement, no 12
reasonable investor would have inferred that mere statements of 13
confidence suggested that the FDA had not engaged in industry‐ 14
standard dialogue with Defendants about potential deficiencies in 15
either the testing methodology or the drug itself. 16
Second, Defendants’ statement that they “expect[ed] a 17
decision on Lemtrada by the end of the year” did not conflict with 18
the information available to them at the time. On the contrary, 19
Defendants were correct about the proposed timing—Defendants 20
announced on December 30, 2013 that the FDA had rejected 21
Lemtrada. Defendants’ statement is about timing, not about the 22
likelihood of approval. Further, as set forth above, Defendants’ 23
optimism about the approval of Lemtrada was not in conflict with 24
the FDA’s comments, which had indicated that Lemtrada could be 25
approved if it demonstrated an “extremely large effect.” 26
For these reasons, Plaintiffs’ allegations with regard to 27
statements made about the prospective launch of Lemtrada fail to 28
support a claim. 29
3. Lemtrada’s Trial Results 30
The final set of opinion statements identified by Plaintiffs as 31
misleading are Defendants’ statements that Lemtrada demonstrated 32
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a “strong and robust treatment effect,” and that “the data are 1
nothing short of stunning.” 2
Plaintiffs fail, in the first instance, to show a relationship 3
between the FDA’s critical feedback and Defendants’ statements 4
touting the results of the Lemtrada trials. Sanofi is a global 5
pharmaceutical company operating in a $14 billion market—by early 6
2014, Lemtrada had already been approved for distribution in the 7
European Union, Canada, Australia, Mexico, and Brazil, totaling at 8
least 30 countries, based on Lemtrada’s exceptional clinical results. 9
Plaintiffs’ argument that Sanofi had no reason to comment on 10
Lemtrada’s Phase III success except to build investor anticipation 11
about FDA approval has no merit—Sanofi had an interest in 12
building global interest in Lemtrada. Statements lauding the 13
effectiveness of Lemtrada, when taken in the context of a global 14
rollout plan, do not suggest any special approval (or likelihood of 15
approval) from the regulators of a single country. 16
In addition to the lack of any rational connection between 17
Defendants’ statements about the general effectiveness of Lemtrada 18
and the FDA’s methodological feedback, Plaintiffs fail to 19
demonstrate any conflict between the two. The Supreme Court’s 20
example of an issuer stating a belief that its conduct is lawful is 21
particularly instructive. Such a statement does not imply that the 22
issuer’s conduct is, in fact, lawful, but only that the issuer has 23
conducted a meaningful inquiry and has a reasonable basis upon 24
which to make such an assertion. Here, too, Defendants’ statements 25
about the effectiveness of Lemtrada cannot be misleading merely 26
because the FDA disagreed with the conclusion—so long as 27
Defendants conducted a “meaningful” inquiry and in fact held that 28
view, the statements did not mislead in a manner that is actionable. 29
At bottom, Plaintiffs’ allegations regarding Defendants’ stated 30
opinion about the Lemtrada trial results are little more than a 31
dispute about the proper interpretation of data, a dispute this Court 32
rejected as a basis for liability in Kleinman. 706 F.3d at 154. 33
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Defendants’ statements were not misleading simply because the 1
FDA disagreed with Defendants’ interpretation of the data; an issuer 2
is not liable merely because it “knows, but fails to disclose, some fact 3
cutting the other way.” Omnicare, 135 S. Ct. at 1329. 4
Nowhere in the complaints do Plaintiffs even allege that 5
Defendants’ interpretation of the data was irrational or 6
unreasonable, and such an allegation would have little merit 7
anyway, as the FDA eventually accepted Lemtrada without further 8
clinical trials. Again, as Omnicare counsels, investors account for the 9
“customs and practices of the relevant industry,” and statements 10
must be considered “as is appropriate, in a broader frame.” Id. at 11
1330. Reasonable investors understand that dialogue with the FDA 12
is an integral part of the drug approval process, and no sophisticated 13
investor familiar with standard FDA practice would expect that 14
every view of the data taken by Defendants was shared by the FDA. 15
In the absence of plausible allegations showing a conflict between 16
Defendants’ statements and the FDA feedback, Plaintiffs’ claims here 17
fail as well. 18
CONCLUSION 19
Issuers must be forthright with their investors, but securities 20
law does not impose on them an obligation to disclose every piece of 21
information in their possession. As Omnicare instructs, issuers need 22
not disclose a piece of information merely because it cuts against 23
their projections. Given the sophistication of the investors here, the 24
FDA’s public preference for double‐blind studies, and the absence of 25
a conflict between Defendants’ statements and the FDA’s comments, 26
we conclude that no reasonable investor would have been misled by 27
Defendants’ optimistic statements regarding the approval and 28
launch of Lemtrada. The judgment of the District Court is affirmed. 29
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