## Facts

- ARIAD Pharmaceuticals, Inc. (ARIAD) developed ponatinib (Iclusig), a leukemia drug, and conducted clinical trials in patients resistant or intolerant to other treatments (second-line patients).
- Interim trial data through July 2012 reflected arterial thrombosis events in about 8% of patients.
- ARIAD also initiated a separate trial in previously untreated patients (front-line patients).
- In December 2012, ARIAD announced that the U.S. Food and Drug Administration (FDA) approved ponatinib for certain second-line patients, conditioned on ARIAD using a warning label and submitting 12 months of follow-up data; the announcement included the 8% arterial-thrombosis rate.
- In January 2013, ARIAD completed a secondary offering of common stock using registration statement and prospectus materials that disclosed the July 2012 thrombosis data and included risk disclosures about serious adverse events and regulatory action.
- During 2013, ARIAD provided additional follow-up data to the FDA. ARIAD later announced updated information indicating higher rates of serious cardiovascular events, terminated the front-line trial, and suspended marketing of the drug; ARIAD’s stock price fell after these disclosures.
- Investors filed consolidated class claims asserting (1) Exchange Act claims under § 10(b) and Rule 10b-5 (and § 20(a) control-person claims) based on allegedly misleading statements and omissions about ponatinib’s safety profile and regulatory status, and (2) Securities Act claims under § 11 (and § 15 control-person claims) tied to the January 2013 secondary offering.
- Defendants, including ARIAD, certain officers/directors, and the offering underwriters, moved to dismiss under Rule 12(b)(6). The Exchange Act claims were evaluated under the PSLRA’s heightened pleading standards.

## Issues

1. Whether plaintiffs plausibly alleged materially false or misleading statements or omissions about ponatinib’s safety risks and FDA-related matters, as required for § 10(b) and Rule 10b-5.
2. Whether the complaint alleged facts giving rise to a strong inference of scienter under the PSLRA for the Exchange Act claims.
3. Whether plaintiffs had standing to sue under Securities Act § 11 by adequately alleging that their shares were purchased pursuant to, or traceable to, the January 2013 secondary offering.
4. Whether the offering materials were materially misleading under § 11 for omitting any increase in adverse events between July 2012 and the January 2013 offering, including whether such information was known and required to be disclosed at the time.
5. Whether control-person claims under Exchange Act § 20(a) and Securities Act § 15 could proceed absent a viable primary violation.

## Decision

- The court granted defendants’ motions to dismiss and dismissed the consolidated complaint in its entirety.
- The court dismissed the Exchange Act § 10(b)/Rule 10b-5 claims for failure to plead actionable falsity and for failure to allege a strong inference of scienter under the PSLRA; the derivative § 20(a) claims were dismissed as well.
- The court dismissed the Securities Act § 11 claims on the ground that plaintiffs did not adequately plead tracing/standing and, alternatively, because the complaint did not plausibly allege a material misstatement or omission in the January 2013 offering documents as of the offering date; the derivative § 15 claims were dismissed.

## Legal Principles

- For § 10(b) and Rule 10b-5, a plaintiff must plead a materially false or misleading statement or omission; later adverse developments do not, by themselves, make earlier disclosures fraudulent.
- The PSLRA requires particularized facts supporting a strong inference that defendants acted with intent to deceive or with a highly unreasonable state of mind; allegations that executives “must have known” based on the drug’s importance or the seriousness of adverse events are generally insufficient without specific contemporaneous facts.
- Companies are not required to disclose every detail of their communications with regulators; liability turns on whether what was said was misleading in light of what was omitted.
- Under Securities Act § 11, a plaintiff must show that the registration statement contained a material misstatement or omission at the time it became effective; § 11 does not impose liability for failing to supply every incremental update in interim clinical data absent a showing that omission made the offering materials misleading when issued.
- Section 11 standing requires that the plaintiff’s shares be purchased pursuant to, or traceable to, the challenged offering; conclusory “pursuant and/or traceable to” allegations may fail where other shares trade in the market.
- Control-person claims under Exchange Act § 20(a) and Securities Act § 15 generally require an adequately pleaded primary violation.

## Conclusion

In *In re ARIAD Pharmaceuticals, Inc. Securities Litigation*, the district court dismissed, at the pleading stage, investors’ federal securities claims arising from ARIAD’s ponatinib safety disclosures and later regulatory actions. The court held that the complaint did not plead actionable misstatements or omissions and did not plead scienter with the specificity required by the PSLRA for the Exchange Act claims. It also held that the Securities Act claims tied to the January 2013 secondary offering failed because plaintiffs did not adequately trace their shares to the offering and, in any event, did not plausibly allege that the offering documents were materially misleading at the time based on known adverse-event information.


In re ARIAD Pharmaceuticals, Inc. Securities Litigation, 2015 U.S. Dist. LEXIS 36818 (2015)