WANG v. PTC THERAPEUTICS, INC. et al

Filing 64

OPINION. Signed by Judge Kevin McNulty on 8/28/17. (DD, )

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

Civ. No. 16-1124 (1KM) (MAR)
IN RE PTC THERAPEUTICS, INC.
SECURITIES LITIGATION

OPINION

KEVIN MCNULTY. U.S.D.J.:
The plaintiffs brought this securities class action against PTC
Therapeutics, its CEO and founder, Dr. Stuart Peltz, and its CFO, Shane
Kovacs (collectively, “defendants” or “PTC”), after the FDA found PTC’s New
Drug Application (“NDA”) for Translarna facially inadequate for review.
Plaintiffs, who purchased FtC stock sometime between November 6, 2014 and
February 23, 2016, allege that FIt misrepresented or omitted facts about the
efficacy of Translarna while knowing all along that the clinical data failed to
meet FDA approval standards. As a result, plaintiffs claim, they suffered
substantial financial losses when PTC’s share price plummeted nearly 60%
following the public announcement of the FDA’s refusal to file its NDA.
Defendants have moved to dismiss the complaint, claiming that plaintiffs fail to
allege any actionable misstatement or omission made with intent to defraud or
deceive. The motion to dismiss will be granted in part and denied in part.

1

I.

FACTUAL BACKGROUND1
A.

PTC, Translarna, and DMD

Founded in 1998 by Dr. Peltz, FEC develops drugs that treat rare and
ultra-rare genetic diseases and disorders. In 2003, FEC began developing
ataluren (brand name Translarna), which it designed to treat a genetic
mutation called a “nonsense mutation.” Nonsense mutations can cause a
variety of serious genetic diseases, including a particularly rare and
devastating disease known as Duchene muscular dystrophy (“DMD”).2 With a
process called “post-transcriptional control,” FEC hoped that that Translarna
would slow the disease’s progress by allowing cells to “read-through” the
nonsense mutation and produce functional proteins. (AC

¶J

2, 30, 34, 35, 38-

39)
Translarna was the first product for which FEC sought regulatory
approval in the United States and Europe. Because PTC’s other drugs were
years away from being marketed, Translarna was PTC’s only opportunity to
begin generating revenue during the class period. The approval of Translarna, if
obtained, would reflect favorably on theory of post-transcriptional control,
which might assist FEC in marketing and developing other drugs that treat
disorders caused by nonsense mutations. Translarna accounted for 100% of
FEC’s revenues in February 2016. (AC

¶J

34-37, 184)

Citations to the record are as follows:
“AC”

—

Consolidated Amended Class Action Complaint, ECF No. 52

Exhibits attached to the Declaration of Deborah S. Birnbach,
“Def. Ex.
Esq., filed February 14, 2014, ECF No. 56-2
2
DMD, which predominantly occurs in boys, causes the muscles to weaken and
progressively waste away. Patients typically exhibit symptoms at two or three years
old, and by adolescence are unable to walk. When DMD eventually reaches the lungs,
a respirator is required; when it reaches the heart, the patient dies.
—“

—

2

B.

The Drug Approval Process: An Overview

A company, such as PTC, which wants to market and sell a new drug,
such as Translarna, must submit a new drug application (“NDA”) to the FDA.
To approve the drug, the FDA must be convinced that there is “substantial
evidence” that the drug is safe and effective at treating the condition it purports
to treat. The developer usually does this by conducting a series of clinical
trials. The first, a Phase 1 trial, evaluates the drug’s safety and dosage
tolerance. The second, a Phase 2 trial, evaluates safety, dosage, and efficacy.
Phase 2 is sometimes broken up into two sub-phases, 2a and 2b. As a rule of
thumb, Phase 2b trials are more intensive than Phase 2a trials; they evaluate a
drug’s efficacy in a larger patient population or over a longer period of time
than a 2a trial, and as against a placebo. A phase 3 trial, usually the final trial,
also evaluates safety and efficacy, but in an even larger patient population. To
secure an NDA, the FDA typically requires two successful efficacy trials, ideally
a phase 2b and a phase 3 trial. (Id.

¶

40-49)

Once an NDA is submitted, the FDA conducts a preliminary review of the
application. If it is incomplete, improperly constructed, or otherwise facially
inadequate, the FDA will issue a RTF—Refuse to File—letter. According to the
FDA:
A RTF is based on omission of clearly necessary information
or omissions or inadequacies so severe as to render the
application incomplete on its face and where the omissions
or inadequacies are so obvious, at least once identified, and
not a matter of interpretation or judgment about the
meaning of data submitted.”
(AC

¶f

50-52)

3

RTFs, plaintiffs say, are relatively uncommon. From January 2010 to
February 2016, the FDA issued 16 RTFs out of more than 200 NDAs for new
molecular entities (not including the two Translarna RTFs).3 (Id.

¶ 53-54)

Because DMD is so rare and so serious, Translarna benefited from two
programs during the development and review process. From the FDA’s Orphan
Products Clinical Trial Grants Program, FEC received a grant to help fund
Translama’s clinical trials. The FDA also designated Translarna as a “fast
track” drug, which allowed FEC to submit Translarna’s NDA on a rolling basis,
instead of waiting until after all the trials had been completed. The FDA
encourages fast-track drug developers to communicate with it “early” and
“frequent[ly]” during the development and review process. (Id. ¶jJ 40-43)
C.

Translarna’s Development and Review
1.

The 2011 2b Trial

By May 2007, FEC had completed the Phase 1 and Phase 2a trials for
Translama. Patients began enrolling in the 2b trial—Translarna’s first major
efficacy trial—in February 2008. 174 DMD patients between the ages of 5 and
20 enrolled. (Id.

¶ 55)

The goal of the 48-week 2b trial was to determine whether Translarna
treated patients experienced a slower decline in their ability to use their
muscles. To test that hypothesis, one group of patients was given Translarna
while a second group was given a placebo. At the beginning (week one) and end
(week 48) of the trial, the researchers measured the distance that each patient
could walk in six minutes. The difference between those two figures was then
calculated, and averaged across the relevant group. If the average change in
distance walked by Translarna-takers exceeded that of placebo-takers by more

As plaintiffs acknowledge, the FDA does not disclose which drugs receive RTFs,
and a publicly traded company (like PTC) need only disclose the existence of an RTF
(and even then, not necessarily its contents) if it considers the RTF to be a material
event. The data, then, may be incomplete. (AC ¶ 53)

3

4

than 30 meters, then PTC could conclude that Translarna had a clinically
meaningful effect on DMD patients. To achieve statistical significance, the
results would need a p-value of 0.05 or less.4 (AC

¶1J 56-59)

In December 2009, the 2b trial wrapped up. On March 3, 2011, FEC
released some preliminan’ results. Translarna failed to meet the pre-specified
endpoints for effectiveness and statistical significance. At 29.7 meters, the
mean change in 6-minute walking distance fell just short of 30-meter threshold
necessary to demonstrate clinical effectiveness, and the p-value for the results,
0.149, far exceeded the .05 limit of statistical significance. PTC theorized that
the 2b trial failed to reach its endpoints because the study included “younger
patients and patients with higher baseline 6-minute walk distances [thati are
less likely to exhibit measurable declines in 6-minute walk distance over 48
weeks.” The problem, in other words, was that 2b trial included patients that
were not yet sick enough to report a benefit—as PTC had defined it—from
Translarna. FEC therefore removed the younger, more able patients from the
dataset, and performed a retrospective data analysis on the older, “declinephase” patients. These so-called “corrected” results were better, and met the p
test of statistical significance. (AC

¶11 60-63)

In March 2011, FTC filed an NDA (the “2011 NDA”) for Translarna based
on the corrected findings. Because “Phase 2b clinical trial contained in the
NDA did not achieve statistical significance in the pre-specified analysis,” the
FDA refused to file the NDA (the “2011 RTF”). PTC appealed in December 2011,
and the FDA affirmed its decision in February 2012. (Id. ¶j 64-66)

The p-value for a dataset represents the probability that the hypothesis being
tested was borne out simply by chance. In lay terms, a p-value of 0.05 means that
there is a 5% likelihood that an occurrence was the result of chance alone. This is
sometimes referred to as statistical significance, a term of art; it does not imply that
results are “significant” or important as those words are used colloquially.

5

In August 2014, the European Medicines Agency (“EMA”) authorized PTC
to market Translarna in Germany.5 Although the EMA initially had “major

Defendants have submitted a slew of extrinsic documents with their papers, a
number of which plaintiffs have moved to strike. (ECF Nos. 56, 58) Many are clearly
subject to judicial notice (i.e., PTC’s 10-Q’s, 8-Ks, transcripts of conference calls relied
upon in the AC, etc.), and plaintiffs do not contend other-wise. See generally Fed. I?.
Evid. 201 (“The court may judicially notice a fact that is not subject to reasonable
dispute because it: (1) is generally known within the trial court’s territorial
jurisdiction; or (2) can be accurately and readily determined from sources whose
accuracy cannot reasonably be questioned.”) Because these documents are publicly
available, authentic records, and are explicitly relied upon and integral to the
complaint, I will take judicial notice of them. See In re NACH Sec. Litig., No. CIV.A 004020, 2001 WL 1241007, at *5 (ED. Pa. Oct. 17, 201), affd 306 F.3d 1314 (3d Cir.
2002).
5

I will decline to take judicial notice of other documents, however. Defendants
have submitted a number of analyst reports (Def. Exs. 28-31), SEC filings of its
competitors, (Def. Exs. 34-35), and their own 8-K and 10-Q, filed after the close of the
class period. (Def. Exs. 19-20). The AC relies upon none of these documents. See In re
Asbestos Product Liability Litig. (No. VI), 822 F.3d 125, 134 n.7 (3d Cir. 2016) (on a
motion to dismiss, a courts may consider “documentlsj integral to or explicitly relied
upon in the complaint” or any “undisputedlv authentic document that a defendant
attaches as an exhibit to a motion to dismiss if the plaintiffs claims are based on the
document”) (internal citations omitted)).
Defendants observe that I have the discretion to notice these documents, not for
their truth, but for the existence of their contents. Some courts, for example, have
taken notice of analyst reports and SEC documents not relied upon in the complaint.
NAHC, 306 F.3dat 1331; SECv. Ustain, 229 F. Supp. 3d 739, 761 (N.D. 111.2017).
Defendants cite no authority, however, for the proposition that a court may take notice
of the SEC filings of another company to resolve a motion to dismiss a securities
lawsuit. At any rate, the inferences defendants wish to draw from these documents go
beyond the mere existence of statements within them (e.g., what PTC actually believed
about the ACT DMD results, what the investing public actually believed about the ACT
DMD results, etc.). Such contentions cannot properly be weighed on a motion to
dismiss. That is all the more true since materiality is not an issue on this motion.
Ustain, 229 F. Supp. 3d at 761 (taking judicial notice of analyst reports “to resolve
questions about the materiality of alleged misrepresentations or omissions”).
None of these documents would change my analysis in any event. Defendants
submit the analyst reports to demonstrate that the market was generally aware that
the ACT DMD study had failed to reach its endpoints. But those reports also reiterate
the allegedly false or misleading information that management conveyed to the market
by other means: in particular, that the 300-400 meter subgroup results, standing
alone, could be sufficient to for FDA approval. As explained in Part JIB. 1-2, it is
sufficiently alleged that those assertions were false or misleading.

VPC proffers the SEC filings of its competitors to prove up the point that the
FDA had filed competitors’ NDAs even though their clinical trials had failed to meet
6

objections” because it believed there was “insufficient evidence of efficacy based
on [VrCl’s single Phase 2b clinical trial,” it was eventually convinced by the
post-hoc analysis of the data described above. The EMA authorization was
“conditioned upon the successful completion of ACT DMD and subject to
annual review and renewal by the EMA.” (Def. Ex. 6, pp. 3, 4, 14; Def Ex. 10
pp. 3-4, 6)
2.

The 2015 ACT DM13 (Phase 3) Trial

Following the 2011 RTF, FEC pushed onward with the development and
design for the phase 3 trial, also known as the Ataluren Confirmatory Trial in
DMD, or “ACT DMD.” The goal of the ACT DMD trial would be to “confirm” the
positive results from the older, decline-phase patients that seemed to benefit
most from Translarna in the 2b trial. Enrollment in the ACT DMD trial was
therefore restricted DMD patients from ages 7 to 16 who could still walk.
(AC

¶11

72-74)

As far as structure and design, the ACT DMD study was essentially the
same as the 2b study: a 48-week, double blind trial measuring six minute
their primary endpoints or weren’t complete at all. What FEC believed about other
company’s disclosures is several steps removed from the issues presented here. To the
extent those filings are relevant at all, I could not give them weight in this procedural
po snare.
Fit’s own November 2016 and January 2017 SEC filings are offered to
substantiate two relatively inconsequential contentions: After the FDA issued
Translarna its second RTF, FEC decided to file an NDA “over protest,” and the EMA
renewed Translarna’s marketing approval. Each of those events occurred nearly a year
after the allegedly false or misleading statements, however, and so their relevance to
the issues here—e.g., what was known to PTC at the time it made the alleged
misstatements—is quite low.

The last item plaintiffs wish to strike is a 16-page summary chart (Def. Ex. 2).
The chart compares the alleged misstatements side-by-side with defendants’
arguments as to why those statements are not false or misleading. Plaintiffs argue that
the chart is not the proper subject of judicial notice. Their real gripe seems to be that
defendants effectively augmented the size of their opposition brief by attaching the
chart as an exhibit. Plaintiffs do not argue, however, that they are prejudiced in any
way by the chart. Nor can I discern prejudice: The chart does nothing more than
organize portions of the AC (reprinted verbatim) and refer to arguments already raised
in the papers. Although I assign it little significance, I also decline to strike it.

7

walking distance, a 30-meter clinical benefit endpoint, a .05 or less statistical
significance threshold, and so on. After the study concluded, FEC planned to
perform a “meta-analysis” combining all of the ACT DMD data with the
favorable 2b study decline-phase data. (AC

9

71-77)

PTC would also take a closer look at two subgroups that it had pre

specified for statistical analysis. The first was a subgroup of patients who could
not walk more than 350 meters at the beginning of the trial. PTC considered
this subgroup “key” because “350 meters represents a transition point for
patients towards a more rapid decline in walking ability as supported by
analysis from our Phase 2b study.” These children and teenagers, in other
words, were the decline-phase patients around which FEC designed the entire
ACT DMD study. The second pre-specified “key” subgroup consisted of patients
who had a baseline that fell somewhere between 300-400 meters. This second
group was specified “based on an increasing understanding of the sensitivity
limitations of the six minute walk test as an endpoint in 48-week studies.” That
FEC had pre-specified either subgroup was not known publicly until after the

ACT DMD results were announced. (AC

¶J

73-74, 77-82, 87)

During the development of ACT DMD trial, FEC told investors that its
design reflected what it had learned from the 2b trial and incorporated the
FDA’s feedback, which made FEC confident that the study would succeed.
Thus, for example, in an August 2013 earnings call, Peltz stated that “[t]he
design of the trial reflects the knowledge gained from our earlier study as well
as the views expressed in discussions with the FDA.

.

.

.

“

A couple years later,

in January 2015, Peltz stated at healthcare conference that FEC “used the
learnings from our previous study to really wring out the risk in the current
study.” A few months after that, in May 2015, Kovacs, FEC’s CFO, told
attendees at a healthcare conference that FEC had “refined” the ACT DMD
study “versus the prior Phase 2 study” and “had a high degree of confidence in

8

the likelihood of a positive outcome in this study later this year.” (Id.

67-69,

114, 124)
On October 15, 2015, FF0 announced the ACT DMD results. They were
worse than the 2b trial results. For the overall population of patients
(sometimes referred as the overall “intent-to-treat,” or “111” population), the
mean change from baseline in the 6-minute walk test fell significantly below
the 30-meter efficacy: goal (15 meters) and well above the of .05 statistical
significance threshold (p=O.2l3). But there was a bright spot: the 300-400
meter subgroup did report promising, statistically significant results. (47
meters, p=O.OO7). Corroborating those favorable results, FEC claimed, was the
“pre-specified meta-analysis of their Phase 2b and ACT DMD results,” although
that analysis did not demonstrate meaningful clinical benefit. FEC did not
disclose the <350 meter subgroup results.7 (AC

¶ 81-84; Def. Ex. 13 p. 1-2)

In a Q&A conference call announcing the ACT DMD results, FEC
emphasized the 300-400 meter subgroup and the pre-specified meta-analysis.
FEC did not state that nearly 60% of the ACT DMD patients reported no

clinically meaningful or statistically significant benefit from Translarna. The
“totality of the data,” PTC claimed, “confirmed” the clinical benefit of
Translarna. As Peltz explained:
The totality of the data for Translarna demonstrates clinical
benefit across primary and secondary endpoints. We have
pre-specified the key subgroup for analysis and the meta
analysis, both of which show Translarna had a clinically
meaningful benefit for DMD patients. The results from ACT
DMD trial showed consistent evidence of the clinical benefit
of Translama for individuals with nonsense mutation
Duchenne muscular dystrophy, and its impact on the course

It is not clear when the ACT DMD trial actually started, although Peltz told
investors that FEC had submitted the ACT DMD’s proposed statistical analysis plan
sometime in “spring 2015.” (Id. ¶ 103)
6

So far as this record reveals, PTC has never released the <350 subgroup
results.

9

of the disorder, and the quality of life for those boys and
young men.
(AC ¶ 88-90, 128)
On the same call, Peltz implied that pre-specified meta-analysis
combining the ACT DMD data with the decline-phase 2b trial data had the
FDA’s blessing:

Q:

Hi, thanks for taking the question. So have you had
discussions with the FDA on the degree of consideration they
might give to pre-specified meta-analysis? And if so, can you
provide any more information on that?
A. Sure, yes. Thanks for that question. The pre-specified
meta-analysis was in our statistical plan, which we had
discussions with with [sic] the FDA. This was in part, part of
the pre-specified plan. So they were well aware that this was
agreed upon, or what was in our plan. So, yes, that’s in a
sense, standard procedure.
More generally, Peltz told analysts that PTC’s “approach was consistent
with the recent draft guidance for Duchenne muscular dystrophy, but to pre
specify subgroups were a treatment effect is more likely to be seen, for the
chosen primary and secondary endpoints.” (AC

¶

129; Def. Ex 23 p. 4)

About a month later, in a November 9, 2015, 8-K, 10-Q, and during a
quarterly earnings call, PTC continued to represent that the “totality” of the
data “confirmed” the clinical benefit of Translarna. From the 8-K:
ACT DMD results confirm clinical benefit of Translarna in
The
nonsense mutation Duchenne muscular dystrophy
totality of the clinical data from two large, placebo-controlled
clinical trials across 400 patients demonstrates Translarna’s
ability to slow disease progression.

(Id. ¶ 136)
From the l0-Q:
[W]e believe that the results of the ACT DMD and the totah
of clinical data across our two large, randomized placebo
controlled trials (ACT DMD study and our prior Phase 2b
study, Study 007), provide substantial evidence of the
10

effectiveness of Translarna and demonstrate a meaningful
benefit of Translarna for the treatment of nmDMD.
(Id.

¶ 137)
And from the conference call (Peltz is speaking):
[TJhe goal is to show efficacy with given endpoints in the
limited window of a 48 week clinical study. We see this in
the totality of clinical data confirmed
ACT DMD
Translarna’s ability to slow disease progression for patients
with DMD.
.

(Id.

.

.

¶ 138)
A week-and-a-half after that, on November 18, Kovacs spoke at a

healthcare conference. He too implied that the “totality” and “consistency” of
the data favored FDA approval:
And the big picture about our data is and what will be part
of our argument to both the regulatory authorities in the US
and Europe is that the consistency of the results now seen
across two of the largest placebo-controlled Phase 3 studies
ever done in the disease, the totality of the data support the
clinical benefit and certainly the risk-benefit profile of the
drug in favor of an approval and getting something to these
kids.
(AC

143)
In December 2015, Kovacs spoke at another healthcare conference. He

told attendees that VPC’s “intention today is for filing for full approval on the
basis of two large well-controlled studies that all point to safety and efficacy for
a risk-benefit profile in favor of the drug.” (Id.

11

¶ 147)

3.

The 2016 RTF

In January 2016, FEC announced that it had submitted a second
NDA (the “2016 NDA”) for Translarna. This NDA was for full, not conditional,
approval; that is, FEC sought approval of Translarna for the treatment of all
DMD patients, not just for patients of a certain age or at a particular stage of
the disease. The 2016 NDA relied on (1) the 300-400 meter subgroup findings
and (2) the meta-analysis combining the ACT DMD data with the decline-phase
2b trial data. PTC also submitted (3) a meta-analysis for all patients (i.e.,
everyone in the ACT DMD Ifl and “corrected” 2b patient populations) who had
a baseline 6 minute walking distance of 300 to 400 meters. That analysis was
not specified in advance of the either the ACT DMD or 2b trials; it was a post
hoc analysis. It also accounted for less than 42% of all patients across both
trials.8 After receiving the ACT DMD results but before submitting the 2016
NDA, FEC did not meet with the FDA. (Id.

¶31

55, 92-93, 105, Def. Ex. 24)

While the FDA reviewed Translarna’s NDA application, FEC continued to
state or imply that substantial evidence supported approval. At yet another
healthcare conference, this one held on January 13, 2016, Peltz stated:
So you see in the two large studies where we used the sixminute walk test as the primary endpoint, we saw a benefit
in the primary endpoint as well as the secondary endpoint.
And in prespecified subgroups, we saw more robust effects
being observed, both the primary and second endpoints. So
consistent data in two independent studies.
One of the things we’ve noticed they [presumably the FDA]
asked for was sensitivity analysis, and that while you have
prespecified subgroups, if you go beyond those, does the
data still show clinically meaningful differences? And it does
both in the primary and secondary endpoints.
(AC

¶

150)

If all 174 patients that enrolled in the 2b trial (i.e., the non-”corrected”
population) are included in the calculation, that figure drops to less than 36%. (See
Def. Ex. 24)
8

12

Discussing one of the meta-analyses, Peltz added:
In the meta-analysis, where you combine the results, you see
both in the six-minute walk distance as well as the time
function tests, you see clinically meaningful and statistically
significant improvements with Translarna over placebo.
And really it’s consistent with totality of the data,
demonstrating that this drug was efficacious. So I think
we’ve checked that box.
(AC

¶ 151)
On February 22, 2016, the FDA issued Translarna a second RTF (the

“2016 RTF”). Like the 2011 RTF, it is not publicly available. FtC relayed to
investors the gist of it: The 2016 NDA was “not sufficiently complete to permit
substantive review.” “There were really two bases

.

.

.

that were outlined in the

letter[,]” FtC said: “the first of which was that both the Phase 2b and Phase 3
studies had failed and therefore did not demonstrate substantial evidence of
effectiveness and secondly that the application did not sufficiently describe the
abuse potential of the drug.” (Id.

¶1J 96, 157)

After the announcement, the market turned on Translarna. From
February 22 to February 23, 2016, PTC’s share price fell from $28.26 to
$10.84—a 61.6% drop. (Id.

¶t

158)

More details about the FDA’s reasoning trickled out a week later. In a
February 29, 2015 press release, FtC stated that the FDA viewed “certain of
the company’s adjustments to the ACT DMD study as post hoc and therefore
not supportive of effectiveness.” On a conference call the same day, an analyst
asked Peltz to reconcile the FDA’s position with PTC’s previous representations
“that the [ACT DMD] statistics plan was submitted to the FDA earlier in 2015.”
Peltz responded that FtC indeed had submitted the plan “in the spring of
2015.” While the “FDA commented on our statistical analysis plan,” he
explained, they “had no comments on our subgroups.” He continued:
We submitted the final statistical analysis plan to the FDA
before unblinding the ACT DMD study. However in the RTF

13

letter the FDA characterized that PTC proposed a post hoc
adjustment of ACT DMD that eliminates data from a majority
of enrolled patients.
We believe the FDA’s perspective in the RTF letter may be
that although we’ve pre-specified the subgroup, relying on
the subgroup as the main analysis is considered as a post
hoc adjustment and we’ll be talking to them further on this
point.
(AC

¶ 98-103)
In August 2016, PTC appealed the RTF, which was denied in November

2016.
D.

This Case

From March 3 to March 11, 2017, three class action complaints alleging
violations of section 10(b) and Rule lob-5 were filed against PTC in this
district. See Wang v. PTC Therapeutics, Inc., 16-1224, Parker v. PTC
Therapeutics, inc., 16-1384, and Kosin u. FTC Therapeutics, 16-1383. Pursuant
to the Exchange Act and Private Securities Litigation Reform Act (“PSLRA”) of
1995, I consolidated the cases and designated Wang as the lead case.
On January 13, 2017, plaintiffs filed a consolidated amended class
action complaint (“AC”). Co-lead plaintiff Boston Retirement System is a
pension plan which purchased or acquired PTC common stock from November
6, 2014 to February 23, 2016—the “Class Period”. A second co-lead plaintiff, Si
Nguyen, Hong-Luu Nyugen, John Nguyen, and the Si Tan Nguyen Trust also
purchased Wit common stock during the Class Period. So too did another
plaintiff, Retail Wholesale Department Store Union Local 338.
Plaintiffs allege that, during the Class Period, PTC knowingly or
recklessly made a number of false or misleading statements to investors
concerning Translarna. These generally fall into three overlapping categories:
(1) statements about the anticipated timeline for FDA review of the 2016 NDA;
(2) statements about the likelihood that the ACT DMD trial would meet its

14

efficacy endpoints; and (3) statements about the ACT DMD results.° Under
Section 20(a), plaintiffs also seek to hold PTC’s CEO, Peltz, and CFO, Kovacs,
individually liable as “control persons.”
On February 14, 2017, defendants moved to dismiss the AC. The motion
is now fully briefed and ripe for decision.
II.

DISCUSSION
A.

Rule 12(b)(6) and the PLRSA

In place of the normal pleading standard articulated in Fed. R. Civ. P. 8,
Plaintiffs pleading securities fraud claims pursuant to Section 10(b) of the
Securities Exchange Act and Rule lOb-S must meet a heightened pleading
standard as set forth in the Private Securities Litigation Reform Act (“PLRSA”).
15 U.S.C.

§ 78u-4(b)(l). Under the PSLRA, plaintiffs bringing a claim involving

an allegedly false or misleading statement must: “(1) ‘specify each statement
alleged to have been misleading [and] the reason or reasons why the statement
is misleading,’ 15 U.S.C.

§ 78u—4(b)(1), and (2) ‘state with particularity facts

giving rise to a strong inference that the defendant acted with the required
state of mind,’

§ 78u—4(b)(2).” Rahman v. Kid Brands, Inc., 736 F.3d 237, 242

(3d Cir. 2013) (quoting Tellabs, Inc. u. Makor Issues & Rights, Ltd., 551 U.S.
308, 321 (2007)) (internal quotations omitted); accord Williams v. Globus
Medical, Inc., No. 16-3607, 2017 WL 3611996, at *3 (3d Cir. Aug. 23, 2017).
That required state of mind is “scienter,” which is defined as “a mental state
embracing intent to deceive, manipulate, or defraud.” Rahman, at 242. (quoting
Tellabs, 551 U.S. at 319).
Both provisions of the pleading standard require that facts be pleaded
“with particularity,” echoing the requirement set forth in Fed. R. Civ. P. 9(b).
Institutional Investors Group v. Avaya, Inc., 564 F.3d 242, 253 (3d Cir. 2009);
see Fed. R. Civ. p. 9(b) (a party must state with particularity the
Both sides have employed this three-part categorization of the allegations, and I
do so as well.

9

15

“circumstances constituting fraud or mistake.”). Although the PSLRA
supplanted Rule 9(b) as the pleading standard governing private securities
class actions, Rule 9(b)’s particularity requirement is effectively subsumed by
the requirements in Section 78u-4(b)(1) of the PSLRA. Id. (citing Miss. Pub.
Employees’Ret. Sys. u. Boston Scientific Corp., 523 F.3d 75, 85 n. 5 (1st Cir.
2008)). This standard requires that plaintiffs plead the “who, what, when,
where and how” of their claims. Id. (citing In re Advanta Corp. Sees. Litig., 180
F.3d 525, (3d Cir. 1999)).
Where the PSLRA exceeds the requirements of Rule 9(b), however, is in
its approach to pleading scienter.1° Under the PSLRA, the Court must evaluate
whether all the facts in the complaint as alleged, taken collectively, give rise to
a “strong inference of scienter.” Tellabs, 551 U.S. at 323. In determining
whether the pleaded facts collectively give rise to a strong inference of scienter,
the Court must take into account plausible opposing inferences. Id. This
involves a comparative inquiry, weighing the likelihood of one conclusion as
compared to others, in light of the pleaded facts. Id. The Court must therefore
consider not just plaintiff-friendly inferences, but also plausible, nonculpable
explanations for the defendant’s conduct. Id. Although the inference that the
defendant acted with scienter need not be irrefutable, the inference must be
more than merely “reasonable” or “permissible.” Id. A complaint will survive
only if a reasonable person would “deem the inference of scienter cogent and at
least as compelling as any opposing inference one could draw from the facts
alleged.” Id.
These PSLRA pleading requirements apply irrespective of whether the
alleged fraudulent statement at issue is an assertion of current fact or a
prediction of the future. Avaya, 564 F.3d at 253-54. When an allegation
involves a prediction, however, the Safe Harbor Provision of the PSLRA provides

‘C
Rule 9(b) provides that “fm]alice, intent, knowledge, and other conditions of a
person’s mind may be alleged generally.”

16

some protection to defendants. The Safe Harbor Provision immunizes from
liability any forward-looking statement provided that “the statement is
identified as such and accompanied by meaningful cautionary language; or is
immaterial; or the plaintiff fails to show the statement was made with actual
knowledge of its falsehood.” Id. at 254; 15 U.S.C.
B.

§ 78-u-5(c).

Analysis

Securities fraud has six elements: “(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.” City
of Edinburgh Council v. Pfizer, Inc., 754 F.3d 159, 167 (3d Cir. 2014). FEC seeks
to dismiss the AC for failure to plead elements (1) and (2).’’ To some extent,
PTC is entitled to prevail on its contentions. As to Peltz and Kovacs’s allegedly
false projections about Translarna’s regulatory review timeline and
mischaracterizations about the risk that the ACT DMD trial would fail, I agree
that plaintiffs have failed to allege factually that the statements were false or
misleading when made. But as to Peltz’s and Kovacs’s allegedly false or
misleadingly incomplete statements about what the ACT DMD trial actually
demonstrated, and the resulting inability to pass even the most minimal
standard of FDA review, the AC contains enough particularized factuality to
allege falsity and scienter.
1.

Actionable Misrepresentations

As to the first element of securities fraud, PTC argues that the AC fails to
allege with sufficient particularity any false or misleading statement. Recall
that Peltz’s or Kovacs’s allegedly false or misleading statements fall into roughly
three categories: (1) statements, as of November 2014, about Translarna’s
review timeline; (2) statements, as of early-to-mid 2015, about risks of the ACT

PTC does not argue that any of the alleged misrepresentations or omissions are
immaterial.

17

DMD study; and (3) statements, from October 2015 and beyond, about the ACT
DMD results. Statements in groups (1) and (2) are not actionable. Group (3)
statements are actionable.
Timeline Projections

i.

Plaintiffs first point to a couple of statements in which PTC suggested
that Translarna would launch by the first half of 2016. Both were made by
Peltz during a November 6, 2014 quarterly earnings call:
1) “We expect that the submission of this confirmatory’ Phase 3
data will complete our rolling NDA.
.

.

2) “Well then expeditiously get it in and it’s our hope and I think
in our dialog with them [i.e., the FDA], given the severe unmet
medical needs that this would be rapidly reviewed on that, that
this would expect in terms of the approval to move it up
potentially after six months. So I think we’re thinking about is
that we would think this can be a launch within the first half of
2016.”
(AC

V

109-110)

These statements were false or misleading, the AC alleges, because PTC
failed to “disclose the substantial risk that the Translarna NDA submission
would be rejected as facially insufficient by the FDA.” (emphasis added).
(AC

¶

111) That the FDA eventually declined to file the 2016 NDA—some 15

months after these allegedly false statements were made—does not suggest
they were false or misleading as of November 2014. Nor is there any factual
allegation that, as of November 2014, the FDA had told FEC something about
the design or structure of the ACT DMD study or statistical analysis plan that
would have made the facts underlying Peltz’s projections false or misleading.
Indeed, the ACT DMD study and statistical analysis plan were not even
submitted to the FDA until months later, in the spring of 2015. “To be
actionable, a statement or omission must have been misleading at the time it
was made; liability cannot be imposed on the basis of subsequent events.” In re
NACH Inc., Secs. Litig., 306 F.3d 1314, 1330 (3d Cir. 2002); accord Williams,
2017 WL 3611996, at

*

7 (“[Ijnstead of citing contemporaneous sources to show
18

Globus knowingly incorporated Vortex revenue into those projections, plaintiffs
rely on conjecture based on subsequent events. This is insufficient.”) The AC
contains no factual basis to support a conclusion that these statements were
false or misleading when made in November 2014.
As to these two statements about Translarna’s anticipated FDA review
timeline, then, the motion to dismiss is grantedJ2
ii.

Risk of the ACT DMD Study

Plaintiffs next point to a handful of alleged misstatements made after the
ACT DMD trial had started but before it concluded. Those statements generally
implied that there was a low risk that the ACT DMD study would fail meet its
endpoints, and a good chance that the study would “confirm” the benefit of
Translama and allow Pit to file successfully an NDA. These statements were
false or misleading, plaintiffs say, because FEC knew or learned that the ACT
DMD was likely, if not certain, to fail even before it received the final results.
Here, too, the AC lacks factual particulars that would make that a plausible
allegation.
Here are the four allegedly false or misleading statements.
1) At a January 15, 2015 healthcare conference, Peltz stated:
“We have the confirmatory trial for Duchenne
muscular dystrophy ongoing. That will allow us then
to sell it in the United States, where we expect each
trial to be completed this year and next year that we
What we did is
get approval in the United States
we used the learnings from the previous studies to
really wring out the risk in the current study.”
.

(AC

¶

113-14)

Because the AC does not adequately allege that Peltz’s statements about
Translarna’s regulaton? timeline were false when made, I do not reach PTC’s argument
that they were protected by the PSLRA’s Safe Harbor Provision, which governs
fonvard-looking statements.
12

ig

2) At a March 9, 2015 healthcare conference, PTC senior vice
president Tuyen Ong stated:
I think we talked about the confirmatory studies really
being enriched and sort of enhanced and somewhat
we’ve wrung out the risk of the confirmatory study
based on the learnings of the second study. 1 think
ultimately it’s really dependent on the data; is there a
clinical benefit, is it statistically significant.
(Id.

¶ 118)
3) At a May 6, 2015 healthcare conference, Kovacs stated:
O}bvious1y we’ve tried to mitigate as much risk as
possible in this study by a lot of the care around
reducing the enrollment criteria and try to control for
the patients that were at least enrolled in the study
So we’re doing that (inaudible) de-risk the outcome.

(Id.

¶ 121)
4) At a May 12, 2015 healthcare conference, Peltz stated:
for
this study versus the prior Phase 2 study that gives us
such a high degree of confidence in the likelihood of a
positive outcome in this study later this year

[hf you think about what have we done and refined
.

(Id.

¶ 124)
Plaintiffs again allege that these four statements were false and

misleading because PTC “failed to disclose the substantial risk that the
Translarna NDA submission would be rejected as facially insufficient by the
FDA.” (Id. ¶jJ 116, 119, 122, 125) (emphasis added)). Describing the ACT DMD
study as aconfirmatory was likewise misleading, the AC alleges, because the
FDA “would require PTC to demonstrate Translarna’s efficacy more sufficiently
than the company had in its Phase 2b trials.” (Id.) (emphasis added). What VFC
ultimately failed to disclose, plaintiffs say, is that “the design of the ACT DMD
study had just as much risk of failure as had the Phase 2b trial,” and did not
“minimize[] any risk of negative outcomes.” (Id.

20

¶ 117, 120, 123, 125)

While it is true that the FDA eventually rejected the 2016 NDA based on
the facial insufficiency of the ACT DMD results, the AC alleges no facts to
suggest that PTC knew that would happen as of January, March and May 2015.
Reasoning backward from the eventual rejection, plaintiffs posit that the ACT
DMD must have been doomed from the start. To plead an actionable
statement, however, a securities fraud complaint must contain particularized
facts that plausibly suggest that a misstatement was false or misleading when
made; it is never enough to plead “fraud by hindsight.” NAHC, 306 F.3d at
1330; CaL Pub. Employees Re. Sys. v. Chubb Corp., 394 F.3d 126, 158 (3d Cir.

2004) (“We have long rejected attempts to plead fraud by hindsight.”); cf
Tellabs, 551 U.S. at 320 (“The ‘strong inference’ formulation was appropriate,

the Second Circuit said, to ward off allegations of ‘fraud by hindsight.”’). The
AC here contains no such facts, however.
Plaintiffs proffer that the FDA had told PTC that the trial would need to
meet certain “additional” requirements to pass muster, and that FEC knew it
couldn’t despite its enriched patient population and pre-specifled subgroups.
Plaintiffs never specify the content of those requirements, or state who knew
about them and when. Their very existence, and PTC’s knowledge of them, is
simply assumed. More is required to bridge the gap between conceivability and
plausibility.
The particularity requirement of the PSLRA and Rule 9(b) is more
stringent than the usual pleading standard, if not actually onerous: What is
required is the level of factual detail ordinarily found “in the first paragraph of
any newspaper story.” Avaya, 564 F.3d at 253. As to FEC’s statements about
the ACT DMD study’s risk, the AC fails to make those minimal factual
allegations: what the FDA told FEC, when it did so, and how that that
information related to the likelihood of the study’s success. The AC therefore

21

fails to allege plausibly that Peltz and Ong’s statements about the risk of the
ACT DMD study were false or misleading when made.’3
The motion to dismiss as to this second group of statements is therefore
granted. 14
iii.

ACT DMD Results

The third and final group of allegedly false or misleading statements
stands on a different footing. These statements concern the actual results of its
clinical trials. The AC alleges that although PTC knew that the ACT DMD
trial—like the 2b trial—had failed to meet its primary endpoints for most
patients, PTC stated or implied that the “totality” and “consistency” of the
clinical data met the requirements for FDA approval. Unlike FtC’s statements
about Translarna’s review timeline or the likelihood of the ACT DMD study’s
success, these were not predictions. The AC plausibly alleges that PTC’s
statements about the ACT DMD results were factual in nature, and were
misleading or false when made.
Here are the specific statements.

In this way, this case is very different from In re Nuvelo, Inc. Sees. Litig., 668 F.
Supp. 2d 1217 (N.D. Cal. 2009). The complaint in that case alleged that the defendant
a p-value
had agreed with the FDA “that regulatory approval rested on achieving
of 0.00125,” but told investors that it had modelled its study after a program that used
a 0.05 p-value. That type of concrete factual averment, which plausibly suggests
falsity, is absent from the AC.
‘3

...

The facts the AC does contain actually suggest that some of FtC’s statements
about the risk of the ACT DMD were not misleading at all. By pre-specifying two
subgroups it thought might especially benefit from Translarna, PTC did “use the
learnings of the previous studies” to “mitigate” the risk of the ACT DMD study. By
restricting enrollment in the Act DMD study to patients of certain age who could walk
a certain distance, FtC did “enhance[)” and “enrich[]” the pool of patients in the ACT
DMD study. Knowing what we know now, it was overly optimistic for Peltz to proclaim
that PTC had “really wTjung out the risk” of the ACT DMD study. Nevertheless, as Ong
told investors in March 2015, whether the ACT DMD study would provide substantial
evidence of Translarna’s effectiveness was “really dependent on the data; is there a
clinical benefit, is it statistically significant.”
Here, too, I need not address FtC’s alternative argument that fonvard-looking
statements about the risk of the ACT DMD study qualify for safe harbor protection.
14

22

1) In an October 15, 2015 conference call announcing the ACT
DMD results, Peltz told analysts and investors:
[Wie are very pleased that the totality of the Translarna
results demonstrate clinical benefit for DMD. These
include In results, the pre-specified subgroup results,
and pre-specified meta-analysis
.

The totality of the data for Translarna demonstrates
clinical benefit across primary and secondary
endpoints. We have pre-specified the key subgroup for
analysis and meta-analysis, both of which show
Translarna had a clinically meaningful benefit for
DMD patients. The results of the ACT DMD trial show
consistent evidence of the clinical benefit of Translarna
for individuals with nonsense mutation Duchenne
muscular dystrophy.
***

The pre-specified meta-analysis was in our statistical
analysis plan, which we had discussions with with [sic]
the FDA. This was in part, part of the pre-specified
plan. So they are well aware that this was agreed
upon, or what was in our plan. So, yes, that’s in a
sense, standard procedure.
We are proud to have confirmed the benefit of
Translarna for the DMD patients.
(AC ¶3j 126-130)
2) A November 9, 2015 press release stated:
ACT DMD results confirm clinical benefit of Translarna
in nonsense mutation Duchenne muscular dystrophy.
The totality of the clinical data from two large,
placebo-controlled clinical trials across over 400
patients demonstrates Translarna’s ability’ to slow
disease progression.
(Id.

¶ 136)

23

3) A quarterly earnings report filed the same day similarly said:
[Wje believe that the results of ACT DMD and the
totality of clinical data across our two large,
randomized, placebo-controlled trials (ACT DMD and
our prior Phase 2b study, Study 007), provide
substantial evidence of the effectiveness of Translarna
and demonstrate a clinically meaningful benefit of
Translarna for the treatment of nmDMD.
(AC

¶ 137)
4) Peltz, during conference call announcing the quarterly earnings
report, told participants:
The goal is to show efficacy with given endpoints
[T]he totality of clinical
We see this in ACT DMD.
data confirmed Translama’s ability to slow disease
progression for patients with DMD.
.

(Id.

¶ 138)
5) At a November 18, 2015 healthcare conference, Kovacs said:
And the big picture about our data is and what will be
part of our argument to both the regulatory authorities
in the US and Europe is that the consistency of the
results now seen across two of the largest placebocontrolled Phase 3 studies ever done in the disease,
the totality of the data support the clinical benefit and
certainly the risk-benefit profile of the drug in favor of
an approval and getting something to these kids.

(Id.

9 143)
6) At a December 19, 2015 healthcare conference, Kovacs stated:
Our intention today is for filing for full approval on the
basis of two large well-controlled studies that all point
to safety and efficacy for a risk-benefit profile in favor
of the drug.

(Id.

¶ 147)

24

7) On January 13, 2016, Peltz told attendees at a healthcare
conference:
So you can see in two large studies where we used the
sbc minute walk test as the primary endpoint, we saw
a benefit both in the primary endpoint as well as
secondary endpoints. And in prespecified subgroups,
we saw more robust effects being observed, both the
primary and secondary endpoints. So consistent data
in two independent studies.
One of the things we’ve noticed they asked for was a
sensitivity analysis, and that while you have
prespecified subgroups, if you go beyond those, does
the data still show clinically meaningful differences?
And it does both in the primary and secondary
endpoints.
(AC

¶

150)
8) At the same conference, Peltz said of one of the meta-analyses:
In the meta-analvsis, where you combine the results,
you see both in the six-minute walk distance as well
as the time function tests, you see clinically
meaningful and statistically significant improvements
with Translarna over placebo.
And really it’s consistent with the totality of the data,
demonstrating that this drug was efficacious. So, I
think we’ve checked that box.

(Id.

¶

151)
All eight statements generally claim that the “totality” or “consistency” of

the data “show Translarna had a clinically meaningful benefit for DMD
patients,” “demonstrates Translarna’s ability to slow disease progression,”
“provides substantial evidence of the effectiveness of Translarna,” and “point to
safety and efficacy for a risk-benefit profile in favor of the drug.” Yet, as the AC
alleges, only a fraction ofpatients—about 25%—ever reported a clinically
meaningful and statistically significant benefit in the 6-minute walk test across
the ACT DMD and 2b studies on a pre-specified basis. Nor did the pre-specified

25

meta-analysis, which reported a statistically significant but not clinically
meaningful benefit, demonstrate “consistent” clinical benefit across the ACT
DMD I’VE and decline phase 2b populations. Contrary to PTC’s representations,
then, the “totality” of the data did not “demonstrate clinical benefit for DMD” or
evince “consistent” evidence of “clinical benefit” since each study and the pre
specified meta-analvsis failed to produce such evidence for most DMD patients.’5
If defendants’ assertions about the clinical data were were true, the AC
alleges, it was because of the post-hoc meta-analysis of the 300-400 meter
subgroup. Yet that meta-analysis was not pad ofthepre-specUIed ACT DMD
statistics plan. As Pit had learned five years earlier, however, post-hoc
adjustments to clinical data are no substitute for a well-controlled clinical trial
meeting its primary efficacy and statistical significance endpoints.’6 More
importantly, plaintiffs allege, PTC never disclosed that the 300-400 meter
subgroup meta-analysis was the primary factual support for its public
statements. 7

15
1 note that statement (7), that data outside of the pre-specified subgroups
demonstrated “clinically meaningful differences,” will bear an interpretation that is
affirmatively false, since the ACT DMD study failed to meet its endpoints for the In
population. (The statement might also be misleading, if the <350 meter subgroup
failed to reach its endpoints too). Similarly problematic is the part of statement (1) in
which Peltz claimed that the FDA had “agreed” upon the ACT DMD pre-specified meta
analysis, if the point of that statement was to suggest that the FDA would find that
meta-analysis sufficient to move past facial review. Another arguably misleading part
of statement (1) is the assertion that PTC “pre-specified the key subgroup for analysis,
That implies
both of which show Translama had a clinically meaningful benefit
that there was only one pre-specified subgroup when there were two, and that the pre
specified meta-analysis revealed a clinically meaningful benefit, which it didn’t.
“

I do not suggest that the use of a meta-analysis is inherently false or
misleading. The technique has its place. The thrust of the FDA’s position would seem
to be that it carries the danger of substituting wishful thinking for scientific rigor; the
inevitable cliché is that it is comparable to shooting an arrow at a wall and then
drawing a target around it. Plaintiffs real point, however, seems to revolve around the
allegedly inadequate disclosure of the extent to which PTC was relying on a post hoc
meta-analysis of the data.
16

As early as Peltz’s October 15, 2015 remarks, VEC used the 300-400 meter
post-hoc analysis as evidence that the ACT DMD study “confirmed” the benefit of
Translarna and “demonstrated consistent benefit,” even though Peltz allegedly implied
‘7

26

PTC says that these statements were not misleading because, at least for
some of the statements, it disclosed that the ACT DMD study failed to meet its
endpoints for the overall ITT’ population.’8 See, e.g., Kleinman v. Elan Corp., plc,
706 F.3d 145, 153 (2d Cir. 2013) (finding no actionable misstatement where
defendant emphasized “encouraging preliminary findings” found in a subgroup
but “disclosed that the ‘overall study population’ did not attain statistically
significant results based on primary endpoints”). But FEC was not merely
highlighting favorable data while downplaying disappointing data—it was
affirmatively telling investors that it had proven that Translarna was effective at
treating DMD. Arguably, the actual results of the 2b and ACT DMD studies
were actually contran’, which suggests a plausible allegation that FEC made
“affirmative false statements about a drug’s efficacy and safety” to lull investors
into thinking that the clinical data was sufficient to meet FDA efficacy
standards. City of Edinburgh Council v. Pfizer, 754 F.3d 159, 170 (3d Cir. 2014)
(citing In re Virophan-na Inc., Litig., No. CIV.A. 02-1627, 2003 WL 1824914, at
*4, 7 (E.D. Pa. April 7, 2003) (“Statements regarding the overall efficacy of the
drug.

.

.

cannot be simply dismissed as immaterial.

..

.

[T]he Plaintiffs have

pleaded that statements by Defendants were contrary to the then existing state
of facts, for example, that Pleconaril was effective for all adults when it was
not.”)).’9

that the sole factual bases for his statements were the ItT’, the subgroup, and pre
specified meta-analysis results. (Compare Def. Ex. 23 p. 3 with Def. Ex. 24)
Defendants, to be sure, disclosed in its November 9, 2015 lO-Q that its “our
potential efficacy of Translarna in nmDMD are primarily
conclusions regarding the
based on pre-specified meta-analysis and ACT DMD data and retrospective analyses of
(Def. Ex. 15, pp. 44) Again, however, this disclosure
our Phase 2b clinical data
fails to inform investors that PTC was relying on the post-hoc meta-analysis as the
“main analysis.”
.

.

.

See, e.g. Def. Exs. 13, 15, 23. A number of the allegedly false statements were
made orally at healthcare conferences, however, and FEC has not submitted
transcripts of those remarks.
18

FEC cites Pfizer for the proposition that “interpretations of clinical data are
considered opinions” and “[ojpinions are only actionable under the securities laws if
they are not honestly believed and lack reasonable basis.” 754 F.3d at 170. Only one
19

27

Furthermore, FEC did not disclose that the primary (and perhaps only)
factual support for its claim that “totality” and “consistency” of the ACT DMD
and 2b data was the post hoc meta-analysis of the 300-400 meter subgroup.2°
Had PTC made such a disclosure, plaintiffs allege, the factual parallels between
PTC’s failed 2011 NDA effort and its after-the-fact manipulation of the ACT
DMD would have been obvious to a reasonable investor.
FEC points out that Section 10(b) and Rule lOb-5 “do not create an
affirmative duty to disclose any and all material information.” Pfizer, 754 F.3d
at 173-74. That is true, as far as it goes. Id. at 174 (“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.”) (citing Or-an a Stafford, 226 F. 275, 285-86 (3d Cir. 2000). But
“once a company has chosen to speak on an issue—even an issue it had no
independent obligation to address—it cannot omit material facts related to that
issue so as to make the disclosure misleading.” Williams, 2017 WL 3611996, at
*4 (quoting Kline v. First W. Gou’t Sec., Inc., 24 F.3d 480, 490-9 1 (3d Cir. 1994)

of the alleged misstatements (contained in a document drafted by a lawyer) is
potentially a statement of opinion, however. (AC ¶ 137 (“[Wje believe that the results of
ACT DMD and the totality of clinical data. . . provide substantial evidence of the
effectiveness of Translarna . . . .“) (emphasis added)). And even that statement
allegedly omitted that the factual basis for that statement was a non-pre-specified
meta-analysis of the 300-400 meter subgroup. ‘lore fundamentally, these statements
were not misleading because they were opinions that were not honestly believed and
lacked a reasonable basis (though they may well have been). Plaintiffs instead allege
that they were false or misleading because they are misrepresented the existing state
of facts (i.e., whether the clinical actually provided substantial evidence of
effectiveness, whether subgroups outside the 300-400 meter subgroup actually
reported a clinically meaningful benefit, etc.).
Contrary to its assertions in the papers, FEC did not “accurately disclose that
the only positive results from the entirety of the . . study stemmed from the use of
post-hoc analysis.” Kleinman, 706 F.3d at 154-55. Rather, it implied, or affirmatively
stated, that the “totality” and “consistency” of the pre-specfied ACT DMD results
provided “substantial evidence” of effectiveness. From Peltz’s October 15, 2016
remarks especially, it was not at all clear “that a post-hoc analysis [wasi being used”
to support PTC’s assertions, let alone that FEC would use such an analysis as the
main analysis to convince the FDA of Translarna’s efficacy. Id. at 154-55.
20

.

28

(“[E]ncompassed within that general obligation [to speak truthfully] is also an
obligation to communicate any additional or qualifying information, then
known, the absence of which would render misleading that which was
communicated.”) Such is the case here. According to the AC, VFC omitted facts,
including the extent to which it was relying on post-hoc statistical analysis,
which made VFC’s disclosures misleading. Those allegations, taken as true, are
sufficient to trigger a duty to disclose.
Because the alleged misstatements are assertions of current fact, not
predictions, they do not qualify for safe harbor protection.2’ In re Viropharma
Inc. Sec. Litig., 21 F. Supp. 3d 458, 471 (E.D. Pa. 2014) (“[O]missions of existing
facts or circumstances are not fonvard-looking, and thus do not qualify for safe
harbor protection.”); see also 15. U.S.C.

§

78u-5(i)(1)(A)-(C) (defining forward-

looking statements to include “a projection of revenues, income (including
income loss), earnings (including earnings loss) per share, capital expenditures,
dividends, capital structure, or other financial items”; statements of “the plans
and objectives of management for future operations, including plans or

Even assuming they were predictive, they still would not qualify for safe harbor
protection, at least not on the basis of what is alleged in the AC. Statements (1), (4),
(5), (6), (7), and (8) were made orally, and the parties have not performed the necessary
analysis to allow me to rule on this issue at this time. See EPMedsystems, Inc., v.
EchoCath, Inc., 235 F.3d 865, 872-73 n.3 (3d Cir. 2000) (oral forward-forward looking
statements may qualify for safe harbor protection if the speaker tells the audience that
the statement is forward-looking if”(l) the issuer informs the audience that the
statement is fonvard-looking and that actual results may differ materially from the
predictions; (2) the issuer orally directs the audience to other “readily available”
written documents that contain the additional information about important factors
relating to the fonvard-looking statement; and (3) the identified documents set forth
satisfactory cautionary- statements.”) (citing 15 U.S.C. § 78u-5(c)(2flBfl.

21

While statements (2) and (3) axe written, they are not accompanied by
meaningful disclosures. The relevant disclosures are boilerplate recitations of the
possibility that the FDA may not “agree with our interpretation of the results of ACT
DMD” and that retrospective analyses “are generally considered less reliable than pre
specified analyses.” (Def. Ex. 14, p. 4, Def. Ex. 15 p. 44) That language, however, is
not “extensive, specific, and directly related to the alleged misrepresentations,” In re
Aetna, Inc. Sec. Litig. 617 F.3d 272, 278-79 (3d Cir. 2010), which in this case includes
FtC’s allegedly exclusive reliance on 300-400 meter post-hoc meta-analysis.

29

objectives relating to the products or services of the issuer”; or statements of
“future economic performance”).
In sum, taking the factual allegations of the AC as true and drawing all
inferences in plaintiffs’ favor, I find that there are sufficient factual particulars
to support the allegation that FEC misrepresented the sufficiency of the ACT
DMD and 2b results to meet even the most basic FDA review standards. As to
these statements, then, the motion to dismiss for failure to plead an actionable
misstatement is denied.

To summarize, plaintiffs have not adequately alleged the reasons why
PTC’s late 2014 and early 2015 statements about (1) Translarna’s FDA review
timeline and (2) the risk of the ACT DMD study were false or misleading when
made. I find sufficient the allegations that (3) FEC misrepresented the ACT
DMD results. The motion to dismiss is therefore granted as to statements (1)
and (2) but denied as to (3).
2.

Scienter

I next consider the issue of whether the AC adequately alleges that Peltz’s
and Kovacs’s statements concerning the ACT DMD results and the “totality”
and “consistency” of the clinical data were made with scienter.
Under the PSLRA, it is not enough to plead that a defendant has made a
misleading or false statement. The complaint must also plead that the alleged
misrepresentations were made with the “intent to deceive, manipulate, or
defraud.” Rahman, 736 F.3d at 242. “This scienter standard requires plaintiffs
to allege facts giving rise to a ‘strong inference’ of ‘either reckless or conscious
behavior.” Avaya, 564 F. 3d at 267-68 (footnote omitted). Recklessness in this
context is an “extreme departure from the standards of ordinary care, and
which presents a danger of misleading buyers or sellers that is either known to
the defendant or is so obvious that the actor must have been aware of it.” id. at
267 n. 42 (quoting Advanta 180 F.3d at 535). While the factual particulars pled

30

must give rise to “a strong inference” of scienter, the inference “need not be
irrefutable, i.e., of the ‘smoking gun’ genre, or even the most plausible of
competing inferences.” Id. at 267 (quoting Tellabs, 551 U.S. at 326 (2007)).
“The pertinent question is whether all of the facts alleged, taken collectively,
give rise to a strong inference of scienter, not whether any individual allegation,
scrutinized in isolation, meets that standard.” Id. (quoting Tellabs, at 323.)
Viewed holistically, the AC alleges sufficient circumstantial evidence that
PTC’s alleged misstatements about the ACT DMD results were made with the
necessary fraudulent intent. 1 again emphasize, of course, that these are
allegations only, untested by discovery or the adversary process.
Most persuasive here are the content and context of the alleged
misstatements. See Auaya, 564 F. 3d at 269 (“Among the facts alleged by
Shareholders, the most powerful evidence of scienter is the content and context
of [defendant’s CFO’s] statements themselves.”). During conference calls, public
remarks, and in quarterly reports, Peltz and Kovacs explicitly and repeatedly
told investors that the “totality” and “consistency” of the ACT DMD and 2b data
“demonstrates Translarna’s ability to slow disease progression” and provides
“substantial evidence” of effectiveness. (E.g. AC ¶j 126, 128, 136, 138, 143) At
the time those statements were made, however, Peltz and Kovacs knew that the
FDA refused to file the 2011 NDA because the “2b clinical trial.
achieve statistical significance in the pre-specified analysis.” (Id.

.

.

¶

did not
65) They

knew that the ACT DMD trial, which was stacked with what were considered
ideal patients, not only failed to reach its

primary

endpoints for the ITt

population, but generally reported worse results than the 2b study. (Id.

¶%

72,

81) They knew that the FDA typically requires two successful clinical trials
before approving a drug, and that Translarna had none. (Id.

¶

49) And they

knew that the 300-400 meter post hoc meta-analysis, which was the most
persuasive evidence of clinically meaningful and statistically significant effect
across all trials, was the same type of non-pre-specified statistical analysis that
the FDA had previously found facially insufficient. (Id. ¶3j 52, 62-63, 65, 85, 88,

31

89, 100) These facts strongly suggest that Peltz and Kovacs knew or recklessly
disregarded the obvious risk that their statements would mislead the investing
public as to whether the ACT DMD results met FDA efficacy standards.22
FIt, it is true, disclosed that the ACT DMD and 2b trials failed to reach
their endpoints and disclosed that the FDA considered post-hoc statistical
analyses less reliable than pre-specified ones. And investors knew, as early as
2012, that “the adequacy of the data for filing and approval of an NDA would
remain review issues.”23 (AC

¶

169) Yet the essential allegation here is that PTC

knew (or recklessly disregarded the obvious risk) that neither the pre-specified
data nor the post hoc data, considered alone or collectively, were even facially
sufficient. Nevertheless, the AC alleges, Peltz and Kovacs repeated and
confidently told investors that the “totality” and “consistency” of the clinical
data met FDA standards. Those statements are hard to square with the facts
allegedly known to FFC, including that the ACT DMD had failed on its own
terms, and that the FDA would not accept a post hoc statistical analysis as a
substitute for a successful clinical trial. These facts, if true, suggest more than

Because these allegations are not supported by testimony from confidential
witnesses or documents, FIt seems to suggest that dismissal is appropriate on that
basis. It cites no authority holding that such documents are required to state a claim,
however. That is not surprising: The documents most likely to prove scienter are
commonly within the exclusive control of the defendant, and hence unavailable to
plaintiffs at the pleading stage. When the AC was filed, for example, FtC had yet to
release the full ACT DMD dataset.
22

During the October 15, 2015 conference call announcing the ACT DMD results,
PTC points out that Peltz told investors that their “approach [in pre-specifying the
<350 meter and 300-400 meter subgroupsj was consistent with the recent FDA draft
(Def. Ex. 23 p. 4). The implication
guidance for Duchenne muscular dystrophy
seems to be that PTC had some reason to believe that the FDA might file the 2016
NDA solely on the basis of pre-specified subgroup data if the ACT DMD narrowly
missed meeting its Ifl endpoints. That may be, though I note that the ACT DMD did
not narrowly miss its primary endpoints, it completely missed them. Defendants at
any rate Will have the opportunity to explore these issues during discover. As things
stand now, however, I do not have a copy of that FDA “draft guidance,” and even if I
did, the AC alleges that the “main analysis” of the 2016 NDA was post-hoc meta
analysis, not pre-specified subgroup data. The citation to FDA guidance, then, does
not quite explain away plaintiffs’ allegations.
23

32

mere optimism, and support a strong inference that Peltz’s and Kovacs’s
statements were made knowingly or recklessly.24
The plaintiffs plead other circumstantial evidence of scienter as well.
RTFs, the AC alleges, are relatively uncommon.25 They are intended to address
“omissions or inadequacies so severe as to render the application incomplete
on its face.” (AC

¶

52) Because an RTF is based on an NDA’s facial sufficiency,

not interpretations or judgment calls about what the data says, communicating
with the FDA prior to submitting an NDA may diminish the risk of receiving an
RTF.26 (AC ¶54) FEC certainly understood the importance of FDA feedback; it
made sure investors knew, for example, that the FDA had blessed ACT DMD
study’s design and statistical analysis plan. (AC

¶

69, 168) Yet FEC chose not

to meet with the FDA after receiving the ACT DMD results but before
submitting Translarna’s 2016 NDA. If PTC had done so, the AC alleges, the
FDA would have told PTC that the ACT DMD data was facially inadequate, and
that it should not (or should not yet) file the NDA. PTC’s silence could support
an inference that FEC thought that more discussion and disclosure would only

That the market took Peltz’s and Kovacs’s representations about the ACT DMD
data seriously is corroborated by the precipitous drop in PTC’s stock price after, but
not before, the 2016 RTF was received.

24

Citing to In re Sanofi Sec. Litig., 87 F. Supp. 3d 510 (S.D.N.Y. 2015) and In re
Bristol Meyers Squibb Secs. Litig., 312 F. Supp. 2d 549 (S.D.N.Y. 2004), FEC claims
that an RTF in and of itself is not a basis to infer fraudulent intent, and I agree. An
RTF, after all, might issue for relatively mundane reasons, such as failing to submit “a
completed application form” or presenting data in a confusing way. See Sanofi, 87 F.
Supp. 3d. at 522. That is not the case here, however. The AC alleges that the FDA
issued the 2016 RTF because the clinical data was an insufficient substitute for a
successful clinical trial—the same reason the FDA issued the 2011 RTF. Neither
Sanofl nor Bristol Meyers address that kind of allegation. More fundamentally, the
RTFs are not the sole basis for the fraudulent intent inference; there is, for example,
the content and context of the alleged misstatements themselves.

25

That is especially true for drugs in the fast track program, the AC alleges, which
is premised on “early” and “frequent” communication with the FDA. (AC ¶ 13)
26

33

harm what

was

a weak application, but the inference is far from ironclad. I

therefore assign it only minor significance.27
I also consider certain characteristics of the PTC and the speakers of the
alleged misstatements, FTC’s founder and CEO, Peltz, and CFO, Kovacs. See
Nat’l Junior Baseball League v. Phannanet Dcv. Gip. Inc., 720 F. Supp. 2d 517,

556 (D.N.J 2010) (“[Aj person’s status as a corporate officer, when considered
alongside other allegations, can help support and inference that this person is
familiar with company’s most important operations.”); see also Avaya, 564 F.3d
at 569-7 1. Financially, Translarna accounted for 100% of VP C’s revenues in
February 2016. Short term, Translarna was the only drug PTC could market.
Long-term, if the FDA approved Translarna, FTC thought that it could apply its
post-transcriptional research to treat other nonsense mutation disorders (and
therefore market and sell new drugs). Translarna, in short, was everything to
FTC. (ACjJ 184, 189)

Inadvertence or inattention, then, do not suggest themselves as
alternatives to scienter. It seems implausible that Peltz and Kovacs were not
paying close attention to the results of the company’s most critical clinical trial
for their most important drug. Nor is it plausible that Peltz and Kovacs, as
CEO/founder and CFO of PTC, played a subordinate role in the decision to
submit the 2016 NDA. To the contrary, Kovacs’s and Peltz’s statements to
investors during earnings calls and healthcare conferences implied that they
had first-hand knowledge of ACT DMD results and FTC’s conversations with
the FDA.28 These circumstances, while not conclusive, tend further to bolster

I similarly give minor weight to the allegation that the 2016 NDA sought
approval for all DMD patients, as opposed to a specific subgroup of patients.
28
For that reason, PTC’s assertion that the “core operations” doctrine does not
support scienter unless “allegations of specific information conveyed to management
and related to fraud” are alleged fails. Rahman, 736 F.3d at 246. Through their public
statements, Peltz and Kovacs demonstrated personal knowledge of the ACT DMD
results and PTC’s conversations with the FDA.
27

This case is indeed factually closer to Avaya, in which the Third Circuit
recognized the core operations doctrine where a company’s CFO consistently and
34

the inference that either Peltz or Kovacs “knew at the time that his statements
were false or was reckless in disregarding the obvious risk of misleading the
public.” Avaya, at 273.29
PTC resists this conclusion by characterizing these allegations as a
species of “fraud-by-hindsight.” I disagree. The short answer, of course, is that
the AC alleges that Peltz and Kovacs knew, but repeatedly underplayed, a
number of then-existing facts that all suggested that the risk of FDA
disapproval was much greater than they let on. That is an allegation of classic

repeatedly denied the existence of price competition during conference calls with
analysts when the company was actually engaged in “widespread discounting
involving many different product lines and accounts, including some of Avaya’s largest
clients.” Avaya, 736 F. 3d at 269-70. “Because of the context (specific analyst
inquiries) and content (consistent denials of unusual discounting) of [the CFO’sj
statements, the possibility that McGuire was ignorant is not necessarily exculpatory.”
Id. at 270. Here, as there, even if Peltz or Kovacs “were not aware of the full extent” of
the risk that the FDA would find the clinical data facially insufficient, they “might be
culpable as long as what [theyj knew made obvious the risk that [theirl confident,
unhedged” assertions would mislead investors. Taking the factual allegations of the AC
true, what Kovacs and Peltz knew about the ACT DMD trial—that most patients did
not report a statistically significant clinical benefit from Translama—suggests a strong
inference that their statements that “totality” and “consistency” of the clinical data
demonstrated substantial evidence of efficacy reached this required level of
recklessness.
I give less weight to the AC’s allegations of motive and opportunity. The AC
alleges that Peltz and Kovacs knew that devising and implementing another clinical
study would be costly and expensive, and could jeopardize PlC’s financial success.
“[M]otives that are generally possessed by most corporate officers do not suffice,”
however. Rahman, 736 F.3d at 245-46 n. 13 (citing Avaya, 564 F.3d at 278-79
(“Corporate officers always have an incentive to improve the lot of their companies, but
this is not, absent unusual circumstances, a motive to commit fraud.”). The “absence
of a motive allegation is not fatal” to a securities fraud claim, so long as the complaint
adequately alleges a strong inference of scienter, which this complaint does. Tellabs,
551 U.s. at 325.

29

Because I find that Pekz and Kovacs made the alleged misstatements with
scienter, I do not reach defendants’ closely related argument that plaintiffs fail to plead
“corporate scienter.” E.g., Rahman, 736 F.3d at 246 (citing Teamsters Local 445 Freight
Div. Pension Fund v. Dynex Capital Inc., 531 F.3d 190, 195 (2d Cir.2008) (“In most
cases, the most straightforward way to raise such an inference for a corporate
defendant will be to plead it for an individual defendant.”). This is allegedly a case of
direct statements by a corporate CEO and CFO, not one of diffuse organizational
respon sibifity.

35

fraud, not fraud-by-hindsight. The somewhat longer answer is that cases in
which district courts in this circuit have dismissed “fraud-by-hindsight” claims
against pharmaceutical companies based on what those companies “must have
known” about clinical data and approval prospects are not quite on point.
VFC cites four cases in which allegations that defendants knew but
misrepresented certain information about clinical data, which ultimately misled
investors about the likelihood of FDA approval, were insufficient to repel a
motion to dismiss. See In re Columbia Laboratories, Inc. Secs. Litig., Civ. No. 12-

614, 2013 WL 5719599 (D.N.J. Oct. 21, 2013); Sapir v. Averback, et aL, Civ.
No. 14-7331, 2016 WL 554581 (D.N.J. Feb. 10, 2016); In reAdolor Corp. Secs.
Litig., 616 F. Supp. 2d 551 (E.D. Pa. 2009); In reAmarin Corp. PLC, Civ. No. 136663, 2015 WL 3954190 (D.N.J. June 29, 2015).3° Those cases, however, lack
key factual particulars alleged in this case. For example, none of the drugs at
issue in Columbia, Sapir, Adolor, or Amarin ever received an RTF, let alone two
RTFs issued for essentially the same reason. More importantly, the Columbia,
Sapir, Adolor, and Amarin complaints rested on allegations as to what the
defendants “must have known” about their clinical data; the AC here, by
comparison, contains specific factual allegations about what Peltz and Kovacs
actually knew at the time the alleged misstatements were made.
PT C alternatively argues that an inference of non-fraudulent intent is
stronger than any inference of fraudulent intent. Essentially, PTC contends

See Columbia, 2013 WL 5719500, at *7 (rejecting allegations that defendants
knew that a clinical trial did not demonstrate efficacy because there was no factual
allegation that the FDA had told defendants that the results would need to meet a
certain p-value threshold); Sapir, 2016 WL 554581 at *1014 (rejecting allegations that
defendants knew that their Phase 3 study would fall because documents flatly
contradicted plainfiffs proposed inference); Adolor, 616 F. Supp. 2d at 562-63, 575-76
(rejecting allegations that defendants knew that it had “rigged” and “manipulated”
clinical data because “Defendants’ public disclosures accurately described the results
of each study”); Amarin, 2015 WL 3954190, at *5..8 13-15 (rejecting allegations that
defendants were aware of but chose to ignore concerns with clinical trials because
[that] executives were optimistic about the
they “merely create[dj the inference
despite some concerns”).
success of Vascepa.
30

...

.

.,

36

that it is not plausible that it would file an NDA it knew would fail. The facts, it
says, were not so one-sided. The pre-specified 300-400 meter subgroup—a
sizable group of about 100 patients—reported statistically significant and
clinically meaningful results, while the pre-specified meta-analysis
demonstrated a modest statistically significant (if not clinically meaningful)
benefit. Because of the significant unmet need for a DMD treatment, FEC says,
it was reasonable to think that FDA might approve Translarna regardless of the
ACT DMD results if the potential benefits outweighed safety concerns. And not
for nothing, FEC points out that it had been selling Translarna in Europe since
2014 solely on the basis of the 2b trial data.3’ Given these facts, defendants
say, the more compelling inference is that Peltz and Kovacs believed what they
said, even though they were ultimately wrong about what the FDA would
require.32

Defendants also point to two competitor’s NDAs, which the FDA filed despite
those companies’ failures to either complete a confirmatory trial or meet the primary
endpoints of such a trial. Because, as noted above, the relevance of these NDAs to the
issues presented here rest on a host of factual assumptions and inferences, I give
these facts little weight at this early pleading stage.
3]

With some force, defendants claim that this case is the mirror image of Kuyat u.
BioMimetic Therapeutics, 747 F.3d 435 (6th Cir. 2014). The plaintiffs there alleged that
BioMimetic misrepresented that lEE results were less important than modified lEE
results, even though the “FDA privately communicated” to the company that it
“expected BioMimefic to obtain statistically significant results based on an analysis of
the lEE population.” Id. at 438-4 1.

32

Affirming the trial court’s dismissal of the complaint, the Court of Appeals for
Sixth Circuit observed that there were a number of reasons why “BioMimefic
the
rightfully expressed optimism about the device’s success,” including the FDA’s prior
approval of other devices based on mITE analyses and the device’s approval had been
in Canada and Australia. Id. at 442-43. The complaint also failed to show that the
“presence or absence of statistically significant results in an analysis of the ITt
population was the FDA’s absolute requirement” generally or the FDA’s position as to
Augment specifically. Id.
This AC is different. The AC factually alleges that the FDA typically requires two
successful clinical trials before approving a drug, which Translama didn’t have, and
that FEC knew from prior experience that post-hoc meta-analyses would not
substitute for pre-specified clinical data. Now it is true, as defendants point out, that
the AC lacks factual particulars about what the FDA may have “privately”
communicated to FEC. But the AC alleges that the FDA refused to file Translarna’s
37

There is something to be said for the defendants’ account, and PTC will
have an opportunity to adduce evidence in support of it at a later stage. For
now, however, it is sufficient to note that PTC’s version of events fails to negate
key facts, including its consistent and confident assertions about what the
clinical data actually said (as opposed to what it believed or interpreted the
data said) and its sufficiency to meet FDA requirements. Nor does PTC’s
proposed inference negate its failure to explain that the post hoc 300-400
meter subgroup meta-analysis was the “main analysis” supporting Peltz’s and
Kovacs’s assertions that the “totaliw” and “consistency” of the evidence evinced
substantial evidence of effectiveness. That is not to say that plaintiffs version
of events is factually bulletproof; surely it is not.33 Given the factual particulars
alleged, however, the inference of scienter is “at least as compelling” as an
inference non-fraudulent intent, which means that these allegations survive
the PSLRA standard, and should go forward to the discovery phase and
subjected to proof or disproof.
3.

Section 20(a) claims

Defendants argue that the plaintiffs’ “control person” liability claim
must fail for failure to plead an underlying violation of the Exchange Act. I have
already found, however, that such a violation has been adequately pled. The
motion to dismiss the section 20(a) claim against Peltz or Kovacs is therefore

NDA because the application failed to meet minimal FDA review standards (e.g., that
the application contain at least some pre-specified data evincing efficacy in more than
one clinical trial), not because of some secret FDA requirement. FEC, in other words,
allegedly knew that the “lack of statistically significant results in the lU population
would be the device’s downfall or that such a lack was so obvious an impediment” to
the 2016 NDA that FEC’s “failure to perceive the risk of non-approval was reckless
Id. at 44. The issue is concededly a debatable one, but for the reasons stated herein,
1 think the AC alleges sufficient facts to raise an inference of scienter that is at “least
as compelling as any” inference of non-fraudulent intent.
.“

Among the allegations that will be tested in discovery is the assertion that
certain manipulations of clinical data were not honestly believed or lacked a
reasonable basis, or were performed to cover up known deficiencies in the clinical
data, or did not conform to FDA guidance.

38

dismissed on this basis. I make no ruling as any other issue, such as whether
the AC pleads “circumstances establishing the defendant’s control over the
company’s actions.” The Wirier Family Trust v. Queen, No. Civ.A. 03-43 16, 2004
WL 2203709, at *22 (E.D. Pa. Sept. 27, 2004).
III.

CONCLUSION

For the reasons set forth above, the defendants’ motion to dismiss is
GRANTED IN PART AND DENIED IN PART. Specifically, the motion to dismiss
is GRANTED as to PTC’s statements about Translarna’s FDA review timeline
(AC

¶1J

108-112) and the risk of the ACT DMD study (itt

¶

113-125), but

DENIED as to VFC’s statements about the ACT DMD results. (Id

¶

126-155).

For the reasons stated in I.C.1 n.5, plaintiffs’ motion to strike ECF Nos.
56-2 1, 56-22, 56-30—56-33, 56-35, and 56-36, is GRANTED. In all other
respects, the motion is DENIED.
A separate order will issue.
Dated: August 28, 2017

KEVIN MCNULTY
United States District Judge

39