BAUER v. EAGLE PHARMACEUTICALS, INC. et al

Filing 30

OPINION. Signed by Judge Jose L. Linares on 5/19/17. (sr, )

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT Of NEW JERSEY

BLAKE BAUER,

Civil Action No.: 16-3091(JLL)
Plaintiff,

OPINION

V.

EAGLE PHARMACEUTICALS, INC. and
SCOTT TARRIFF,
Defendants.

LINARES, District Judge.
This matter comes before the Court by way of a motion to dismiss an amended class action
complaint, which motion was filed by Defendants Eagle Scott Pharmaceuticals, Inc. (“Eagle”) and
Scott Tarriff(”Tarriff’), collectively (“Defendants”). (ECF No. 19). Lead Plaintiffs Blake Bauer,
Brent Kawamura and Guarang Patel (collectively, “Plaintiffs”) have opposed this motion (ECF
No. 24), and Defendants have replied to same (ECF No. 29). The Court decides this matter without
oral argument pursuant to federal Rule of Civil Procedure 7$. For the reasons stated below,
Defendants’ motion to dismiss is granted. The Court dismisses Plaintiffs’ complaint without
prejudice to the refiling of an amended pleading that cures the deficiencies identified herein.

I.

Background1
A. Parties

The facts as stated herein are taken as alleged in Plaintiffs Amended Complaint. (ECF No. 14, “Am. Compl.”). For
purposes of this motion to dismiss, these allegations are accepted by the Court as true. See Phillips i’. County of
Allegheny, 515 F.3d 224, 228 (3d Cir. 200$) (“The District Court, in deciding a motion [to dismiss under Rule]
12(b)(6). was required to accept as true all factual allegations in the complaint and draw all inferences from the facts
alleged in the light most favorable to [the plaintiff].”).

1

Defendant Eagle is a publicly-traded “specialty pharmaceutical company that focuses on
developing and commercializing injectable products.” (Am. Cornpl.

¶ 2). Eagle was founded in

2007 by Defendant Tarriff, the Company’s Chief Executive Officer. (Id.).
Although Eagle is a pharmaceutical company, it does not focus on developing new drug
therapies.

(Id.

¶ 3). Rather, Eagle’s business model focuses on “develop[ing] proprietary

innovations that improve upon short-comings of existing FDA-approved, injectable drugs.” (Id.).
Under this model, Eagle seeks to utilize the FDA’s 505(b)(2) New Drug Application (“NDA”)
regulatory pathway. (Id.). A pharmaceutical company seeking entry into the market under this
regulatory pathway may “rely, in part, on the FDA’s prior findings of safety and efficacy for an
existing product, or published literature, in support of its application.” (Id. ¶ 4). Thus, as compared
to the regulatory regime applicable to novel drugs that may require extensive clinical testing, the
505(b)(2) pathway may offer companies a cheaper, faster route to approval. (Id.

¶ 3).

Plaintiffs, purchasers of Eagle common stock, bring this action on behalf of a putative class
“of all persons who purchased Eagle common stock between May 12, 2015 and March 18, 2016,
inclusive (the ‘Class Period’).” (Id.

¶ 1). Plaintiffs assert claims of securities violations against

Defendants pertaining to an alleged “series of materially misleading statements and omissions
concerning the Defendants’ failed attempt to secure FDA approval of its ready-to-use (‘RTU’)
liquid Bivalirudin product,” which product Eagle unsuccessfully sought to introduce into the
market through the 505(b)(2) pathway.

2

B.

The Product

This action pertains to a particular product developed by Eagle, which product was
originally known as “Kangio” (“the Product”). (Am. Compi.

¶ 10).2 Consistent with Eagle’s

business model, the Product was not a novel drug. Rather, the drug was based off of a pre
approved drug called “Bivalirudin,” which was developed by the Medicines Company and is
marketed under the brand name “Angiomax.” (Id.

¶ 6). In industry terms, Bivalirudin is the

“reference drug” to Eagle’s Product. Plaintiffs explain the differences between the Product and
Bivalirudin as follows:

Historically, Bivalimdin has been delivered to hospitals in powder form. Prior to being
administered at the beginning of catheter laboratory (“cath lab”) angioplasty procedures to
prevent clotting, hospital pharmacists had to reconstitute the drug from powder form into
liquid form, before the drug was further diluted into an IV bag. As described herein, Eagle
developed [the ProductJ as a purportedly shelf-stable, liquid intravenous form of Angiomax
that was ready-to-use. Eagle’s development of a ready-to-use liquid form of Bivalirudin,
if successful, meant that routine pharrriacy compounding errors associated with the process
of reconstituting Bivalirudin from powder fonri into liquid form could be eliminated, while
the time and attention required to administer the drug could be reduced, both valuable
improvements that caused excitement among analysists and investors.
(Id.6).
Eagle and its investors were excited about the prospect of FDA approval of the Product.
(Id.

¶ 8). On May 19,

2015, Eagle submitted a New Drug Application (“NDA”) to the FDA,

seeking approval through the 505(b)(2) regulatory pathway. (Id.

¶ 10). Plaintiffs allege that “[b]y

June 30, 2015, the Company had announced that the NDA had been accepted as filed by the FDA
and that the FDA action was due by March 19, 2016.” (Id.). Plaintiffs further allege that in the

2

According to Plaintiffs, “[o]n July 7, 2016, pursuant to ongoing patent litigation brought by Bivalinidin’s original
marketer against the Company, Eagle stipulated to abandon its trademark application for the name ‘Kangio’ and to
remove the name from its still pending FDA NDA application and to cease using the name in any and all promotional
marketing material.” (Id. ¶ 5, n.1). Accordingly, hereinafter, the Court refers to the subject of the NBA as the
“Product.”

3

months following Plaintiffs’ filing of the FDA, “Eagle assured investors that the Company was
engaged in an ongoing, positive dialogue with the FDA.” (Id.

¶ 11). Moreover, according to

Plaintiffs, “in the weeks leading up to an anticipated FDA decision, Tarriff and Eagle created a
materially misleading impression to investors that FDA approval of Kangio was highly likely, if
not a fait accompli.” (Id.).
However, on March 18, 2016, Eagle a;mounced that it had received a Complete Response
Letter from the FDA, which letter, in short, advised the Company that it would not approve Eagle’s
NDA relating to the Product in its present fonm

(Id.

¶ 13, 37). Critical Response Letters

(“CRL”), because they relate to confidential drug developments, are generally not released to the
public.3 (Id. ¶ 38). However, Eagle’s March 18, 2016 press release apprised investors of the CRL.
(Id.

¶ 87). In pertinent part, Eagle’s press release stated that: “In its letter to Eagle, the FDA

requested further characterization of bivalirudin-related substances in the drug product.” (Id.).
According to Plaintiffs, “{t]he share price of Eagle stock reacted sharply to this news[,]
declining by $10.18 (or 18.9%) from the March 17, 2016 closing price of $53.68 to close at
$43.50.” (Id.

¶ 88). Citing to a research note from Piper Jaffray issued the same day that Eagle

announced its receipt of the CRL, Plaintiffs state that the decline in share pricing is directly
attributable “to the unexpected denial” of the Product NDA. (Id.

C.

¶ $9).

Alleged Misrepresentations and Omissions

Generally, Plaintiffs allege that investors were misled into purchasing Eagle stock at
inflated prices due to material misrepresentations and omissions made by Eagle and its CEO,
Defendant Tarriff. specifically relating to the Product and its likelihood of receiving FDA

As of the date that the briefs pertaining to the pending motion were filed, the CRL has not yet been publicly
shared.

4

approval. These alleged misrepresentations can be classified, as in Plaintiffs’ opposition brief,
into two main categories: (1) “Defendants’ representations that [the Product] was simply a liquid,
‘ready to use’ version of Angioi-nax,” and; (2) Defendants’ representations that FDA approval of
[the Product’s] NDA was imminent based on a continuing dialogue with the FDA.” (ECF No. 24,
“Pls.’ Br.” at 9-14).
As to the first category of statements, Plaintiffs argue that “[ml any of Defendants’ Class
Period descriptions of [the Product] contain references to Angiomax, with many specifically
stating that [the Product] contained the same active ingredient, and that the only difference between
the two drugs was that one was a liquid ([the Product]) and one was a powder (Angiornax) that
needed to be reconstituted into a liquid before being administered.” (Pls.’ Br. at 9). Plaintiffs
allege that these statements must be false given the fact that, as phrased by the press release, the
FDA “requested further characterization of the bivaliruden-related substances in the drug
product.” (Id. at 9; Am. Compi. ¶ 87). Plaintiffs further maintain that Eagle “effectively conceded
that [the Product] differed from Angiomax as previously disclosed” by stating that it is in
discussions with the FDA about the design of a study that would “support approval of the product.”
(Pls.’ Br. at 9-10; Am. Compl.

¶

103).

As to the second category of statements, Plaintiffs do not dispute that Eagle and the FDA
were, in fact, engaged in ongoing discussions leading up to the CRL. (Pls.’ Br. at 13). However,
Plaintiffs contend that Defendants’ “statements about the dialogue were misleading in that they
indicated that everyone was on track for an approval in March 2016, and that Eagle would be in a
position to capitalize on a ‘lucrative’ market.” (Id.). Specifically, Plaintiffs cite to the following
statement made by Defendant Tarriff during a February 23, 2016 presentation: “We are in dialogue
with the FDA, as you would expect coming down to the final weeks before approval. We have

5

every expectation that based on our file and the dialogue that’s been ongoing that we’ll get an
approval. So, March 19, three and a half weeks, and we expect to launch.” (Id.; Am. Compl.

¶

76). Plaintiffs also allege that during a february 25, 2008 earnings call, Tarriff stated:
[W]e currently expect to be the next entrant into this market [i.e., Bivalirudin] ahead of
other generics.
So we feel good about our chances of capturing a meaningful share of
that market. We have been interacting with FDA and we are preparing for launch,
everything seems to be on track for a March 19 approval, and we anticipate shipping in late
Qi or early Q2....
.

(Am. Compl.

.

.

¶ 11). In summary, according to Plaintiffs, Defendants’ representations (1) that the

Product was a RTU version of the name-brand product and (2) that FDA approval was imminent
based on Defendants’ dialogue with the FDA were both false and misleading.

B.

Allegations

Against this backdrop, Plaintiffs filed this putative class action asserting securities
violations under the Securities and Exchange Act of 1934 (the “Act”). Specifically, in Count I of
the Amended Complaint, Plaintiffs assert a violation of Section 10(b) of the Act, and Rule lOb-S
promulgated thereunder. In Count II, Plaintiffs assert a derivative claim against Defendant Tarriff
for violation of Section 20(a) of the Act. Defendants now move for a dismissal of this action for
failure to state a claim pursuant to federal Rule of Civil Procedure 12(b)(6). Defendants’ motion
has been fully briefed, and is now ripe for the Court’s adjudication.

II.

Legal Standard

Federal Rule of Civil Procedure 8(a) requires that a Complaint set forth “a short and plain
statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P 8(a)(2). The
plaintiffs short and plain statement of the claim must “give the defendant fair notice of what the

6

•

.

.

claim is and the grounds upon which it rests.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544,

545 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). For a complaint to survive
dismissal, it “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that
is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S.
at 570).

In evaluating the sufficiency of a complaint, a court must “accept all well-pleaded factual
allegations in the complaint as true and draw all reasonable inferences in favor of the non-moving
party.” Phillips v. County ofAllegheny, 515 F.3d 224, 234 (3d Cir. 2008) (quotations omitted).
“Factual allegations must be enough to raise a right to relief above the speculative level.”
Twombly, 550 U.S.at 545.

Further, “[a] pleading that offers ‘labels and conclusions’ or ‘a

fomiulaic recitation of the elements of a cause of action will not do. Nor does a complaint suffice
if it tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement.” Iqbal, 556 U.S. at 678
(quoting Twombly, 550 U.S. at 555, 557); Evancho v. Fisher, 423 f.3d 347, 350 (3d Cir. 2005)

(“[A] Court need not credit either ‘bald assertions’ or ‘legal conclusions’ in a complaint when
deciding a motion to dismiss.”). To that end, a Court considering a motion to dismiss must take
account of the elements necessary to plead the claims alleged in the complaint.
In this case, Plaintiffs seek relief under Sections 10(b) and 20(a) of the Securities Exchange
Act. “Section 10(b) prohibits the ‘use or employ, in connection with the purchase or sale of any
security,

.

.

.

[of] any manipulative or deceptive device or contrivance in contravention of such

rules and regulations as the Commission may prescribe
277 f.3d 658, 666 (2002) (quoting 15 U.S.C.

.

.

.

.“

In re I/con Office Solutions, Inc.,

§ 78j(b)). Rule lOb-5, in turn, created a private right

of action for investors harmed by materially false or misleading statements to enforce Section
10(b), and it “makes it unlawful for any person ‘[t]o make any untrue statement of a material fact

7

or to omit to state a material fact necessary to make the statements made in the light of the
circumstances under which they were made, not misleading
or sale of any security.” Id. (quoting 17 C.F.R.

.

.

.

in connection with the purchase

§ 240.10b-5(b)).

To establish liability under 10(b) and lOb-5, a plaintiff must show:
(1) a material misrepresentation (or omission), (2) scienter, i.e., a wrongful state of mind;
(3) a connection with the purchase or sale of a securily, (4) reliance, often referred to in
cases involving public securities markets (fraud-on-the-market cases) as “transaction
causation;” (5) economic loss, and (6) “loss caitsation, “i.e., a causal connection between
the material misrepresentation and the loss.
Dura Pharm, Inc. v. Broudo, 544 U.S. 336 (2004) (internal citations omitted).
“Because this is a securities fraud case,.

.

.

[the Court] does not merely ask, as [it] normally

would under Rule 12(b)(6), ‘whether, under any reasonable reading of the complaint, the plaintiff
may be entitled to relief.” Institutional Investors Group v. Avaya, Inc., 564 F.3d 242, 252 (3d Cir.
2009) (quotations omitted).

This is because the Private Securities Litigation Reform Act

(“PSLRA”), applicable to this case, imposes a heightened pleading standard for claims arising
under the Securities Exchange Act. Id. Specifically, under the PSLRA, a plaintiff must “state
with particularity both the facts constituting the alleged violation, and the facts evidencing scienter,
i.e., the defendant’s intention ‘to deceive, manipulate, or defraud.” Tellabs, Inc. v. Makor Issues
& Rights, Ltd., 551 U.S. 308, 313 (2007) (quoting Ernst & Ernst v. Hochfelder, 425 U.S. 185, 194,
and n. 12 (1976), and citing 15 U.S.C.

§ 78u—4(b)(1), (2)).

First, with regard to misleading statements and omissions of material fact, a plaintiff must
“specify each statement alleged to have been misleading, the reason or reasons why the statement
is misleading, and, if an allegation regarding the statement or omissions is made on infonriation
and belief, the complaint shall state with particularity all facts on which that belief is fonTled.” 15
U.S.C.

§ 78u—4(b)(1). Further, “{t]o be actionable, [the] statement or omission must have been
8

misleading at the time it was made; liability cannot be imposed on the basis of subsequent events.”
In reNAHC, Inc. Sec. Litig., 306 f.3d 1314, 1330 (3d Cir. 2002).

Second, as to the scienter requirement, with respect to each alleged wrongful
misrepresentation or omission, a complaint must “state with particularity facts giving rise to a
strong inference that the defendant acted with the required state of mind.” 15 U.S.C.

§ 78u-4(b)(2).

Under the PSLRA, unlike the general rule for pleading fraud under FRCP 9(b), “any private
securities complaint alleging that the defendant made a false or misleading statement must
state with particularity facts giving rise to a strong inference that the defendant acted with the
required state of mind.” Avava, 564 F.3d at 253 (quoting, in full, Tellabs, 127 S. Ct. at 2504,
250$).
III.

Discussion

Defendants argue that Plaintiffs’ Amended Complaint should be dismissed because it fails
to meet the heightened pleading standards of a securities fraud claim. Among other arguments,
Defendants maintain that Plaintiffs have not sufficiently pled the first element of a 10(b) claim—
namely, a material misrepresentation or omission.4
As noted above, to survive a motion to dismiss a claim brought under the PSLRA, a
plaintiff must “specify each allegedly misleading statement, why the statement was misleading,
and if an allegation is made on infonnation and belief, all facts supporting that belief with
particularity.” Winer Family Tr. v. Queen. 503 F.3d 319, 326 (3d Cir. 2007). Here, Plaintiffs’
opposition brief categorizes the challenged statements into two categories: (1) “Defendants’

Defendants also maintain that Plaintiffs failed to adequately plead scienter and loss causation—respectively, the
second and sixth elements of their Section 10(b) fraud claim. However, because the Court finds that Plaintiffs have
not pled the first element of their claims, the Court need not address the remaining elements. That said, and because
the Court will permit Plaintiffs an opportunity to file an amended complaint, the Court only notes that Plaintiffs should
be cognizant of the heightened pleading requirements with respect to scienter under the PSLRA.

‘

9

representations that [the Product] was simply a liquid, ‘ready to use’ version of Angiomax” and;
(2) “Defendants’ representations that FDA approval of [the Product’s] NDA was imminent based
on a continuing dialogue with the FDA.” (Pls.’ Br. at 9, 13). In a similar vein, Plaintiffs have
alleged a securities violation based upon Defendants’ failure to disclose that there were significant
differences between the Product and the reference drug and based upon Defendants’ failure to
disclose that additional human studies would likely be required to achieve FDA approval. (Am.
Cornpl.

¶J 62, 64).
According to Defendants, Plaintiffs have not pled any particularized facts tending to

support their allegations that the challenged statements were false or otherwise misrepresentations,
or that any omissions rendered any statements false or misleading. Specifically, Defendants state
that the statements or omissions upon which Plaintiffs base their claims are inactionable in that
they are either demonstrably true, are prohibited by the PSLRA’s safe harbor provision, are/or are
mere puffery. (ECF No. 19-1, “Defs.’ Mov. Br. at 14-23). The Court considers each of these
arguments, as well as Plaintiffs’ responses thereto, in turn.
A. Whether Plaintiffs have sufficiently alleged that the Challenged Statements
were False

Defendants argue that many of the alleged misrepresentations or omissions are inactionable
because they are accurate statements of fact.

(Defs.’ Mov. Br. at 22-23).

In other words,

Defendants maintain that “the ‘[Amended] Comlaint fails to satisfy the ‘PSLRA’s first pleading
requirement,’ which is to specify each allegedly misleading statement and ‘the reason or reasons

Defendants contend that Plaintiffs have failed to state why the following five categories of statements are untrue: the
characteristics of the Product; the Product’s NDA and PDUFA date; discussions with the FDA; the Company’s
business model; and the Product’s launch, are all true statements that cannot form the basis of Plaintiff’s claim for
misrepresentation or omission. (Id.). Given that Plaintiffs group their challenged statements into two categories—(1)
relating to the likelihood of FDA approval and (2) the chemical make-up of the Product—to the extent possible, the
Court’s discussion groups

10

why the statement is misleading.” (Id. at 22, quoting Avaya, 564 F.3d at 259, 267 (internal
quotations omitted)). Of the two main categories of statements as organized by Plaintiff—that is,
statements relating to the Product’s make-up and statements regarding the likelihood of FDA
approval—it is allegations relating to the chemical make-up of the Product that underlie the
majority of the challenged statements.

In other words, Plaintiffs’ allegations that Defendants

misled investors with representations as to the likelihood of FDA approval are, to a large extent,
premised upon their allegations that Defendants were somehow aware, via their discussions with
the FDA and otherwise, that the Product was not merely a RTU version of the branded drug and
would require human clinical trials.

Accordingly, the Court will first address Defendants’

argument that Plaintiffs have not sufficiently pled that Defendants’ statements regarding the nature
of the Product were false.
Plaintiffs offer two factual allegations that they argue show that Defendants’ statements
relating to the composition of the Product and the Product’s status as a “ready to use” form of
Angiornax were misrepresentations. Principally, Plaintiffs rely upon the fact that the CRL, as
summarized by the Company in its press release, “requested further characterization of the
bivalirudin-related substances in the drug product.” (Pis.’ Br. at 9). Second, Plaintiffs rely upon
the fact that Eagle has confirmed that it is currently in discussions with the FDA to develop a
human clinical trial. (Id.). According to Plaintiffs, if the Product was “truly just a liquid form of
Angiomax,” then the now-contemplated human studies would not be necessary. (Id. at 9-10).
For their part, Defendants contend that Plaintiffs have not alleged any facts that tend to
contradict the Company’s representations as to the nature of the Product. (Def.’s Mov. Br. at 23).
Specifically, Defendants stated that “[t]he fact that the FDA did not approve the NDA does not,
for instance, render Defendants’ descriptions of RTU Bivalirudin false.”

(Id.).

Similarly,

Defendants argue that the Amended Complaint does not contain any particularized facts
suggesting that Defendants concealed differences between RTU Bivalirudin and Anigomax. (Id.
at 24-25).

First, Defendants note that while the Amended Complaint alleges “significant

differences” between the Product and the reference drug, the Complaint does not state what those
alleged differences are. (Id.). Second, Defendants note that no reasonable investor could have
been misled into thinking that the Product was identical to Angiomax, since “Eagle’s entire
business model is premised on making changes to the branded reference drug and utilizing the
505(b)(2) pathway.” (Id. at 25). Additionally, addressing Plaintiffs’ argument that Defendants’

post-class period statements that they are engaged in discussions with the FDA regarding
conducting human clinical trials, Defendants note that “[t]hese discussions do not show that during
the Class Period Defendants were aware of the need for human trials.” (Defs.’ Mov. Br. at 30).
And, as Defendants point out, Plaintiffs have not pled any factual allegations tending to show that,
during the Class Period and at the time that any of the challenged statements were made,
Defendants had any reason to believe that human clinical trials would be required.
The Court agrees with Defendants that Plaintiffs have not sufficiently pled particularized
facts demonstrating how any representations regarding the composition of the Product were false.
The sum and substance of Plaintiffs’ argument relating to the Product’s composition is as follows:
In light of the CRL requesting further information on the “bivalirudin-related substances,” and in
light of the fact that Eagle is now in discussions with the FDA regarding human trials, it must be
the case that Defendants’ statements that the Product was a RTU-version of Angiornax were false.
(See Pls.’ Br. at 10). Yet, Plaintiffs have failed to explain how this is so. While the Court
acknowledges that Plaintiffs may lack information due to the confidentiality of the CRL, this fact
does not give Plaintiffs the authority to speculate. That is, speculation and conjecture will not

12

support a claim under the PSLRA’s heightened pleading standard. See, e.g., California Public
Employees’ Retirement System v. Chubb Coip., 394 F.3d 126, 155 (3d Cir. 2004) (“Generic and
conclusory allegations based upon rumor and conjecture are undisputedly insufficient to satisfy
the heightened pleading standard of 15 U.S.C.

§ 78u-4(b)(1).”).

In summary, the Court finds that Plaintiffs have failed to plead with sufficient particularity
any facts tending to support their theory that Defendants’ statements relating to the characteristics
of the Product were false. Accordingly, Plaintiff has not met the heightened pleading standard of
the PSLRA with respect to these particular challenged statements. Thus, to the extent Plaintiffs’
claims are premised upon statements regarding the composition of the Product, those claims are
not actionable.
B. The PSLRA’s Safe Harbor Provision

As to the second category of challenged statements relating to the likelihood of FDA
approval, Defendants maintain that these statements are not actionable as they are protected under
the P$LRA’s “safe harbor” provision. (Defs.’ Mov. Br. at 15). The PSLRA contains a “safe
harbor” provision, which, in pertinent part, protects oral or written fm-ward-looking statements
from Rule lOb-5 liability. 15 U.S.C.A.

§ 78u—5. Specifically, § 78u-5(c)(1)(A) provides that:

[A] person. shall not be liable with respect to any forward-looking statement, whether
written or oral, if and to the extent that (A) the forward-looking statement is (i) identified
as a forward-looking statement, and is accompanied by meaningful cautionary language
statements identifying important factors that could cause actual results to differ materially
from those in the forward looking statement; or (ii) immaterial; or (B) the plaintiff fails to
prove that the forward-looking statement. was made with actual knowledge [on the part
of the individual making the statement] that the statement was false or misleading.
.

.

.

.

Id. The safe harbor provision defines a “forward-looking statement” broadly, to include:

(A) a statement containing a projection of revenues, income (including income loss),
earnings (including earnings loss) per share, capital expenditures, dividends, capital
structure, or other financial items;
13

(B) a statement of the plans and objectives of management for future operations, including
plans or objectives relating to the products or services of the issuer;
(C) a statement of future economic perfonuance, including any such statement contained
in a discussion and analysis of financial condition by the management or in the results of
operations included pursuant to the rules and regulations of the [SEC];
(D) any statement of the assumptions underlying or relating to any statement described in
subparagraph (A), (B), or (C).
15 U.$.C.A.

§ 78u—5(i)(1).

In order for a forward-looking statement to be protected by the safe harbor provision, it
must be tempered by cautionary language that is “directly related to the alleged
misrepresentations,” but such cautionary language does not have to “actually accompany the
alleged misrepresentation.” GSC Partners CDO fitnd v. Washington, 368 F.3d 228, 243 (3d
Cir.2004) (quoting EF Medsystems, Inc. v. EchoCath, Inc., 235 F.3d 865, 874 (3d Cir.2000)); see
also $emerenko v. Cendant Corp., 223 F.3d 165, 182 (3d Cir.2000) (quoting In reDona/di Tritmp

Casino Sec. Litig.-Taj Mahal Litig., 7 F.3d 357, 369 (3d Cir.1993)). “Cautionary language must
be extensive and specific.” Avaya, 564 f.3d at 256 (quoting GSC Partners CDO fttnd v.
Washington, 368 f.3d 228, 243 n.3 (3d Cir. 2004). In In re Trump, the Third Circuit explained:

[A] vague or blanket (boilerplate) disclaimer which merely warns the reader that the
investment has risks will ordinarily be inadequate to prevent misinformation. To suffice,
the cautionary statements must be substantive and tailored to the specific future projections,
estimates or opinions in the prospectus which the plaintiffs challenge.
In re Trump, 7 F.3d at 37 1—72. In Kline v. First Western Gov’t Sec., Inc., 24 F.3d 480, 489 (3d

Cir. 1994), the Third Circuit clarified that “Trttmp requires that the language bespeaking caution
relate directly to that by which plaintiffs claim to have been misled.”
Finally, even if a defendant can show that challenged statements were forward-looking and
accompanied by cautionary language, the safe harbor clause will not apply if the statement was
made with actual knowledge that the statement was false or misleading. 15 U.S.C.
5(c)(1)(B)(i); In reAdvanta Corp., 180 f.3d at 535.
14

§ 78u—

1.

Whether Challenged Statements were “Forward-Looking”

Here, Defendants argue that the vast majority of the challenged statements are protected
under the safe harbor provision. (Defs.’ Mov. Br. at 15). Generally, these statements relate to the
Company’s belief that the NDA would be approved.

Specifically, Defendants state that the

following statements, as taken from the Amended Complaint, are forward-looking:

•

•
•

“We will file the NDA for RTU bivalirudin in the very near future and would expect its
acceptance for filing Lw the end ofJttlv and our PDUFA date should be 10 months after
filing.” (Am. Compi. ¶ 59) (emphasis in Defendnats’ brief).
“[W]e’re going to do everything we can, and we think we have a good position to get us
through and on to the market as soon as we possibly can.” (Am. Compi. ¶ 61).
“We look forward to the FDA’s decision on this NDA in March 2016 and, f approved,
intend to launch our RTU bivalinidin product the following day.
(Id. ¶ 63) (emphasis
in Defendants’ brief).
“We expect to launch RTU bivalirudin in March.
(Id. ¶ 65) (emphasis in Defendants’
brief)
“So we believe we will gain very strong market share with this product. It should be sticky.
(Id. ¶ 66) (emphasis in Defendants’ brief).
“[W]e continue to expect an FDA decision in March 2016.” (Id. ¶ 68) (emphasis in
Defendants’ brief).
“We have every expectation that based on our file and the dialogue that’s been ongoing
that we’ll get an approval.” (Id. ¶ 76) (emphasis in Defendants’ brief).
“We currently expect to be the next entrant into this market ahead of other generics... So
we feel good about our chances of capturing a meaningful share of that market.” (Id. ¶ 83).
.

•
•

.

.

.

.“

.“

.“

•
•
•

.

Defendants maintain that courts have routinely found similar statements to be forward
looking under the P$LRA. (Defs.’ Mov. Br. at 17).
In opposition, Plaintiffs argue that these statements are not forward-looking. (Pls.’ Br. at
21). Specifically, Plaintiffs state that “with respect to the expectation that the NDA would be
approved and the product would launch in March of 2016, the statements Defendants argue are
forward looking are actually based on past interactions and ‘ongoing’ and ‘continuing’ then

15

present discussions with the FDA.” (Id. at 22) (citing to Am. Compi.

¶J 63, 76,

83).6

Moreover,

Plaintiffs contend that
Defendants’ statements regarding their expectation that [the Product] would be the next
entrant into a limited market and would therefore capture “a meaningful share of the
market” (J 83) were similarly a representation of present conditions, namely that: (1) FDA
approval was imminent; (ii) competitors were locked in protracted patent litigation which
would prevent them from entering the market before Eagle (J 49); and (iii) [the Product’s]
formulation was such that it was eligible for fast-track approval.
(Id. at 22-23).
The Court agrees with Defendants that the above-listed challenged statements, as taken
directly from Defendants’ moving brief, are forward-looking statements. That is, statements
relating to anticipated FDA approval of the NDA are “statement[s] of the plans and objectives of
management for future operations, including plans or objectives relating to the products.” 15
U.S.C.A.
finding

§ 78u—5(i)(1)(B). Just as in Avaya, where the Third Circuit affirmed the district court’s
that

“the

‘on

track’

and

‘position us’ portions of the [challenged statements], when read in context, cannot meaningfully
be distinguished from the future projection of which they are a part,” Avaya, 564 F.3d at 255, this
Court finds that the above statements anticipating FDA approval are not transfonned into mixed
present/future statements by virtue of references to the “ongoing” and “continuing” discussions
with the FDA. (See Pl.’s Br. at 22). This is particularly the case where Plaintiffs concede that
Defendants and the FDA were, in fact, engaged in discussions.

ii.

Whether Challenged Statements were Accompanied by Cautionary Language

Plaintiffs also state that “statements concerning the chemical composition of [the Product), and its eligibility for a
streamlined FDA approval process because it is a reconstituted version of an already-approved drug, are clearly not
forward-looking.” (Pls.’ Op. Br. at 21-22). However, the Court does not construe any of the statements that
Defendants have identified as forward-looking to be related the composition of the Product. Accordingly, the Court
sees this argument as inapposite.

16

Having found that the statements relating to the likelihood of FDA approval were forwardlooking, the Court must determine whether they were properly accompanied by cautionary
language.
According to Defendants, the above statements were countered by cautionary language in
the Company’s FonTi 10-Q and Form 10-K. (Defs.’ Mov. Br. at 17-18). Eagle’s Form 10-Q for
the quarterly period ending March 31, 2015 states that the Form contains forward-looking
“statements about: the success, cost and timing of our product development activities and clinical
trials; tand] our ability to obtain.

.

.

regulatory approval of our product candidates.

.

.

.“

(Defs.’

Mov. Br. at 18, Exh. 20). Specifically, the Form 10-Q contains the following statements:

•

•

“We cannot provide assurance that we will be able to obtain approval for any of our product
candidates from the FDA or any foreign regulatory authority or that we will obtain such
approval in a timely manner.” (Exh. 20 at 25)
“The FDA may also require us to perfonn one or more additional clinical studies or
measurements to support the change from the branded reference drug, which could be time
consuming and could substantially delay our achievement of regulatory approvals for such
product candidates.” (Id. at 25-26).

Moreover, the Company’s Form 10-K contained the following statements:
•

“If the FDA does not allow us to pursue the 505(b)(2) regulatory pathway for our product
candidates as anticipated, we may need to conduct additional clinical trials, provide
additional data and information and meet additional standards for regulatory approval. If
this were to occur, the time and financial resources required to obtain FDA approval for
our product candidates would likely substantially increase
[and] could result in new
competitive products reaching the market faster than our product candidates, which could
materially adversely impact our competitive position and prospects. Even if we were
allowed to pursue the 505(b)(2) regulatory pathway for a product candidate, we cannot
assure you that we will receive the requisite or timely approval for commercialization of
such product candidate.”
“It is possible that none of our existing product candidates or any product candidates we
may seek to develop in the future will ever obtain regulatory approval in the United States
or other jurisdictions.”
“Our product candidates could fail to receive regulatory approval... [because] we may be
unable to demonstrate to the satisfaction of the FDA.
that a product candidate is safe
and effective or comparable to its branded reference products for its proposed indication..
.

•

•

.

17

.

.

.

(Defs.’ Mov. Br. at 18-19, Exh. 19).
Defendants argue that the above cautionary statements are extensive, specific, and
narrowly-tailored to address the challenged statements. (Defs.’ Mov. Br. at 19). That is, “Eagle’s
cautionary language warned investors about the very risks of which Plaintiffs now complain.”
(Id.).
Plaintiffs challenge these statements as appropriately cautionary. (Pls.’

Op. Br. at 24-25).

According to Plaintiffs, these statements are merely vague, boilerplate language that fails to
“identifiy] the specific facts posing risks to the approval of RTU Bivalirudin, namely that the
Bivalirudin-related substances in [the Product] were not the same as in Angiomax, such that [the
Product] was ineligible for fast-track approval.” (Id. at 24).
The Court agrees with Defendants that the above cautionary statements, as identified in the
Form 10-Q and form 10-K, were sufficiently “extensive and specific.” Avaya, 564 F.3d at 256.
These statements, in no uncertain terms, warn investors that FDA approval through the 505(b)(2)
regulatory pathway is not guaranteed, that the FDA may require additional, time consuming
testing, and finally, that the FDA may find that Defendants’ products are not, in fact, comparable
to the branded drug. Each of these warnings are sufficiently tailored to Defendants’ statements
relating to the risks that came to fruition and form the basis of Plaintiffs’ complaint. Moreover,
Plaintiffs’ argument that the warnings are insufficient because they fail to warn investors that “the
Bivalirudin-related substances in [the Product] were not the same as in Angiomax” is simply an
attempt to bootstrap the alleged misrepresentation/omission into the required warnings. Thus,
were the Court to credit this argument, the Court would necessarily be accepting Plaintiffs’
argument that the failure to notify of alleged differences between the Product and reference drug
was, in fact, an actionable omission. For the reasons discussed above, however, the Court finds
18

that Plaintiffs have not sufficiently pled allegations to substantiate their claims that Defendants
misrepresented the nature of the Product.
In summary, the Court finds that any allegations as to the likelihood of FDA approval of
the Product’s NDA and potential launch date of the product were forward-looking and
accompanied by cautionary language.
iii.

Whether Defendants had “Actual Knowledge” of the Falsity of their
Statements

Although the Court has found that many of the suspect statements were forward-looking
and accompanied by appropriate cautionary language, the safe harbor provision will not apply if
statements were made with actual knowledge of their falsity. 15 U.S.C.

§ 78u—5(c)(l)(B)(i); In re

Advanta Corp., 180 F.3d at 535. Accordingly, the question at this juncture is whether Plaintiffs
have sufficiently pled that Defendants had actual knowledge that their statements respecting the
likelihood of FDA approval were false or misleading.
Here, the Court finds that Plaintiff has not sufficiently pled that the Defendants had actual
knowledge of the falsity of their statements.

Plaintiff argues that “[t]he FDA’s fundamental

disagreement with Eagle’s characterization of [the Product’s] composition, following more than
nine years of development and an ongoing dialogue with the FDA that continued into the weeks
before the FDA’s CRL, ‘support[s] an inference of scienter.” (Pls.’

Op. Br. at 27).

In other words,

Plaintiff states that “the fact that the Company was admittedly engaged in an ongoing dialogue
with the FDA, which ultimately expressed concerns about [the Product], gives rise to the inference
that the FDA either directly asked questions or expressed concerns that required follow-up prior
to the release of the CRL” (Id. at 27-28).

19

In response, Defendants contend that the Complaint fails to allege what, if anything the
FDA allegedly said to Defendants during their Class Period discussions which would lead
Defendants to believe that FDA approval would not be forthcoming. (Defs.’ Mov. Br. at 29).
Rather, from Defendants’ perspective, Plaintiffs’ argument “amounts to pure speculation—i.e.,
that Defendants ‘must have known’ about the FDA’s concerns simply because they were engaged
in ongoing dialogue.” (Id.).
Plaintiffs also encourage the Court to impute scienter to Defendants by virtue of the
“inference that key officers have knowledge of the ‘core operations’ of a company.” (Id. at 28).
According to Plaintiff, the Company’s small size of less than 45 employees and the significance
of the Product to the Company’s bottom-line further support an inference of scienter. (Id. at 2829). That is, given this information, “Tarriff cannot credibly disavow knowledge of the [Product’s]
development process and its likelihood of success.” (Id. at 29).
However, the alleged misrepresentations with respect to the Product’s launch date are
largely based upon allegations that Defendants’ representations that the Product was a RTU
version of the referenced drug were false. Yet, as discussed above, the Court finds that Plaintiff
has failed to sufficiently plead that these allegations were, in fact, false. Because the Court finds
that Plaintiff has not pled falsity as to these statements, there is no basis from which to conclude
that the Company’s on-going discussions with the FDA, coupled with the core operations doctrine,
supports an inference that Defendants knew that the Product’s NDA would not be approved.
Plaintiffs also attempt to bolster the inference of scienter by demonstrating that Defendants
had a motive and opportunity to mislead investors. (Pis.’ Br. at 32-35). However, because a
plaintiff cannot “establish scienter through proof ofmotive or opportunity alone,” and because the

20

Court has already found that Plaintiffs have not sufficiently pled scienter, the Court need not
address this argument.
In summary, the Court finds that Plaintiffs’ allegations that Defendants’ statements relating
to the likelihood of FDA approval are protected by the safe harbor provision. Therefore, these
statements cannot form the basis of Plaintiffs’ claims.

C. Puffery

In addition to arguing that many statements are protected by the safe harbor clause,
Defendants contend that “[m]any of the challenged statements are also inactionable statements of
opinion, puffery, and corporate optimism.” (Defs.’ Mov. Br. at 20).
While material misrepresentations may be actionable, such “representations must be
contrasted with statements of subjective analysis or extrapolations, such as opinions, motives and
intentions, or general statements of optimism.” ER MedSystems, Inc. v. EchoCath, Inc., 235 F.3d
865, $72 (3d Cir. 2000). As the Third Circuit has stated, these “statements ‘constitute no more
than ‘puffery’ and are understood by reasonable investors as such.” In re Aetna, Inc. Securities
Litig., 617 f.3d 272, 283 (3d Cir. 2010) (quoting In re Advanta Corp. Sec. Litig., 180 F.3d 525,
538 (3d Cir. 1999), abrogated on other grounds as recognized in Avava, Inc., 564 f.3d at 276).
Here, Defendants contend that the following statements fall into the category of
inactionable puffery:
•
•
•
•
•
•

“Bivalirudin is a uniqtteprodttct.” (Compl. ¶ 59).
“[W]e have a product that we consider far superior to the other generics on the market.”
(Id. ¶ 7$).
“[W]e think we have a good position to get us through and on to the market as soon as we
possibly can.” (J 61).
(Id. ¶ 83).
“[E]verything seems to be on track for a March 19 approval.
“We expect our RTU liquid formulation will be well received due to its multiple
differentiating features.” (Id. ¶ 63).
“I think on bivalirudin, we should do very well.” (Id. ¶ 66).
.

21

.

.“

•

“So we believe we will gain very strong market share with this product. It should be sticky.”
(Id.).
According to Defendants, these are the type of vague statements of puffery or corporate

optimism that cannot be said to mislead reasonable investors. (Defs.’ Mov. Br. at 20-22).
Plaintiffs contend that “the challenged statements are definitive, verifiable statements
regarding the essence of [the Product] and the likelihood that RTU Bivalinidin would gain FDA
approval without onerous and costly human trials, and there is no question that such statements
were material to investors.” (Pls.’ Br. at 15). However, as to the first category of statements
(relating to the chemical composition of the Product), and as Plaintiffs noted in their opposition
brief, Defendants are not arguing that any statements pertaining to the chemical makeup of the
Product were puffery. (Pls.’ Br. at 15). Moreover, as to the second category of statements (i.e.,
the likelihood of FDA approval), the Court has already determined that these claims are protected
under the safe harbor provision.
The remaining statements enumerated above that do not fall into the category relating to
FDA approval, for example, the Company’s statements that the Product is “unique,” “far superior”
to other generic drugs, should do “very well” and will be “well received” are not the kind of
statements that a “reasonable investor making an investment decision” would have relied upon. In
re Burlington Coat factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997). Accordingly, the
Court agrees with Defendants that, to the extent Plaintiffs are relying upon such statements in
support of their Section 10(b) claim, such statements are not actionable.
In summary, the Court finds that Plaintiffs have failed to plead the first element of their
claim of a violation of Section 10(b) of the Securities and Exchange Act. Because Plaintiffs fail
to sufficiently plead this primary violation, Plaintiffs’ claim for individual liability as against
Defendant Tarriff pursuant to Section 20(a) also fails. See In re Merck & Co., Inc. Sec. Litig., 432
22

F.3d 261, 275 (3d Cir. 2005) (“[C]ontrolling-person liability is ‘premised on an independent
violation of the federal securities laws.”) (quoting In re Rockefeller Ctr. Props, Inc. Sec. Litig.,
311 f.3d 198, 211 (3d Cir. 2002)).
Conclusion

IV.

For the reasons stated herein, Plaintiffs’ Amended Complaint is hereby dismissed without
prejudice. An appropriate Order accompanies this Opinion.

IT IS SO ORDERED.
DATED:

May

[1

,2017

LINARES, U.$.D.J.

23