PHILADELPHIA (Legal Newsline) - The U.S. Appeals Court for the Third Circuit has ruled that a district court appropriately dismissed a lawsuit against Pfizer and Wyeth that alleged they made false and misleading statements regarding trials for an Alzheimer's drug.
City of Edinburgh Council, as administering authority for the Lothian Pension Fund, and ARCA S.G.R.S.P.A. claimed that Pfizer Inc. and Wyeth all made false and misleading statements about a possible Alzheimer's drug that was going through phase trials.
Judges D. Brooks Smith, Patty Shwartz and Anthony Joseph Scirica decided the case, with Scirica authoring the opinion.
In the private securities fraud class action under the Private Securities Litigation Reform Act of 1995, two institutional investors alleged the pharmaceutical company and its executives made materially false and misleading statements in violation of the Securities Exchange Act of 1934 regarding interim clinical trial data related to the development of an experimental Alzheimer's drug.
"The District Court granted defendants' motion to dismiss for failure to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure," the June 6 opinion states. "We will affirm."
The plaintiffs brought the suit on behalf of a class of investors who purchased Wyeth common stock between May 21, 2007, and July 29, 2008, according to the opinion.
In May 2007, the defendants released a statement that they were beginning Phase 3 trials on an Alzheimer's drug known as Bapineuzumab. The company knew, but did not disclose, that the Phase 2 interim results did not support the decision to initiate the Phase 3 trial, it was alleged.
On July 29, 2008, the defendants revealed the Phase 2 results in a press release, stating that Phase 2 trials had failed to meet its objectives.
Despite the fact that Phase 2 trials had failed to meet overall objectives, the investors only learned for the first time on July 29, 2008, that the trial was nearly a complete failure, according to the opinion.
The plaintiffs sued the defendants in district court and on Feb. 10, 2012, the district court granted the defendants' first motion to dismiss, but on Dec. 21, 2012, it granted the plaintiffs leave to file a second amended complaint, which was again dismissed on April 22, 2013.
On appeal, the plaintiffs contended that the district court erred in dismissing their section 10(b) and Rule 10b-5 claims for failure to adequately plead falsity.
The plaintiffs also appealed the district court's dismissal of their control person liability and insider trading claims.
"We conclude the District Court correctly dismissed those claims for failure to adequately plead a predicate Exchange Act violation," the opinion states.
Because the plaintiffs have failed to adequately plead a predicate section 10(b) violation, their section 20(a) claim must be dismissed, according to the opinion.
"Similarly, section 20A of the Exchange Act provides that a corporate insider who trades stock 'while in possession of material, nonpublic information' is liable to any person who traded contemporaneously with the insider, provided there is an independent Exchange Act violation," the opinion states. "Because the Funds have failed to adequately plead a predicate Exchange Act violation, their section 20A claim must also be dismissed."
U.S. Court of Appeals for the Third Circuit case number: 13-2314
From Legal Newsline: Kyla Asbury can be reached at firstname.lastname@example.org.