City of Edinburgh Council as A v. Pfizer Inc

PRECEDENTIAL

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________

No. 13-2314
___________

CITY OF EDINBURGH COUNCIL AS ADMINISTERING
AUTHORITY FOR THE LOTHIAN PENSION FUND;
ARCA S.G.R.S.P.A,
Appellant

v.

PFIZER, INC., as successor in interest to WYETH, a
Delaware Corporation; ROBERT ESSNER; BERNARD
POUSSOT; KENNETH J. MARTIN; ROBERT R.
RUFFOLO; WYETH
_______________________

On Appeal from the United States District Court
for the District of New Jersey
D.C. Civil Action No. 2-10-cv-03105
(Honorable Susan D. Wigenton)
______________

Argued: January 8, 2014

Before: SMITH, SHWARTZ, and SCIRICA, Circuit Judges.

(Filed: June 6, 2014)
Jeffrey A. Almeida, Esq.
Grant & Eisenhofer
123 Justison Street
Wilmington, DE 19801

Daniel L. Berger, Esq. [ARGUED]
Deborah A. Elman, Esq.
Grant & Eisenhofer
485 Lexington Avenue
29th Floor
New York, NY 10017

Gregory M. Castaldo, Esq.
Joshua E. D'Ancona, Esq.
Michael K. Yarnoff, Esq.
Kessler, Topaz, Meltzer & Check
280 King of Prussia Road
Radnor, PA 19087
Counsel for Appellants

John Villa, Esq. [ARGUED]
George A. Borden, Esq.
David R.J. Riskin, Esq.
Williams & Connolly
725 12th Street, N.W.
Washington, DC 20005

Stephen C. Matthews, Esq.
Porzio, Bromberg & Newman
100 Southgate Parkway
Morristown, NJ 07962
Counsel for Appellees

2
 _________________

OPINION OF THE COURT
_________________

SCIRICA, Circuit Judge

In this private securities fraud class action under the
Private Securities Litigation Reform Act of 1995 (“PSLRA”),
two institutional investors allege a pharmaceutical company
and its executives made materially false and misleading
statements in violation of the Securities Exchange Act of
1934 (the “Exchange Act”) 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. We will
affirm. 1
I.

Plaintiffs-appellants City of Edinburgh Council as
Administering Authority for the Lothian Pension Fund and
Arca S.G.R. S.p.A. (the “Funds”) 2 bring suit on behalf of a
class of investors who purchased Wyeth, Inc. common stock

1
The District Court had jurisdiction under 28 U.S.C. § 1331
and 15 U.S.C. § 78aa. We have jurisdiction under 28 U.S.C.
§ 1291.
2
Security Police and Fire Professionals of America
Retirement Fund, a lead plaintiff below, is not a party to this
appeal.

3
between May 21, 2007, and July 29, 2008 (the “Class
Period”). The Funds allege Wyeth and four former Wyeth
executives—defendants Robert Essner, Bernard Poussot, Jr.,
Kenneth J. Martin, and Robert R. Ruffolo, Jr.—made
materially false and misleading statements regarding the
development of the experimental Alzheimer’s drug
bapineuzumab. Defendant Pfizer Inc. is the successor-in-
interest to Wyeth, which it acquired in 2009.

The Funds bring three claims: (1) securities fraud
under section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b),
and Securities and Exchange Commission (“SEC”) Rule 10b-
5; (2) control person liability under section 20a of the
Exchange Act, 15 U.S.C. § 78t; and (3) insider trading under
section 20A of the Exchange Act, 15 U.S.C. § 78t-1(a). 3

A.

Approximately 5 million Americans and 26 million
people worldwide suffer from Alzheimer’s disease. Wyeth
and Elan Corporation, plc (“Elan”), 4 an Ireland-based
pharmaceutical company, embarked on a joint venture to

3
Because the District Court granted defendants’ Rule
12(b)(6) motion to dismiss, we assume the Funds’ well-
pleaded, nonconclusory factual allegations to be true. See
Ashcroft v. Iqbal, 556 U.S. 662, 678–79 (2009). We may
consider documents incorporated into the complaint,
Institutional Investors Grp. v. Avaya, Inc., 564 F.3d 242, 252
(3d Cir. 2009), and take judicial notice of SEC filings, Oran
v. Stafford, 226 F.3d 275, 289 (3d Cir. 2000).
4
Perrigo Company plc acquired Elan in 2013.

4
develop an Alzheimer’s treatment that, unlike other drugs
then on the market, would target the underlying causes of the
disease. This joint venture produced bapineuzumab, which is
designed to treat mild to moderate Alzheimer’s. As required
by Food and Drug Administration (“FDA”) regulations,
Wyeth and Elan launched clinical trials to assess the efficacy
and safety of bapineuzumab in treating Alzheimer’s. 5 In
2006, Wyeth and Elan completed Phase 1 trials of
bapineuzumab and received Fast Track status from the FDA. 6
Before announcing Phase 1 results, Wyeth and Elan began the

5
FDA regulations require three phases of clinical trials—
which may overlap—to assess the efficacy and safety of
potential new treatments. 21 C.F.R. § 312.21. Phase 1 tests
the drug’s efficacy and safety on a small number of patients.
Phase 2 is a controlled clinical study in which various doses
of the drug are tested on groups of up to several hundred
patients to evaluate preliminary indicia of the drug’s efficacy
and safety. Phase 3 studies—randomized, multicenter trials
on large patient groups over an extended period—aim to
provide sufficient evidence of efficacy and safety to support
FDA approval to market the drug.
6
Fast Track status entitled the companies to priority oversight
from the FDA, including an accelerated path to approval and
more frequent communications with the FDA. See Fast
Track, Breakthrough Therapy, Accelerated Approval and
Priority Review, FDA,
http://www.fda.gov/forconsumers/byaudience/forpatientadvo
cates/speedingaccesstoimportantnewtherapies/ucm128291.ht
m (last visited June 4, 2014). Only drugs intended to treat
serious or life-threatening diseases for which there is a
significant unmet medical need qualify for Fast Track status.

5
Phase 2 trial, a controlled, double-blind study designed to
measure the efficacy of bapineuzumab compared to a
placebo. The companies measured bapineuzumab’s efficacy
using two tests, the Alzheimer’s Disease Assessment Scale-
Cognitive (“ADAS-cog”) and the Disability Assessment
Scale for Dementia (“DAD”).

The Phase 2 trial was not scheduled for completion
until 2008, and Wyeth and Elan said they did not expect to
release any Phase 2 trial data until that time. The focus of the
Funds’ complaint is a joint press release issued on May 21,
2007 (the “May 2007 Release”), announcing the companies’
decision to initiate a Phase 3 clinical trial, subject to FDA
approval, in the second half of 2007. The May 2007 Release
stated (emphasis added):

Elan . . . and Wyeth . . . today announce the
decision to initiate a Phase 3 clinical program
of . . . Bapineuzumab. . . . This decision was
based on the seriousness of the disease and the
totality of what the companies have learned
from their immunotherapy programs, including
a scheduled Interim look at data from an
ongoing Phase 2 study, which remains blinded.
No conclusion about the Phase 2 study can be
drawn until the study is completed and the final
data are analyzed and released in 2008. Phase
3 clinical trial design will be finalized with
regulatory agencies, and subject to regulatory
approval, it is intended for the trial to begin in
the second half of 2007.

The Funds contend that at the time Wyeth issued the May

6
2007 Release the company knew—but did not disclose—that
the Phase 2 interim results did not support the decision to
initiate the Phase 3 trial. 7 The Funds’ two confidential
witnesses 8 allege the interim results showed bapineuzumab
had failed pre-specified criteria for efficacy and revealed
serious adverse safety risks. Wyeth disputes this allegation,
arguing the Phase 2 results showed “statistically significant
and clinically meaningful benefits” among an important
patient subgroup—non-carriers of the Apolipoprotein E4
(“ApoE4”) gene who are believed to make up 40 to 70
percent of Alzheimer’s patients, or approximately 2 to 3.5
million Americans. Further, Wyeth contends CW1’s
statements confirm its interpretation of the subgroup data—
CW1 noted the Phase 2 interim results were “interesting” and
“warranted further testing” with regard to non-carriers of the
ApoE4 gene but only as an additional Phase 2 trial, not as a
Phase 3 trial. And Wyeth notes it had to obtain FDA

7
The Funds also allege defendants Martin and Ruffolo
profited from the concealment of the poor Phase 2 interim
results by exercising and selling stock options on May 22,
2007.
8
The Funds’ confidential witnesses are former high-ranking
Wyeth executives who performed extensive work related to
the development of bapineuzumab during the Class Period.
Confidential witness 1 (“CW1”) was a member of Wyeth’s
Neuroscience Steering Committee and Bapineuzumab
Steering Committee. Confidential witness 2 (“CW2”) was a
member of Wyeth’s Research and Development (“R&D”)
Committee. The confidential witnesses provided their
evidence through affidavits.

7
approval to initiate the Phase 3 trial, 9 on which the companies
spent “millions of dollars of their own assets.”

The Funds also argue the May 2007 Release was
misleading in light of a prior statement made on October 5,
2006, by defendant Ruffolo, Wyeth’s head of research, at the
company’s annual meeting for securities analysts. Ruffolo
stated orally that the companies planned to conduct an interim
review of the Phase 2 results at the end of 2006 in order to
determine whether and how to proceed to a Phase 3 trial:

Now, again, we don’t have any results from this
[Phase 2] study at all, but we have a planned
interim look at the data at the end of the year.
And, based on this interim look, we could do
two things. One, depending on the data, we
could advance directly into Phase III in the first
half of 2007, but the results would have to be
spectacular. We don’t know what results we’re
going to get. Alternatively, we could complete
the study and then move to the next interim
look, which would be in the first half of 2007.

9
The FDA approves a Phase 3 trial, which typically includes
far more subjects than a Phase 1 or Phase 2 trial, where there
is “preliminary evidence suggesting effectiveness.” 21 C.F.R.
§ 312.21(c). But the FDA retains the ability to suspend a
clinical trial through a clinical hold, id. § 312.42, or to
terminate a clinical trial if there is “convincing evidence that
the drug is not effective for the purpose for which it is being
investigated” or the trial poses “an unreasonable and
significant risk of illness or injury,” id. §§ 312.44(b)(1)(i),
(b)(2)(i), (b)(2)(iii).

8
Despite defendants’ explicit warning in the May 2007
Release that “[n]o conclusion about the Phase 2 study can be
drawn” and that initiation of Phase 3 would be “subject to
regulatory approval,” the Funds allege Ruffolo’s remarks led
them to interpret the May 2007 Release’s statement that the
Phase 3 trial would commence early based in part on the
Phase 2 interim results to mean those results were
“spectacular.”

On June 17, 2008, Wyeth and Elan issued a press
release (the “June 2008 Release”) disclosing “preliminary
findings” from the Phase 2 study. The June 2008 Release
reported that the Phase 2 trial failed to meet its objectives as
to the entire study population and reported serious adverse
events among both placebo- and bapineuzumab-treated
patients. But it noted that based on “[p]ost-hoc analyses,”
bapineuzumab showed “statistically significant and clinically
meaningful benefits” among non-carriers of the ApoE4 gene
who are believed to make up 40 to 70 percent of Alzheimer’s
patients. Accordingly, the June 2008 Release announced the
companies’ conclusion that the results of the Phase 2 trial, as
well as its safety findings, supported the decision to proceed
with the Phase 3 trial. 10

On July 29, 2008, Wyeth and Elan revealed the Phase
2 results through a joint press release, conference

10
The Funds also alleged Wyeth and Elan committed
securities fraud through factual omissions in the June 2008
Release. The District Court held the June 2008 Release was
not actionable because defendants had no duty to disclose the
allegedly omitted information, and the Funds do not challenge
that determination on appeal.

9
presentation, and investor conference call. Despite the
disclosure in the June 2008 Release that the Phase 2 trial had
failed to meet its overall objectives, the Funds contend
investors only learned for the first time on July 29 that the
Phase 2 trial was nearly a complete failure—the results
showed no efficacy and revealed serious safety concerns.
According to CW1, the final Phase 2 results did not differ
significantly from the Phase 2 interim results referenced in
the May 2007 Release.

B.

The District Court granted defendants’ first motion to
dismiss on February 10, 2012, holding the Funds had not
adequately alleged defendants made any materially false or
misleading statements and defendants had no duty to disclose
allegedly omitted details. On December 21, 2012, the District
Court granted the Funds leave to file a second amended
complaint. On April 22, 2013, the District Court again
dismissed the Funds’ claims, holding (1) the Funds failed to
adequately allege defendants made any affirmatively false or
misleading statements, (2) defendants had no duty to disclose
additional information about the Phase 2 interim results, and
(3) the Funds failed to sufficiently plead a predicate Exchange
Act violation required to maintain their control person
liability and insider trading claims.

On appeal, the Funds contend the District Court erred
in dismissing their section 10(b) and Rule 10b-5 claims for
failure to adequately plead falsity. The Funds also argue
defendants’ statements and actions triggered a duty to
disclose full and complete material information to investors
about the Phase 2 interim results. And the Funds challenge

10
the District Court’s dismissal of their control person liability
and insider trading claims.

We review de novo the District Court’s decision to
grant defendants’ Rule 12(b)(6) motion to dismiss. See In re
Aetna, Inc. Sec. Litig., 617 F.3d 272, 277 (3d Cir. 2010). We
also exercise plenary review over the dismissal of a complaint
for failure to satisfy the heightened pleading standards of the
PSLRA and over the District Court’s interpretation of federal
securities laws. Institutional Investors Grp. v. Avaya, Inc.,
564 F.3d 242, 251 (3d Cir. 2009). The PSLRA’s heightened
pleading standards require a private securities fraud complaint
alleging false or misleading statements to “specify each
statement alleged to have been misleading, the reason or
reasons why the statement is misleading, and, if an
allegation . . . is made on information and belief, . . . state
with particularity all facts on which that belief is formed.” 15
U.S.C. § 78u-4(b)(1); see Tellabs, Inc. v. Makor Issues &
Rights, Ltd., 551 U.S. 308, 321 (2007). “This standard
requires plaintiffs to plead the who, what, when, where, and
how: the first paragraph of any newspaper story.”
Institutional Investors Grp., 564 F.3d at 253 (internal
quotation marks and citation omitted). A complaint must also
“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); Tellabs, 551 U.S. at 321. We must
evaluate “the complaint in its entirety, as well as other
sources courts ordinarily examine when ruling on Rule
12(b)(6) motions to dismiss,” including documents
incorporated into the complaint by reference and matters of
which we may take judicial notice. Tellabs, 551 U.S. at 322
(citation omitted).

11
 C.

This is not the first case in which the federal courts
have adjudicated securities fraud allegations arising out the
development of bapineuzumab. Three federal courts have
considered and dismissed claims similar to those at issue in
this case. See Kleinman v. Elan Corp., plc, 706 F.3d 145 (2d
Cir. 2013); In re Elan Corp. Sec. Litig., No. 08-cv-8761
(S.D.N.Y. June 23, 2011); Philco Invs., Ltd. v. Martin, No.
10-02785, 2011 WL 500694 (N.D. Cal. Feb. 9, 2010).

In Kleinman, the Second Circuit affirmed the Rule
12(b)(6) dismissal of a suit against Elan, Pfizer, and two Elan
executives for failure to allege any actionable false statements
or omissions and failure to plead a predicate Exchange Act
violation. Kleinman, 706 F.3d at 147. The plaintiff in
Kleinman alleged the June 2008 Release misrepresented the
Phase 2 results as “[e]ncouraging” and omitted key
information about the lack of a dose response and analysis of
the Phase 2 data. But the Second Circuit rejected those
contentions, holding the June 2008 Release clearly stated the
“[e]ncouraging” results were subgroup results and finding
words like “encouraging” to be puffery. Id. at 153. And the
court found the omitted information claim was not actionable
because, although possibly of interest to a reasonable
investor, its omission did not render the June 2008 Release
false or misleading. Id. at 154–55.

In In re Elan, a district court dismissed claims against
Elan for failure to allege any actionable false statements or
omissions. The case challenged many of the same statements
at issue in this case, including the May 2007 Release. The
court rejected the allegation that the May 2007 Release was

12
false based on Ruffolo’s “spectacular” statement. Transcript
of Argument at 10:9–13, In re Elan, Corp. Sec. Litig., No. 08-
cv-8761 (“There’s nothing about [the May 2007 Release]
that says it’s going to be spectacular. Everyone knows that in
this business it’s extraordinarily risky and . . . expensive, and
lots of drugs have been stopped in phase 3, even though they
had high hopes in phase 2.”). The court described Ruffolo’s
“spectacular” statement as “puffery” and noted that the law
does not provide that “an early puffery, if not corrected,
continues to be a false statement every day of the year that
follows.” Id. at 15:20–23. And the court said Elan and
Wyeth would not have agreed to proceed to Phase 3, given
the millions of dollars the companies spent, unless Phase 2
showed at least some promising data. Id. at 18:5–19.

Finally, in Philco Investments, a district court
dismissed claims against Elan and three of its executives for
failure to adequately allege falsity and to plead a predicate
Exchange Act violation. Philco Invs., 2011 WL 500694, at
*1. Plaintiffs challenged both the May 2007 Release and the
June 2008 Release. The court found plaintiffs failed to allege
Elan disclosed criteria by which it would judge the Phase 2
interim results, and, accordingly, plaintiffs failed to
adequately allege the May 2007 Release was false. Id. at *6–
7. The court also concluded plaintiffs failed to allege the
June 2008 Release was false because, although it may not
have included all the information a reasonable investor would
have liked to have, it did not contain false or misleading
information. Id. at *7–9.

II.

Section 10(b) of the Exchange Act prohibits the “use

13
or employ[ment], 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 [SEC] may prescribe.” 15 U.S.C. § 78j(b). SEC Rule
10b-5 implements this provision by making it unlawful to,
among other things, “make any untrue statement of a material
fact or to omit to state a material fact necessary in order to
make the statements made, in the light of the circumstances
under which they were made, not misleading.” 17 C.F.R.
§ 240.10b-5(b). The Supreme Court has implied a private
cause of action from the text and purpose of section 10(b).
Matrixx Initiatives, Inc. v. Siracusano, 131 S. Ct. 1309, 1317
(2011).

To state a claim for securities fraud, plaintiffs must
allege (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. Id. at 1317–18; In re Aetna, Inc. Sec.
Litig., 617 F.3d 272, 277 (3d Cir. 2010).

The primary issue in this appeal is the first element,
whether the Funds have adequately alleged defendants made
a material misrepresentation or omission. The District Court
concluded the Funds had failed to do so. But the Funds
contend that conclusion was incorrect because the May 2007
Release contained affirmatively false and misleading
statements about the Phase 2 interim results, and defendants’
post-May 21 statements were also false or misleading. We
agree with the District Court.

14
 A.

We first analyze whether the May 2007 Release
contained any affirmative false statements, and then we
consider whether the May 2007 Release was misleading in
light of defendant Ruffolo’s October 2006 “spectacular”
statement.

1.

Specifically, the Funds allege one statement in the
May 2007 Release was affirmatively false—the decision to
initiate the Phase 3 trial “was based on the seriousness of the
disease and the totality of what the companies have learned
from their immunotherapy programs, including a scheduled
Interim look at data from an ongoing Phase 2 study, which
remains blinded.” This statement was affirmatively false, the
Funds contend, because Wyeth’s decision to move to Phase 3
was not “based on” the Phase 2 interim results—it was made
in spite of those results, which the Funds characterize as
abysmal. Because their confidential witness statements
demonstrate bapineuzumab failed the interim review, the
Funds argue the Phase 2 interim results did not support
defendants’ decision to initiate Phase 3. 11

11
We apply the PSLRA’s heightened pleading requirements
to confidential witness allegations “by evaluating ‘the detail
provided by the confidential sources, the sources’ basis of
knowledge, the reliability of the sources, the corroborative
nature of other facts alleged, including from other sources, the
coherence and plausibility of the allegations, and similar
indicia.’” Institutional Investors Grp., 564 F.3d at 263

15
 We agree with the District Court, however, that the
Funds’ allegations are insufficient to maintain a plausible
claim of falsity regarding the May 2007 Release statement
under the “[e]xacting pleading requirements” of the PSLRA.
See Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S.
308, 313 (2007); Institutional Investors Grp. v. Avaya, Inc.,
564 F.3d 242, 263 (3d Cir. 2009) (“The PSLRA imposes a
particularity requirement on all allegations, whether they are
offered in support of a statement’s falsity or of a defendant’s
scienter.” (citation omitted)).

The Funds’ own pleading demonstrates the accuracy of
defendants’ statement that the initiation of Phase 3 was based
in part on the Phase 2 interim results. See Cal. Pub. Emps.’
Ret. Sys. v. Chubb Corp., 394 F.3d 126, 156–58 (3d Cir.
2004) (finding plaintiffs failed to adequately plead falsity
where information provided by their confidential witnesses
was generally consistent with defendants’ allegedly false and
misleading public statements). Analyzing the phrase “based
on” in the May 2007 Release under the PSLRA’s heightened
pleading standards, the Funds have failed “to specify . . . the
reason or reasons why the statement is misleading” because
the most cogent interpretation of that phrase is that defendants
considered the Phase 2 interim results as one factor in their
decision to initiate the Phase 3 trial. See Tellabs, 551 U.S. at
322. The Funds’ confidential witness statements indicate
defendants did analyze and consider those results in deciding
whether to initiate Phase 3.

Moreover, the Funds’ argument that the May 2007

(quoting Cal. Pub. Emps.’ Ret. Sys. v. Chubb Corp., 394 F.3d
126, 147 (3d Cir. 2004)).

16
Release falsely conveyed that the Phase 2 interim results
justified the initiation of Phase 3 fails because it is based on a
selective reading of that document. See id. (instructing courts
to consider complaints under the PSLRA in their entirety,
including documents incorporated by reference). The May
2007 Release made no statement about the strength of the
interim results. Instead, the May 2007 Release provided three
bases for the move to Phase 3: (1) the seriousness of
Alzheimer’s disease, (2) the totality of what the companies
learned from their immunotherapy programs, and (3) the
Phase 2 interim results. A full reading of the May 2007
Release under the PSLRA’s heightened pleading
requirements, therefore, bolsters the District Court’s
conclusion that it contained no false statements. See id.; In re
Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d
Cir. 1997) (noting we are to examine statements in the full
context of the documents of which they are part). Most
importantly, the May 2007 Release explicitly cautioned
investors that “[n]o conclusion” could be drawn about the
Phase 2 interim results until the completion of Phase 2.

A comparison with the Second Circuit’s decision in
Kleinman is instructive. In that case, plaintiff challenged
allegedly false statements in the June 2008 Release. The June
2008 Release, unlike the May 2007 Release, did make
affirmative characterizations about the Phase 2 results—it
described the Phase 2 results as supportive of the decision to
initiate Phase 3 because of the “statistically significant and
clinically meaningful benefits” shown for the ApoE4 non-
carrier subgroup. But the Second Circuit concluded plaintiff
had not alleged anything in the June 2008 Release was
literally false because the references to “[e]ncouraging”
results could not have meant anything other than the positive

17
subgroup results. Kleinman v. Elan Corp., plc, 706 F.3d 145,
153 (2d Cir. 2013). Moreover, the Second Circuit held
expressions such as “encouraging” constituted puffery. Id.
Because the May 2007 Release offers no affirmative
characterization of the Phase 2 interim results, Kleinman
supports defendants’ position that the May 2007 Release was
not affirmatively false.

Even reading the May 2007 Release as conveying the
message that the interim results supported the move to Phase
3 and assuming the truth of the Funds’ confidential witness
allegations, the Funds’ allegations still fail to establish that
defendants’ May 2007 Release statement was affirmatively
false. See Institutional Investors Grp., 564 F.3d at 263 n.33
(noting that confidential witness allegations may be found
adequately particularized under the PSLRA but may still “fail
either to establish the falsity of a statement, or to give rise to a
strong inference of scienter”). The Funds’ confidential
witnesses allege bapineuzumab failed the interim review
because it did not achieve pre-defined p-values 12 Wyeth used
to assess the statistical significance of bapineuzumab versus a
placebo under the ADAS-cog and DAD tests. Specifically,
CW2 alleges that unless the Phase 2 interim review met these
specified p-values, Wyeth and Elan had agreed they would
not proceed to Phase 3 based on the interim review. CW1
contends the Phase 2 interim results did not reveal any
statistically significant difference between bapineuzumab-
treated patients and placebo-treated patients with respect to

12
A p-value, or probability value, is a measure of statistical
significance. Relevant to the Funds’ allegations, the
companies did not disclose that achievement of any particular
p-values were necessary to initiate a Phase 3 trial.

18
any of the pre-specified efficacy endpoints measured by the
ADAS-cog and DAD tests. Nor did bapineuzumab show any
“dose response,” meaning higher doses of the drug were not
associated with better results. Furthermore, the Phase 2
interim results showed serious safety concerns with
bapineuzumab, including numerous side effects and three
deaths (compared to no deaths in patients treated with
placebo).

But the Funds point to no public disclosure by
defendants of the specific p-values bapineuzumab was
expected to achieve under the ADAS-cog and DAD tests, no
public statements regarding a “dose response” or whether one
would be expected, see Kleinman, 706 F.3d at 153–54, and no
public comments about the safety metrics, including
anticipated side effects, through which bapineuzumab would
be evaluated. Because defendants never told investors
bapineuzumab would only pass the interim review if specific
p-values, dose responses, or safety metrics were achieved, the
Funds’ confidential witness allegations fail to establish with
sufficient specificity that the challenged May 2007 Release
statement—that the decision to initiate Phase 3 was based in
part on the Phase 2 interim review—was false.

Moreover, CW1 noted that the results showed
“circumstantial evidence of efficacy” for an important patient
subgroup—non-carriers of the ApoE4 gene—consisting of
approximately 40 to 70 percent of Alzheimer’s patients.
CW1 also stated that one of his superiors was upset about the
decision to initiate Phase 3 testing and that the subgroup
results justified further investigation through a Phase 2
“exploratory” trial, not a large scale Phase 3 “confirmatory”
trial.

19
 These allegations show a difference of opinion within
Wyeth about whether the Phase 2 interim results—together
with the seriousness of Alzheimer’s disease and the totality of
what the companies had learned from their immunotherapy
programs—justified initiating a Phase 3 trial. Interpretations
of clinical trial data are considered opinions. See Kleinman,
706 F.3d at 153; In re Adolor Corp. Sec. Litig., 616 F. Supp.
2d 551, 567 (E.D. Pa. 2009). Opinions are only actionable
under the securities laws if they are not honestly believed and
lack a reasonable basis. In re Merck & Co., Inc. Sec.,
Derivative & “ERISA” Litig., 543 F.3d 150, 166 (3d Cir.
2008); Kleinman, 706 F.3d at 153.

The Funds have failed to adequately allege defendants
did not honestly believe their interpretation of the interim
results or that it lacked a reasonable basis. A company’s
failure to accurately disclose clinical trial data may be
actionable under the securities laws, but the cases the Funds
cite are distinguishable because they involve plausible
allegations of affirmative false statements about a drug’s
efficacy and safety. See, e.g., In re Viropharma, Inc. Sec.
Litig., No 02-1627, 2003 WL 1824914, at *6, *9 (E.D. Pa.
Apr. 7, 2003); In re Transkaryotic Therapies, Inc. Sec. Litig.,
319 F. Supp. 2d 152, 160 (D. Mass. 2004). In contrast, the
May 2007 Release contains no affirmative statement about
bapineuzumab’s efficacy or safety. Moreover, the initiation
of Phase 3 cost millions of dollars and required FDA
approval, rendering it improbable that defendants would have
continued if they did not believe their interpretation of the
interim results or if they thought the drug a complete failure.
See Kleinman, 706 F.3d at 153.

Moreover, because the Phase 2 interim results showed

20
“circumstantial evidence of efficacy” for one important
patient subgroup, the disagreement of some Wyeth employees
with the company’s interpretation of the interim results is not
sufficient to show defendants’ interpretation lacked a
reasonable basis. The Funds present three pieces of evidence
showing disagreement among Wyeth’s employees about the
decision to initiate Phase 3. CW2 noted that after
presentation of the Phase 2 interim results to the company’s
four-member Elan Alliance Committee and approximately
100-member R&D Committee, he and two other members of
the R&D Committee “expressed skepticism” at the decision
to proceed with Phase 3 based on the interim results. CW1
revealed that one of his superiors was upset Wyeth decided to
proceed, at Ruffolo’s urging, with a “massive” Phase 3 study.
And CW1 noted his own belief that Wyeth should have
conducted another Phase 2 study to investigate the subgroup
results, not a Phase 3 trial. But the disagreement of five
employees within a large pharmaceutical company about the
interpretation of clinical trial data and the critical strategic
decision of initiating an expensive Phase 3 trial does not
render defendants’ decisions unreasonable or their statements
false. See Kleinman, 706 F.3d at 153 (finding no basis for
inferring defendants did not honestly believe their statements
because the initiation of Phase 3 could only be made “after
there have been positive Phase 2 results sufficient to satisfy
both business and regulatory interests”); In re Adolor, 616 F.
Supp. 2d at 567 (holding disagreements about the proper
methodology and conduct of clinical studies are insufficient
to establish falsity). At bottom, the Funds fail to plead
sufficient facts to show defendants did not honestly believe
initiating Phase 3 was appropriate or that defendants lacked a
reasonable basis for that decision.

21
 2.

We next evaluate whether the District Court correctly
determined that the May 2007 Release was not misleading in
light of defendants’ prior statements. The Funds contend the
May 2007 Release was misleading because defendant Ruffolo
had assured investors in October 2006 that Wyeth would not
commence Phase 3 early unless the Phase 2 interim results
were “spectacular” in meeting specific efficacy criteria. 13 By
telling investors they were moving to Phase 3 early based in
part on the Phase 2 interim results, the Funds contend
defendants misled the market by failing to disclose those poor
results, leaving the impression they must have been
“spectacular” or at least positive. The Funds argue this
failure to disclose in fact misled the market, and they cite
statements by stock analysts and point to the increase in
Wyeth’s stock price following issuance of the May 2007
Release.

We agree with the District Court that defendants’
statements, taken in context, were not misleading. The May
2007 Release did not characterize or discuss the strength of
the Phase 2 interim results. It only listed those results as one
factor among three in the decision to initiate Phase 3, and it
expressly cautioned investors not to draw conclusions about
the Phase 2 study until its completion. The Funds’ attempt to
differentiate between conclusions regarding the interim and
final results is unavailing in light of the May 2007 Release’s

13
Pre-class period statements may be used to ascertain the
falsity and materiality of the challenged statements. In re
Merck & Co., Inc. Sec. Litig., 432 F.3d 261, 272 (3d Cir.
2005).

22
plain language. Defendants’ explicit caution against drawing
conclusions about the “Phase 2 study” by definition includes
the interim results, which were part of the Phase 2 study.

The Funds also appear to misread Ruffolo’s October
2006 statement. They interpret it to mean Wyeth would not
commence Phase 3 early unless the Phase 2 interim results
were “spectacular” in meeting specific efficacy criteria. But
Ruffolo’s statement was more narrow. He noted the
companies “could advance directly into Phase III in the first
half of 2007” if the results were “spectacular” or could
complete the study and then move to the next interim look in
the first half of 2007. As defendants correctly point out, the
course of events Ruffolo envisioned in the “spectacular”
scenario did not come to pass—the companies did not
advance to Phase 3 in the first half of 2007. Instead, the May
2007 Release announced the initiation of Phase 3 in the
second half of 2007. Accordingly, the May 2007 Release
should have superseded any lingering impression left by the
“spectacular” statement in the minds of reasonable investors.
See United States v. Schiff, 602 F.3d 152, 170 (3d Cir. 2010);
Oran v. Stafford, 226 F.3d 275, 286 (3d Cir. 2000).

Bolstering our conclusion is the nature of Ruffolo’s
prior statement. Ruffolo’s 2006 “spectacular” statement was
a forward-looking statement about a course of events that, as
it turned out, did not come to pass. By using the conditional
“could,” Ruffolo did not bind the company to any particular
course of action. Nor could he, because at the time he spoke
initiation of Phase 3 still required FDA approval. Moreover,
the adjective “spectacular” is the kind of “vague and general
statement[] of optimism” that “constitute[s] no more than
puffery and [is] understood by reasonable investors as such.”

23
In re Advanta Corp. Sec. Litig., 180 F.3d 525, 538 (3d Cir.
1999), abrogated on other grounds by Tellabs, Inc. v. Makor
Issues & Rights, Ltd., 551 U.S. 308 (2007), as recognized in
Institutional Investors Grp. v. Avaya, Inc., 564 F.3d 242, 276
(3d Cir. 2009); see also Transcript of Argument at 15, In re
Elan Corp. Sec. Litig., No. 08-cv-8761 (S.D.N.Y. June 23,
2011); Philco Invs., Ltd. v. Martin, No. 10-02785, 2011 WL
500694, at *6 (N.D. Cal. Feb. 9, 2011). Furthermore,
although the May 2007 Release did not offer any specific
characterization of the Phase 2 interim results, it did caution
that no conclusion could be drawn about the Phase 2 data
until the completion of the study. Had the interim results
been “spectacular,” it is reasonable to assume the companies
would have trumpeted that fact in the May 2007 Release—or
at least given some indication the data were positive.

Moreover, Ruffolo never said bapineuzumab was
required to meet specific efficacy criteria to advance to Phase
3. That remark was made by Elan’s CEO at a January 9,
2007, healthcare conference. Defendants cannot be held
responsible for statements they did not make. See Schiff, 602
F.3d at 168, 170–71. Although the Funds’ confidential
witnesses stated that bapineuzumab was required (and failed)
to achieve certain p-values in Phase 2 and showed no dose
response and numerous safety concerns, the Funds fail to
allege any public statements by defendants regarding specific
p-values, dose responses, or safety metrics bapineuzumab
would be expected to achieve in order to advance to Phase 3.

Accordingly, we conclude the District Court correctly
determined the Funds failed to adequately allege defendants
made any affirmatively false or misleading statements in the
May 2007 Release.

24
 B.

The Funds also contend defendants made six false or
misleading public statements following issuance of the May
2007 Release. The Funds allege these statements failed to
disclose the efficacy and safety problems revealed in the
Phase 2 study, as well as that the Phase 2 interim results
showed bapineuzumab did not meet pre-established criteria
and Phase 2 testing was nearly a complete failure. We concur
with the District Court and reject these allegations.

The Funds first challenge defendant Ruffolo’s May 22,
2007, remarks at the Citigroup Healthcare Conference. When
asked to discuss which aspects of the Phase 2 interim review
justified the early initiation of the Phase 3 trial, Ruffolo said
he “cannot comment and will not comment on the Interim
look” because he “cannot do anything to destroy the blind in
that study.” Because Ruffolo only referred attendees to the
May 2007 Release and refused to comment on how the
interim review justified the initiation of Phase 3, he made no
false or misleading statement.

Next, the Funds contend statements made by Wyeth
investor relations representative Justin Victoria and defendant
Poussot during earnings calls on July 19, 2007, and April 22,
2008, that described the Phase 2 interim results as one factor
in the “composite decision” to move to Phase 3 were false
and misleading. But those statements are consistent with the
May 2007 Release and accurately convey that the interim
results were one factor defendants considered in deciding to
initiate Phase 3. Moreover, Victoria confirmed to investors
and analysts on the April 22, 2008, call that Wyeth had not
yet disclosed the strength of the Phase 2 results and needed to

25
complete the analysis of the Phase 2 data to make that
determination. As a result, we find the July 19 and April 22
statements were not false or misleading.

The Funds also challenge statements made by Wyeth
executives Dr. Joseph Camardo and Joseph M. Mahady. At
the January 8, 2008, J.P. Morgan Healthcare Conference,
Camardo described bapineuzumab as a potential
“breakthrough” drug for Alzheimer’s, and at the March 19,
2008, Lehman Brothers Global Healthcare Conference
Mahady mentioned bapineuzumab as an example of a drug
offering “opportunities for transformational growth of the
company.” But these statements are not actionable because
they are vague, non-specific, and forward-looking. See In re
Advanta, 180 F.3d at 538; Philco Invs., 2011 WL 500694, at
*6. Both speakers were also cautious—Camardo noted the
companies still faced risks establishing bapineuzumab’s
efficacy and safety, and Mahady reminded the audience that
the final results of the Phase 2 study were not yet available.
Furthermore, Camardo’s statement that Wyeth and Elan
“learned a lot in Phase II” is true based on the statements
from the Funds’ own confidential witnesses. Accordingly,
the Funds’ allegations that these statements were false or
misleading lack merit.

Finally, the Funds allege defendant Poussot’s
statements on Wyeth’s July 23, 2008, 8-K and earnings call
were false and misleading because he described the Phase 2
results as “encouraging and supportive of our prior decision
to initiate Phase 3.” Unlike the other post-May 21 statements,
Poussot did characterize the final Phase 2 results as positive.
But he only repeated conclusions Wyeth had disclosed six
days before in the June 2008 Release. The District Court held

26
the June 2008 Release was not actionable because defendants
were under no duty to disclose information the Funds alleged
was omitted from that document, and the Funds do not
challenge that determination on appeal. Accordingly, we
concur with the District Court that because the June 2008
Release is not false or misleading, Poussot’s statements
cannot be the basis of liability here.

Based on the foregoing analysis, we hold the District
Court correctly determined the Funds failed to sufficiently
allege defendants’ post-May 21 statements were false or
misleading.

III.

In addition to alleging defendants’ statements were
affirmatively false or misleading, the Funds contend those
statements triggered a duty to disclose full and complete
material information regarding the Phase 2 interim results. 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.
Oran v. Stafford, 226 F.3d 275, 285–86 (3d Cir. 2000). The
Funds urge us to impose a duty to disclose on each of these
grounds because (1) defendants chose to speak about a
material subject to investors, (2) defendants Ruffolo and
Martin allegedly engaged in insider trading, and (3)
disclosure was necessary to make defendants’ prior
statements not misleading. We agree with the District Court
that defendants were under no duty to disclose the allegedly
omitted information.

27
 A.

The Funds first argue defendants had a duty to speak
fully and truthfully about the Phase 2 interim results because
they put the subject “in play” by discussing those results
publicly. Instead of concealing material information about
the poor Phase 2 interim results, the Funds allege defendants
should have either disclosed those poor results or admitted
they had changed their criteria for initiating the Phase 3 trial.

Section 10(b) and Rule 10b-5 “do not create an
affirmative duty to disclose any and all material information.”
Matrixx Initiatives, Inc. v. Siracusano, 131 S. Ct. 1309, 1321
(2011). “Disclosure is required . . . only when necessary ‘to
make . . . statements made, in the light of the circumstances
under which they were made, not misleading.’” Id. (quoting
17 C.F.R. § 240.10b-5(b)). “Silence, absent a duty to
disclose, is not misleading under Rule 10b-5.” Basic Inc. v.
Levinson, 485 U.S. 224, 239 n.17 (1988). “[C]ompanies can
control what they have to disclose under these provisions by
controlling what they say to the market.” Matrixx, 131 S. Ct.
at 1322.

The May 2007 Release made no affirmative statement
about the strength of the Phase 2 interim results nor
characterized those results in any manner. See Oran, 226
F.3d at 285 (finding no material misrepresentation or
omission where defendants did not make any “affirmative
characterization” that FDA approval was based on a complete
review of all relevant medical information as alleged by
plaintiffs). Accordingly, Wyeth did not place the strength or
nature of the Phase 2 interim results “in play,” so it was under
no duty to provide additional details about those results.

28
Wyeth was also not obligated to disclose whether it had
changed its criteria for initiating Phase 3, since that fact was
likewise not “in play.” Significantly, Wyeth never disclosed
that particular p-values would have to be met in order to
commence Phase 3. Nor did it ever reveal the specific
rationale or formula it was using to decide whether to initiate
Phase 3.

The Funds’ attempt to analogize this case to Matrixx is
unavailing. In Matrixx, the Supreme Court evaluated whether
a drug company’s failure to disclose reports of a possible link
between its product and anosmia, the loss of the sense of
smell, rendered the company’s statements relating to revenues
and product safety misleading. Matrixx, 131 S. Ct. at 1313–
14. The company stated, among other things, that reports
linking its product to anosmia were “completely unfounded
and misleading” and that the safety and efficacy of the drug
were well established. Id. at 1323. The evidence showed,
however, that the company had documentation of a biological
link between the drug and anosmia and had conducted no
studies of its own to disprove that connection. Id. In finding
the company’s actions rendered its statements misleading, the
Court determined it was substantially likely a reasonable
investor would regard the omitted information as material.
Id.

Here, by contrast, the central issue is whether the
Funds have adequately alleged falsity, not materiality. And,
unlike Matrixx, the challenged statements in this case do not
characterize or make affirmative claims about the Phase 2
interim results. The May 2007 Release noted only that Wyeth
and Elan decided to initiate the Phase 3 trial “based on the
seriousness of the disease and the totality of what the

29
companies have learned from their immunotherapy programs,
including a scheduled Interim look at data from an ongoing
Phase 2 study, which remains blinded.” Subsequent
statements only reiterated the May 2007 Release statement,
discussed bapineuzumab’s potential to be a “breakthrough”
drug for Alzheimer’s, and noted bapineuzumab as an example
of a drug offering “opportunities for transformational growth”
of Wyeth. None of these statements characterized or made
affirmative claims about the Phase 2 interim results. 14

Accordingly, Matrixx is inapposite to this case, and
defendants did not have a duty to disclose additional
information because they mentioned the Phase 2 interim
results as one factor in their decision to initiate Phase 3.

B.

The Funds next argue defendants were under a duty to
disclose because defendants Ruffolo and Martin allegedly
engaged in insider trading. 15 “[A] corporate insider must

14
Defendant Poussot’s July 23, 2008, statement describing
the Phase 2 results as “encouraging and supportive” of the
decision to initiate Phase 3 did characterize the final Phase 2
results. But, as noted previously, this statement only repeated
conclusions Wyeth had previously disclosed in the June 2008
Release, which the District Court found was not actionable—
a determination the Funds do not challenge on appeal.
15
Specifically, the Funds contend that on May 22, 2007,
Ruffolo exercised options and sold 130,436 Wyeth shares at
$58.33 per share, for a net gain of approximately $2.36
million. The same day, Martin sold 200,500 shares at $57.97
per share, for a net gain of approximately $283,000. By May

30
abstain from trading in the shares of his corporation unless he
has first disclosed all material information known to him.”
Chiarella v. United States, 445 U.S. 222, 227 (1980);
Deutschman v. Beneficial Corp., 841 F.2d 502, 506 (3d Cir.
1988). The Funds’ theory is Ruffolo and Martin knew the
negative Phase 2 interim results, concealed them from
investors, and reaped the benefit of that concealment by
trading on Wyeth’s artificially inflated stock.

But the Funds have failed to adequately plead an
insider trading violation under section 20A of the Exchange
Act because they have failed to adequately plead a predicate
section 10(b) violation. See In re Advanta Corp. Sec. Litig.,
180 F.3d 525, 541 (3d Cir. 1999), abrogated on other
grounds by Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551
U.S. 308 (2007), as recognized in Institutional Investors Grp.
v. Avaya, Inc., 564 F.3d 242, 276 (3d Cir. 2009). Section
20A, which provides an express private cause of action for
insider trading against contemporaneous traders, requires the
alleged insider trader to have committed an independent
violation of the Exchange Act or SEC rules and regulations
promulgated under that law. 15 U.S.C. § 78t-1(a). The
Funds have not adequately alleged that Martin and Ruffolo
committed such an independent violation.

Nor are the Funds’ insider trading allegations
sufficient to meet the heightened pleading standards for
scienter under the PSLRA. The PSLRA requires the Funds to
allege facts giving rise to a “strong inference” of scienter,
which “must be more than merely plausible or reasonable—it

22, 2007, Martin had exercised every profitable option
available to him.

31
must be cogent and at least as compelling as any opposing
inference of nonfraudulent intent.” Tellabs, Inc. v. Makor
Issues & Rights, Ltd., 551 U.S. 308, 314 (2007). The mere
fact that Martin and Ruffolo sold stock is insufficient to
establish scienter. See In re Alpharma Inc. Sec. Litig., 372
F.3d 137, 152 (3d Cir. 2004), abrogated on other grounds by
Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308
(2007), as recognized in Belmont v. MB Inv. Partners, Inc.,
708 F.3d 470, 484 (3d Cir. 2012).

For these reasons, there is no duty to disclose based on
alleged insider trading.

C.

The Funds also allege defendants had an ongoing duty
to disclose throughout the Class Period each time they spoke
about the Phase 2 interim results or the decision to initiate the
Phase 3 trial to avoid misleading disclosures. See Oran, 226
F.3d at 285–86. The Funds contend because defendants
previously told the market the interim results would need to
be “spectacular” to justify early initiation of Phase 3,
defendants had an ongoing duty to disclose that the interim
results were not supportive of the move to Phase 3. We
conclude the District Court properly refused to find
defendants had an ongoing duty to disclose.

As noted above, the course of events outlined in
Ruffolo’s October 2006 “spectacular” statement did not come
to pass. The companies only advanced to Phase 3 in the
second half of 2007, not in the first half of 2007 as Ruffolo
had said they might if the interim results proved to be
“spectacular.” Accordingly, defendants had no duty to update

32
the “spectacular” statement. See United States v. Schiff, 602
F.3d 152, 170 (3d Cir. 2010); Oran, 226 F.3d at 286.
Moreover, we have held that a duty to update applies only in
“narrow circumstances” involving more fundamental
corporate changes such as mergers, takeovers, or liquidations,
as well as when subsequent events produce an “extreme” or
“radical change” in the continuing validity of the original
statement. See Schiff, 602 F.3d at 170 (citing In re Burlington
Coat Factory Sec. Litig., 114 F.3d 1410, 1433–34 (3d Cir.
1997)). Those elements are not present here. Furthermore,
there is no duty to update vague and general statements such
as “spectacular.” See In re Advanta, 180 F.3d at 538
(“[V]ague and general statements of optimism constitute no
more than puffery and are understood by reasonable investors
as such.” (internal quotation marks and citations omitted));
Philco Invs., Ltd. v. Martin, No. 10-02785, 2011 WL 500694,
at *6 (N.D. Cal. Feb. 9, 2011).

Even if we determined defendants had a duty to update
the October 2006 “spectacular” statement, the May 2007
Release would have cut off any such duty. Its explicit caution
that investors should draw no conclusion about the Phase 2
interim results tempered any impression made by the
“spectacular” statement. Had the Phase 2 interim results been
spectacular, it is reasonable to assume Wyeth would have
trumpeted that fact.

Accordingly, defendants were under no duty to
disclose the allegedly omitted information.

IV.

The Funds also appeal the District Court’s dismissal of

33
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.

Section 20(a) of the Exchange Act creates a cause of
action against individuals who exercise control over a
“controlled person,” including a corporation, who has
committed a section 10(b) violation. 15 U.S.C. § 78t(a); see
also Institutional Investors Grp. v. Avaya, Inc., 564 F.3d 242,
252 (3d Cir. 2009). Because the Funds have failed to
adequately plead a predicate section 10(b) violation, their
section 20(a) claim must be dismissed. See Rahman v. Kid
Brands, Inc., 736 F.3d 237, 247 (3d Cir. 2013) (citing
Institutional Investors Grp., 564 F.3d at 252).

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. 15 U.S.C. §
78t-1(a). Because the Funds have failed to adequately plead a
predicate Exchange Act violation, their section 20A claim
must also be dismissed. See In re Advanta, 180 F.3d at 541
(citations omitted); In re Cendant Corp. Litig., 60 F. Supp. 2d
354, 378 (D.N.J. 1999). 16

16
The Funds also allege the District Court erred in relying on
two other bases to dismiss their section 10(b) claims—the
May 2007 Release’s use of cautionary language and the
District Court’s purported finding that the May 2007 Release
statement was immaterial. The Funds contend the District
Court misapplied either the PSLRA Safe Harbor provision, 15

34
 V.

For the foregoing reasons, we will affirm the judgment
of the District Court granting defendants’ Rule 12(b)(6)
motion to dismiss.

U.S.C. § 78u-5(c), or the “bespeaks caution” doctrine, EP
Medsystems, Inc. v. EchoCath, Inc., 235 F.3d 865, 873 (3d
Cir. 2010), in finding the May 2007 Release statement to be
cautious. But the District Court applied neither doctrine and
only invoked defendants’ use of cautionary language in
analyzing whether the plain language of the May 2007
Release was false or misleading. Nor did the District Court
make any findings on materiality—the court based its ruling
on the Funds’ failure to plead falsity, not on the materiality of
the statements. Accordingly, the Funds’ contentions the
District Court erred in relying on the May 2007 Release’s
cautionary language and in making materiality determinations
lack merit.

35