Kader v. Sarepta Therapeutics, Inc.

United States Court of Appeals
For the First Circuit

No. 17-1139

WILLIAM KADER, individually and on behalf of all
others similarly situated; MORAD GHODOOSHIM;
ROGER LAM; LAXMIKANT CHUDASAMA,

Plaintiffs, Appellants,

v.

SAREPTA THERAPEUTICS, INC.; CHRISTOPHER GARABEDIAN;
EDWARD M. KAYE, M.D.,

Defendants, Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Allison D. Burroughs, U.S. District Judge]

Before

Torruella, Kayatta, and Barron,
Circuit Judges.

Kara M. Wolke, with whom Robert V. Prongay, Jonathan M.
Rotter, Glancy Prongay & Murray LLP, Jason M. Leviton and Block &
Leviton LLP were on brief, for appellants.
Christopher G. Green, with whom Mark D. Vaughn,
Christopher C. Boots, Cassandra A. LaRussa and Ropes & Gray LLP
were on brief, for appellees.

April 4, 2018
 TORRUELLA, Circuit Judge. Plaintiff William Kader and

Lead Plaintiffs Morad Ghodooshim, Roger Lam, and Laxmikant

Chudasama (collectively, the "Plaintiffs") sought to represent a

class of purchasers of securities that Sarepta Therapeutics, Inc.

("Sarepta") issued between April 21, 2014, and October 27, 2014

(the "Class Period"). The Plaintiffs brought securities fraud

claims against Sarepta, Sarepta's Chief Executive Officer,

Christopher Garabedian ("Garabedian"), and Sarepta's Chief

Scientific Officer, Edward M. Kaye ("Kaye") (collectively, the

"Defendants"). According to the Plaintiffs, the Defendants

knowingly or recklessly misled investors about their target date

for submitting an application to the United States Food and Drug

Administration ("FDA") for approval of the drug eteplirsen. The

district court dismissed the Plaintiffs' First Amended Complaint

("FAC") for failure to state a claim, and then denied them leave

to file their Proposed Second Amended Complaint ("PSAC"). We hold

that the district court did not err in dismissing the FAC or in

denying Plaintiffs leave to file the PSAC.

I. BACKGROUND

A. The FDA's drug-approval process

Before we immerse ourselves in the details of this case,

it is useful to give a brief overview of the process through which

the FDA reviews and approves drugs. That process begins when the

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sponsor of a new drug submits a New Drug Application ("NDA") to

the FDA. See 21 U.S.C. § 355(a)-(b); Corban v. Sarepta

Therapeutics, Inc., 868 F.3d 31, 34 (1st Cir. 2017) (outlining the

FDA's approval process). The FDA then makes the "threshold

determination" as to whether the NDA is "sufficiently complete to

permit a substantive review." 21 C.F.R. § 314.101(a)(1). "If so,

the FDA accepts the application for filing" and then proceeds to

"assess[] the merits of the application, deciding whether to

approve the drug." Corban, 868 F.3d at 34 (citing 21 C.F.R.

§ 314.101(a)(1), (f)). "Approval generally requires the

application's sponsor to demonstrate the drug's clinical benefit."

Id. (citing 21 U.S.C. § 355(d)).

Sponsors of certain drugs may avail themselves of

various FDA programs that expedite the review process. These

programs aim to facilitate the availability of critical therapies

for serious, unmet medical needs. For example, upon a sponsor's

showing of adequate preclinical data, the FDA may grant a drug

"Fast Track" status. See 21 U.S.C. § 356(b). Among other

benefits, the sponsors of "Fast Tracked" drugs may interact more

frequently with the FDA to discuss "the drug's development plan

and ensure collection of appropriate data needed to support drug

approval." U.S. Food & Drug Admin., Fast Track, https://

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www.fda.gov/ForPatients/Approvals/Fast/ucm405399.htm (last

updated Jan. 4, 2018).

Fast Tracked drugs may also be eligible for "Accelerated

Approval." Id. The FDA approves drugs in the Accelerated

Approval program upon meeting a "surrogate endpoint" or "clinical

endpoint" that is "reasonably likely" to predict the drug's

clinical benefit. 21 U.S.C. § 356(c). "For example, instead of

having to wait to learn if a drug actually extends survival for

cancer patients, the FDA may approve a drug based on evidence that

the drug shrinks tumors, because tumor shrinkage is considered

reasonably likely to predict a real clinical benefit." U.S. Food

& Drug Admin., Accelerated Approval, https://www.fda.gov/

ForPatients/Approvals/Fast/ucm405447.htm (last updated Jan. 4,

2018). This is particularly useful in the case of drugs intended

to treat diseases with longer courses, when measuring the drug's

clinical benefit would otherwise require an extended period of

time. In such cases, the drug's effect on the surrogate or

clinical endpoint may be observable much sooner, allowing the FDA

to determine the drug's efficacy at an earlier juncture.

Crucially, once the FDA has approved a drug, the drug's

sponsor may begin to market it.

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B. The facts underlying this case

Except when we indicate otherwise, we draw the following

facts from the FAC.

1.

Duchenne Muscular Dystrophy ("DMD") is a rare genetic

neuromuscular disorder that primarily affects boys and young men.

As the result of inadequate production of the protein dystrophin,

individuals with DMD suffer from progressive muscle loss causing

severe disability and premature death. The average life

expectancy for someone diagnosed with DMD is 27 years. During the

Class Period, no approved disease-modifying therapies for DMD

existed. Sarepta, however, was developing drug candidates to

treat DMD, including eteplirsen, the drug around which this case

revolves. See Corban, 868 F.3d at 34-37 (describing, in the

context of a case involving a different class period, Sarepta's

development of eteplirsen). During the Class Period, Sarepta's

main competitor, Prosensa Therapeutics, Inc., was also developing

and seeking approval of a drug candidate to treat DMD. The first

company to obtain approval of its drug and succeed in bringing it

to market would obtain the "first mover advantage." In

pharmaceutical markets, the "first mover" gains a considerable

advantage because doctors will quickly prescribe the first

available drug of a new type, and are unlikely to switch to

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prescribing a different drug of the same type that subsequently

becomes available.

The FDA granted eteplirsen Fast Track status in 2007. In

2011, Sarepta began conducting the clinical trials at the center

of this case. Study 201, designed as a randomized, double-blind,

placebo-controlled study involving 12 participants, sought to

assess the effects of "eteplirsen administered intravenously in

two different doses over 24 weeks for the treatment of ambulant

boys with DMD." The study's participants all underwent muscle

biopsies at the study's outset and conclusion to determine if the

amount of dystrophin in their muscle tissue had changed over time

-- a potential surrogate endpoint by which to assess eteplirsen's

efficacy. Study 201's results showed that "treatment with

eteplirsen met the primary efficacy endpoint in the study."

Following these encouraging results, Sarepta began "Study 202," in

which the same participants received varying dosages of eteplirsen

for an additional 24 weeks. All of the muscle biopsy dystrophin

analysis for both of these studies took place at a single location

-- Nationwide Children's Hospital in Columbus, Ohio -- with one

doctor overseeing the entirety of the clinical review. Because

this analysis requires staining muscle samples with a dye that

makes dystrophin visible, and then viewing and analyzing those

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samples in slides, the Plaintiffs aver that it is "inherently

subjective."

2.

On April 21, 2014 -- the first day of the Class Period

-- Sarepta issued a press release discussing the possibility of

submitting an NDA for eteplirsen by the year's end. According to

the press release, that goal was "based on a guidance letter from

the [FDA] that proposed a strategy regarding the submission of an

NDA for eteplirsen under a potential Accelerated Approval

pathway." The press release quoted the FDA's guidance letter,

which explained that "with additional data to support the efficacy

and safety of eteplirsen for the treatment of DMD, an NDA should

be fileable." The press release also explained that the FDA's

letter "outlined examples of additional data and analysis that, if

positive, will be important to enhance the acceptability of an NDA

filing by addressing areas of ongoing concern in the existing

dataset." In addition, the release noted that the FDA had

"expressed concerns about methodological problems in the

assessments of dystrophin and, 'remain[s] skeptical about the

persuasiveness of the (dystrophin) data.'" According to the press

release, the FDA had stated that, as a result, it was "uncertain

whether the existing dystrophin biomarker data will be persuasive

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enough to serve as a surrogate endpoint that is reasonably likely

to predict clinical benefit."

That same day, Sarepta held a conference call with

investors and analysts to discuss its announcement. Per the

guidance letter, Garabedian explained that with "additional data

and analysis," Sarepta would be able to "pursue an NDA filing that

we will plan to submit by the end of this year, for a potential

early approval of eteplirsen sometime in 2015." But, he

cautioned, "the guidance letter described the FDA's reservations

that the existing data set may not be sufficient to support an NDA

filing, or be compelling enough for a favorable review."

Garabedian further offered that "[w]e could submit our NDA now on

the existing data set, but the FDA has highlighted questions and

concerns," for which reason "we are going to be in a much better

position if we just wait for some of these additional pieces of

data."

Following this announcement, Sarepta shares increased in

value by 39.26% on unusually heavy trading volume, closing on

April 21, 2014 at $33.98 per share. The following day, Sarepta

announced that it planned to offer up to $100 million of its common

stock in a public offering. Then, on April 29, it sold 2,650,000

shares of common stock in a public offering at a price of $38.00

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per share, resulting in net proceeds of approximately $94.5

million.

On May 7, 2014, Garabedian participated in another

conference call with analysts. During that call, he characterized

the FDA's guidance letter as communicating to Sarepta, in

paraphrased terms:

[W]e're not telling you you can't submit an NDA
tomorrow on the existing data set . . . . But we're
telling you that we've raised enough concerns on the
existing data set that you would bolster your case
for an NDA filing and potentially a favorable review
if you allow us to do a more detailed review of your
dystrophin methodology [and if you supplement the data
set].

In short, Sarepta expressly disclosed that the FDA wanted to do a

more detailed review of the study's methodology, and get more data,

and that Sarepta's chances of success for an NDA filing would be

affected by whether it allowed the FDA to do so. Additionally,

during the same month, the FDA also visited Nationwide Children's

Hospital -- where Study 201/202 took place -- to review the

clinical trial site and protocols in place there.

Then, on July 29, 2014, the FDA requested that

"independent pathologists at independent labs" review Sarepta's

primary dystrophin endpoint. Sarepta did not disclose this

request to the public during the class period. On the same day,

the director of the FDA's Center for Drug Evaluation and Research

("CDER") responded via a statement on the White House's website to

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a petition urging the FDA to "say YES to Accelerated Approval for

safe, effective therapies for children with Duchenne." Her

response acknowledged Sarepta's intention of filing an NDA for

eteplirsen by the end of 2014.

On August 7, 2014, Garabedian held another conference

call with investors and analysts. During that call, he stated

that "[a]s a reminder, the FDA indicated in its April guidance

that if, after further detailed review, they were to find the

currently available dystrophin biomarker data to be adequate, our

existing dystrophin data set would have the potential to support

accelerated approval." After relaying that the FDA had visited

National Children's Hospital, he added that "we continue to work

with the FDA to provide greater assurance of the quality and

reliability of our dystrophin data in anticipation of a potential

NDA filing decision and potential NDA review next year."

However, on October 27, 2014 -- the last day of the Class

Period -- Sarepta issued another press release announcing that it

had received updated guidance from the FDA regarding its planned

NDA submission for eteplirsen. That guidance indicated that the

FDA now required Sarepta's NDA to include additional data,

including, among other things, "the results from an independent

assessment of dystrophin images and the 168-week clinical data

from study 202." As a result, the press release explained, Sarepta

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would not be able to submit an NDA until mid-2015, as opposed to

its prior target of late 2014. On the same day, Sarepta executives

also held a conference call with investors and analysts to convey

and explain the FDA's concerns. That day, Sarepta shares declined

by more than 32%, closing at $15.91 per share, on unusually heavy

trading volume.

On October 30, 2014, the FDA issued a public statement

addressing "questions the agency has received from DMD patients,

their families, and others in the community who are concerned about

the timing of the filing of an NDA for eteplirsen." The statement

underscored that "[i]n its advice to Sarepta, FDA has consistently

stated that it would be necessary to include data in its NDA

demonstrating that eteplirsen increases production of the muscle

protein dystrophin." The statement also clarified that during the

FDA's visit to Nationwide Children's Hospital, "the agency did not

find any evidence of fraud at this site, as has been perceived by

some." However, the FDA also highlighted its concern "that the

methods used to measure dystrophin were not adequately robust to

support an NDA submission." Finally, the statement concluded by

explaining that the "FDA will continue to work with Sarepta in

their efforts to provide the data it considers critical to FDA's

ability to review the NDA and reach a decision on approvability."

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 3.

We add the following facts from the PSAC.

In May 2015, after the Plaintiffs brought this

securities fraud suit, see infra Section I.C., Sarepta did file an

NDA for eteplirsen. The FDA accepted the NDA for filing on

August 25, 2015. While the director of the CDER has the sole

authority to approve an NDA, the FDA may call upon advisory

committees to provide independent opinions and recommendations

during the approval process. The FDA scheduled an advisory

committee meeting about the eteplirsen NDA for January 22, 2016.

In anticipation of that meeting, the FDA published a briefing

document for members of the advisory committee (the "Briefing

Document"). That document detailed, among other things, the

concerns that the FDA had communicated to Sarepta prior to and

during the Class Period.

So too, primarily for purposes of narrative

completeness, do we mention the following facts contained neither

in the FAC nor the PSAC.

The district court took judicial notice that, on

September 19, 2016 -- after briefing on the Plaintiffs' motion for

leave to amend had concluded, see infra Section I.C. -- the FDA

announced that it had decided to grant accelerated approval to

eteplirsen. Moreover, the Plaintiffs ask us to take judicial

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notice that this announcement came after an appeal within the FDA

to the CDER director's initial decision to grant accelerated

approval to eteplirsen. In brief, the Director of CDER's Office

of Drug Evaluation brought an appeal challenging that decision on

the basis that Study 201/202 was methodologically inadequate.

After reviewing the appeal, the FDA Commissioner decided to "defer

to [the CDER director's] judgment and authority to make the

decision to approve eteplirsen under the accelerated approval

pathway."1 Thus, Sarepta was able to begin marketing eteplirsen.

C. This putative class action

The Plaintiffs filed the FAC on March 20, 2015, alleging

two counts: (1) that all of the Defendants violated section 10(b)

of the Securities Exchange Act of 1934 (the "Exchange Act"), see

15 U.S.C. § 78j(b), and Securities and Exchange Commission ("SEC")

Rule 10b-5, see 17 C.F.R. § 240.10b-5, and (2) that Garabedian and

Kaye violated section 20(a) of the Exchange Act. In broad terms,

the Plaintiffs alleged that the Defendants, in discussing their

intention to file an NDA in 2014, fraudulently misrepresented the

FDA's communications to them concerning Sarepta's dystrophin data.

1 We note that, while we have made reference to these facts, which
were not before the district court, they do not end up having the
effect of impacting our analysis.

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 The Defendants moved to dismiss the FAC for failure to

state a claim. See Fed. R. Civ. P. 12(b)(6). The district court

granted that motion on April 5, 2016. It concluded that the FAC

did not allege "sufficient facts to plausibly suggest that

Defendants made affirmatively misleading statements, or that they

omitted . . . information needed to make their statements not

misleading." It also held that the FAC similarly lacked facts

supporting an inference of scienter on the part of Sarepta's

executives as to the allegedly misleading nature of any of their

statements or omissions.

The Plaintiffs then filed a motion for leave to amend

the FAC, attaching the PSAC to that motion. The PSAC, unlike the

FAC, contained allegations involving the Briefing Document. The

Briefing Document, according to the Plaintiffs, demonstrated that

the FDA had communicated to Sarepta a "plethora of concerns" about

Sarepta's data before and during the Class Period. It also, said

the Plaintiffs, illustrated that the Defendants had misrepresented

Study 201/202 as "blinded."

On January 6, 2017, the district court denied the

Plaintiffs' motion for leave to amend. Specifically, it held that

the Plaintiffs had delayed unduly in moving to amend, and that, in

any event, the PSAC was futile because it also failed to state a

claim. The Plaintiffs now appeal the district court's orders

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denying them leave to file the PSAC and dismissing their claims

with prejudice.

II. THE DISTRICT COURT PROPERLY DISMISSED THE FAC

We first take up the Plaintiffs' contention that the

district court erred in dismissing the FAC for failure to state a

claim. Our review of a district court's dismissal under Rule

12(b)(6) is de novo. Schaefer v. Indymac Mortg. Servs., 731 F.3d

98, 103 (1st Cir. 2013). In determining whether the FAC stated a

claim upon which relief can be granted, "we accept well-pleaded

factual allegations in the complaint as true and view all

reasonable inferences in the plaintiffs' favor." ACA Fin. Guar.

Corp. v. Advest, Inc., 512 F.3d 46, 58 (1st Cir. 2008).

A. The relevant law

To survive a motion to dismiss under Rule 12(b)(6), a

complaint alleging securities fraud under section 10(b) of the

Exchange Act and Securities and Exchange Commission Rule 10b–5

must plead six elements: "(1) a material misrepresentation or

omission; (2) scienter, or a wrongful state of mind; (3) a

connection with the purchase or sale of a security; (4) reliance;

(5) economic loss; and (6) loss causation." Id. at 58. Only the

first two elements are at issue here.2

2 While the Plaintiffs also brought claims under section 20(a),
those claims are "derivative of 10b-5 claims." Hill v. Gozani,
638 F.3d 40, 53 (1st Cir. 2011). Following a finding that a

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 The Private Securities Litigation Reform Act of 1995

("PSLRA"), 15 U.S.C. § 78u-4, governs complaints alleging

securities fraud and imposes a particularity requirement on

pleadings. With regard to misleading representations, the PSLRA

requires that complaints "specify each statement alleged to have

been misleading [and] the reason or reasons why the statement is

misleading." Id. § 78u-4(b)(1)(B); see also Aldridge v. A.T.

Cross Corp., 284 F.3d 72, 78 (1st Cir. 2002). As for scienter,

the PSLRA requires that complaints "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)(A) (emphasis

added). To satisfy this "rigorous" requirement, Advest, Inc., 512

F.3d at 58, a plaintiff must "show either that the defendants

consciously intended to defraud, or that they acted with a high

degree of recklessness," Aldridge, 284 F.3d at 82 (citing Greebel

v. FTP Software, Inc., 194 F.3d 185, 198-201 (1st Cir. 1999)).

Additionally, the Supreme Court has determined that under the

PSLRA, "an inference of scienter must be more than merely plausible

or reasonable -- it must be cogent and at least as compelling as

company has violated a substantive section of the Exchange Act,
section 20(a) imposes joint and several liability on that company's
executives unless they "acted in good faith and did not directly
or indirectly induce the act or acts constituting the violation or
cause of action." 15 U.S.C. § 78t(a).

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any opposing inference of nonfraudulent intent." Tellabs, Inc.

v. Makor Issues & Rights, Ltd., 551 U.S. 308, 314 (2007); see also

Advest, Inc., 512 F.3d at 59 ("[W]here there are equally strong

inferences for and against scienter, Tellabs now awards the draw

to the plaintiff.").

B. Material misrepresentations or omissions

In dismissing the FAC, the district court first held

that the complaint failed "to plead any facts plausibly suggesting

that Defendants' statements or omissions were materially false or

misleading." On appeal, the Plaintiffs argue that the district

court was wrong for two reasons: (1) the FDA's October 30, 2014

public statement supports the inference that the Defendants

"recklessly misrepresented" their ability to file an NDA by the

end of 2014, and (2) after receiving a request for independent

review of its dystrophin data in July 2014, and failing to comply

with that request, the Defendants misled investors by continuing

to represent that a 2014 NDA submission was possible and by failing

to disclose that request and the noncompliance with it. We take

these arguments in turn.

1.

To begin, we disagree with the Plaintiffs that the FDA's

October 30 public statement suggests that the FDA had previously

communicated anything to Sarepta (such as, that its data were

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inadequate) that would render misleading the Defendants' continued

representations that a 2014 NDA submission was possible. That

inference would not be reasonable. Contrary to what the Plaintiffs

insist, the FDA did not appear to make its October 30 statement

with the purpose of correcting any prior misrepresentations by

Sarepta. Rather, the statement explicitly purported to "address[]

questions the agency has received from DMD patients, their

families, and others in the community who are concerned about the

timing of the filing of an NDA for eteplirsen."

It is true that the statement highlighted that: (1) "[i]n

its advice to Sarepta, FDA has consistently stated that it would

be necessary to include data in its NDA demonstrating that

eteplirsen increases production of . . . dystrophin"; (2) "the

need for additional data and analyses to support the NDA was

reinforced by an FDA inspection of the clinical site where

dystrophin analyses had been conducted"; and (3) after the site

visit, the FDA had "provided Sarepta with detailed recommendations

on how to improve these dystrophin analyses, and FDA's most recent

advice was consistent with the advice provided after the April

2014 meeting." But none of this supports the inference that the

FDA had previously told Sarepta that its data were categorically

inadequate. And crucially, the statement also recognized Sarepta's

April 2014 announcement of its "plans to submit an NDA for

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eteplirsen by the end of 2014," without objecting to it or

otherwise characterizing it as misleading or unfounded. So, the

FDA's statement cannot serve as the scaffolding for any reasonable

inference that the FDA had communicated anything to Sarepta during

the Class Period that would make the Defendants' subsequent

representations about filing an NDA in 2014 misleading.

2.

The Plaintiffs next turn their focus to the July request

for independent review, which was not itself disclosed as such.

The Plaintiffs' theory is that once Sarepta received this request,

it knew it could not reasonably expect to file an NDA until the

requested independent review was completed, and it knew that it

was not acceding to the request. As a result, the Plaintiffs say,

its continued assertion on the August 7 call that its existing

dataset could support accelerated approval was misleading.

To advance this argument, Plaintiffs would have us

assume that the July request for independent review was materially

different in its potential impact on the likelihood of approval

than was the FDA's April request for further review (which had

been disclosed to investors). For purposes of our disposition of

this appeal, we can make that assumption. In so doing, however,

we cannot avoid observing that it is hardly obvious that the July

request for independent review was significantly new and that

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compliance with it was more mandatory than what had come before.

Both before and after the July request, it was the case that the

FDA was saying that further review by someone other than Sarepta

would affect the chances of approval, which is precisely what

Sarepta disclosed.

C. Scienter

The Plaintiffs' pursue two lines of argumentation

regarding scienter: (1) that "concealing and avoiding the requests

for reassessment recklessly risked misleading investors"; and (2)

that Sarepta's significant motive to mislead investors is an

indicia of scienter.3

1.

Keeping in mind that inferences of scienter under the

PSLRA must be "at least as compelling as any opposing inference of

nonfraudulent intent," Tellabs, 551 U.S. at 314, we begin with the

first of Plaintiffs' arguments. As the district court correctly

noted, given that it is the only communication that took place

after the FDA made this request, Garabedian's August 7, 2014 phone

call with investors is the only communication we need to look at.4

3 The Plaintiffs also argue that Garabedian's evasive response to
a question during his May 7 conference call indicated that he was
knowingly misleading investors regarding the FDA's July request
for independent review. But this cannot be right, because according
to the Plaintiffs, the FDA had not yet made that request.
4 In their reply brief, the Plaintiffs argue that various

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In analyzing that call, we also keep in mind our recognition that

providing warnings to investors, or otherwise disclosing potential

risks, erodes inferences of scienter. See Fire & Police Pension

Ass'n of Colo. v. Abiomed, Inc., 778 F.3d 228, 244 (1st Cir. 2015)

(holding that defendants' informative disclosures "undercut any

inference of scienter"); City of Dearborn Heights Act 345 Police

& Fire Ret. Sys. v. Walters Corp., 632 F.3d 751, 760 (1st Cir.

2011) ("[A]ttempts to provide investors with warnings of risks

generally weaken the inference of scienter." (alteration in

original) (quoting Ezra Charitable Tr. v. Tyco Int'l, Ltd., 466

F.3d 1, 8 (1st Cir. 2006))).

The substance of what Garabedian communicated during the

August 7 phone call severely weakens any inference of scienter.

He told investors "[a]s a reminder, the FDA indicated in its April

guidance that if, after further detailed review, they were to find

the currently available . . . data to be adequate, our existing

dystrophin data set would have the potential to support accelerated

approval." He further explained that Sarepta was "continu[ing]

to work with the FDA to provide greater assurance of the quality

statements by the Defendants in April and May of 2014 were
misleading in light of the FDA's July request for independent
review. But, this argument necessarily fails because, according to
the FAC, these phone calls took place before the FDA communicated
that request to Sarepta.

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and reliability of our dystrophin data." In this manner,

Garabedian reminded investors that the FDA was looking for further

review, as Sarepta disclosed in April. At the same time, Garabedian

gave no assurance that Sarepta would accede to the type of review

that the FDA sought. As we have discussed, the difference between

those statements and what exactly happened is not obvious, as

investors knew that Sarepta's chances would be less if it did not

receive a further review. And even accepting the Plaintiffs'

position that there was a material difference nonetheless, it was

not such that one might reasonably infer scienter from Sarepta's

failure to elaborate more fully on any difference between a review

by the FDA and a review for the FDA by another lab. In other

words, an arguable misrepresentation provides by itself less

support for an inference of scienter than does a clear falsehood.

See Flannery v. SEC, 810 F.3d 1, 9 (1st Cir. 2015) ("If it is

questionable whether a fact is material or its materiality is

marginal, that tends to undercut the argument that defendants acted

with the requisite intent or extreme recklessness in not disclosing

the fact." (quoting City of Dearborn Heights, 632 F.3d at 757)).

We now turn to the Plaintiffs' related argument that

Garabedian recklessly risked misleading investors about Sarepta's

likelihood of achieving that result by failing to mention that

Sarepta was not complying with the FDA's request for independent

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review. As we have noted, unlike in its October 2014 guidance,

the FDA did not describe compliance with its July 29, 2014 request

as a mandatory prerequisite for a successful NDA filing. And as

we have previously held, when defendants do not divulge the details

of interim "regulatory back-and-forth" with the FDA, that alone

cannot support an inference of scienter under the PSLRA when the

defendants do provide warnings in broader terms. See Abiomed,

Inc., 778 F.3d at 243-44. "There must be some room for give and

take between a regulated entity and its regulator." Id. at 244;

see also Corban, 868 F.3d at 40 ("The defendants had no legal

obligation to loop the public into each detail of every

communication with the FDA.").

Additionally, we understand the Plaintiffs' arguments

about Sarepta's failure to obtain independent review to assert

that Sarepta was avoiding doing so out of concern that its data

would not hold up under scrutiny.5 Thus, the argument that the

Defendants needed to disclose that they had not followed this

request is a variation on the Plaintiffs' other arguments that the

Defendants were not forthcoming about the FDA's concerns about

5 The Plaintiffs do not, for example, argue that Sarepta avoided
complying with this request because it would be costly, or time
consuming, or for any other reason unrelated to the risk that
independent experts would not be able to confirm the studies'
results.

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their data's reliability or that they misleadingly claimed that

they had strong data. And we note again that Garabedian admitted

during the August 7 phone call that the FDA had such concerns about

Sarepta's data. So, even if Garabedian made material

misrepresentations or omissions regarding the July request for

independent review or Sarepta's compliance with it, the inference

that he did so with scienter is not sufficiently compelling under

Tellabs for purposes of stating a claim for securities fraud.

2.

The Defendants' purported motive to deceive investors

similarly fails to make an inference of scienter adequately

compelling. Pointing to Sarepta's public offering during the Class

Period, the Plaintiffs insist that "[i]n a race for FDA approval

and generating no significant revenue, Sarepta was dependent upon

offerings to fund its operations; reporting positive news was

critical to Sarepta's existence." We have set a high bar for

arguments of this sort. Indeed, "catch-all allegations that

defendants stood to benefit from wrongdoing" are not enough.

Greebel, 194 F.3d at 197 (quoting In re Advanta Corp. Sec. Litig.,

180 F.3d 525, 535 (3d Cir. 1999)). Rather, "[w]e require something

more than the ever-present desire to improve results, such as

allegations that 'the very survival of the company w[as] on the

line.'" Corban 868 F.3d at 41 (second alteration in original)

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(quoting In re Cabletron Sys. Inc., 311 F.3d 11, 39 (1st Cir.

2002)).

The Plaintiffs do not clear this bar. The FAC is bereft

of allegations that Sarepta was financially on the ropes, or that

it "would shutter its doors unless it padded earnings by deceiving

investors." Corban, 868 F.3d at 42. It may be so that this

offering generated revenue that proved useful to Sarepta in its

"race for FDA approval," so to secure the "first-mover advantage."

Yet, that alone cannot bear the weight of an inference of scienter

that is "at least as compelling" as any other. Tellabs, 551 U.S.

at 314.

Therefore, because the Plaintiffs did not adequately

plead scienter in the FAC, we hold that district court did not err

in dismissing the FAC for failure to state a claim.

III. THE DISTRICT COURT PROPERLY DENIED LEAVE TO AMEND

We now turn to the Plaintiffs' arguments that the

district court should have granted them leave under Fed. R. Civ.

P. 15(a) to file the PSAC. The district court denied leave on the

grounds that the Plaintiffs had moved to amend with "undue delay"

and because, in any event, the PSAC also failed to state a claim.

On appeal, the Plaintiffs urge the opposite: that they did not

delay unduly and that the PSAC did state a claim. We assume

(without deciding) that the PSAC was not futile, but nonetheless

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affirm the district court's denial of leave to amend on undue delay

grounds.

Under Fed. R. Civ. P. 15(a)(2), a party may amend a

pleading "with the court's leave." The Rule further provides that

"[t]he court should freely give leave when justice so requires."

Nonetheless, grounds for denying leave include "undue delay, bad

faith or dilatory motive . . . repeated failure to cure

deficiencies by amendments previously allowed, undue prejudice to

the opposing party . . . [and] futility of amendment." Advest,

Inc., 512 F.3d at 55-56 (quoting Forman v. Davis, 371 U.S. 178,

182 (1962)). While "[t]he rule reflects a liberal amendment

policy . . . the district court enjoys significant latitude in

deciding whether to grant leave to amend." Id. at 55 (citation

omitted). And notably, "undue delay in moving to amend, even

standing alone," can provide a court with adequate grounds to deny

leave. Zullo v. Lombardo (In re Lombardo), 755 F.3d 1, 3 (1st

Cir. 2014).

We have previously made the observation that "the longer

a plaintiff delays, the more likely [a] motion to amend will be

denied." Advest, Inc., 512 F.3d at 57 (citing Steir v. Girl Scouts

of the USA, 383 F.3d 7, 12 (1st Cir. 2004)). And we have

explicitly condemned a "wait and see" approach to pleading, whereby

plaintiffs "having the needed information, deliberately wait in

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the wings . . . with another amendment to a complaint should the

court hold the first amended complaint was insufficient." Id.

The Plaintiffs filed the FAC on March 20, 2015. The

Briefing Document -- the source of the Plaintiffs' new allegations

in the PSAC -- became available in January 2016. The district

court denied the FAC on April 5, 2016. Three days later, the

Plaintiffs moved to file the PSAC.

The PSAC differed from the FAC in two key respects.

First, it alleged that the FDA had requested an independent review

of Sarepta's dystrophin data in July 2013 (a year earlier than the

FAC claimed that this occurred). Second, it alleged that Sarepta

had manipulated its dystrophin studies, and that the FDA had

communicated concerns to Sarepta that "the blinded nature of the

dystrophin study had been improperly broken after initial

(blinded) analysis failed to yield positive results." Thus,

according to the PSAC, the Defendants "misrepresented that the

dystrophin analysis was conducted in a properly blinded and

controlled manner, and they misrepresented, omitted, and

recklessly ignored the FDA's repeated guidance to seek independent

laboratory verification of the dystrophin assessment results."

Highlighting the three-month gap between the FDA's

publication of the Briefing Document and the Plaintiffs' motion to

amend, the district court reasoned that "[t]he timing of the filing

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of the motion to amend suggests that rather than moving promptly

for leave to file a new complaint based on new information

discovered in January 2016, the Plaintiffs instead waited for the

Court's ruling on the Motion to Dismiss before seeking leave to

amend." This, it concluded, amounted to "wait and see" pleading,

and thus undue delay.

The district court did not abuse its discretion in

reaching this conclusion. The Plaintiffs' arguments to the

contrary focus on their subjective belief in the strength of the

FAC and on minimizing the three months during which they could

have moved for leave to amend. We are unmoved by the Plaintiffs'

arguments concerning their belief that the FAC adequately stated

a claim. Regardless of whether or not they intentionally sandbagged

their claims, the fact remains that despite having three months to

do so, the Plaintiffs did not move to amend until after the

district court dismissed the FAC. And while the Plaintiffs

characterize this period of time as "relatively short," we have

previously upheld denials of leave to amend on undue delay grounds

after a comparable amount of time. See Villanueva v. United

States, 662 F.3d 124, 127 (1st Cir. 2011) (affirming a finding of

undue delay where the plaintiff moved to amend four months after

filing his complaint); Kaye v. New Hampshire, 821 F.2d 31, 34 (1st

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Cir. 1987) (per curiam) (finding a three-month delay to be a

sufficient basis for denying leave to amend).

We also reject the Plaintiffs' argument that moving to

amend post-dismissal is desirable from the perspective of judicial

economy. They press that "it would have been neither practical

nor economical to move to amend the complaint each time new

relevant information was released while dispositive motions were

pending in this case . . . especially in the context of [the]

dynamic factual developments surrounding the [FDA approval]

process." But the Plaintiffs "have it exactly backwards -- their

methodology would lead to delays, inefficiencies, and wasted

work." Advest, Inc., 512 F.3d at 57. Indeed, the resulting

"unnecessary costs and inefficiencies on both the courts and party

opponents" is precisely the reason why we refused to sanction a

"wait and see" approach to pleading in Advest. Id. It may be so

that the Plaintiffs did not move to amend at an earlier juncture

because they believed that further information relevant to their

claims may have been coming down the pike amid the FDA's

consideration of the eteplirsen NDA. But that is not so much an

argument against the district court's denial of their motion for

leave to amend as it is a suggestion that the Plaintiffs perhaps

jumped the gun in filing the FAC. Accordingly, we conclude that

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the district court did not abuse its discretion in denying leave

to amend on undue delay grounds.6

IV. CONCLUSION

The FAC failed to state a claim, and even assuming that

the PSAC did not also suffer from that deficiency, the district

court did not abuse its discretion in ruling that the Plaintiffs

moved to file it with undue delay. Therefore, the district court's

judgment is affirmed.

Affirmed.

6 While both of the PSAC's new claims -- that the FDA had requested
independent review in July 2013 and that Sarepta had fraudulently
characterized its dystrophin studies as blinded -- derived from
the Briefing Document, the PSAC also cited the transcript from the
hearing before the district court in Corban, during which a portion
of the FDA's July 2013 written guidance to Sarepta (requesting
that Sarepta confirm its data independently) was read into the
record. Because this hearing took place in August 2015, however,
this does not impact our conclusion that the district court did
not abuse its discretion in denying leave to amend.

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