Employees' Retirement System of the City of Baton v. Macrogenics, Inc.

USCA4 Appeal: 21-2238 Doc: 48 Filed: 03/02/2023 Pg: 1 of 38

PUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 21-2238

EMPLOYEES’ RETIREMENT SYSTEM OF THE CITY OF BATON ROUGE
AND PARISH OF EAST BATON ROUGE,

Plaintiff - Appellant,

and

TODD HILL,

Plaintiff.

v.

MACROGENICS, INC.; SCOTT KOENIG; JAMES KARRELS,

Defendants - Appellees.

Appeal from the United States District Court for the District of Maryland, at Greenbelt.
George Jarrod Hazel, District Judge. (8:19-cv-02713-GJH)

Argued: December 6, 2022 Decided: March 2, 2023

Before GREGORY, Chief Judge, WILKINSON, Circuit Judge, and John A. GIBNEY, Jr.,
Senior United States District Judge for the Eastern District of Virginia, sitting by
designation.

Affirmed by published opinion. Chief Judge Gregory wrote the opinion, in which
Judge Wilkinson and Judge Gibney joined.
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ARGUED: William C. Fredericks, SCOTT+SCOTT ATTORNEYS AT LAW LLP, New
York, New York, for Appellant. Nina Fran Locker, WILSON SONSINI GOODRICH &
ROSATI, P.C., Palo Alto, California, for Appellees. ON BRIEF: Thomas L. Laughlin, IV,
Donald A. Broggi, Rihana L. Swartz, New York, New York, Jacob B. Lieberman,
SCOTT+SCOTT ATTORNEYS AT LAW LLP, Colchester, Connecticut; Steven J. Toll,
Jan E. Messerschmidt, COHEN MILSTEIN SELLERS & TOLL PLLC, Washington, D.C.,
for Appellant. Jeremy W. Gagas, Wilmington, Delaware, Laurie B. Smilan, Steffan N. Johnson,
John B. Kenney, WILSON SONSINI GOODRICH & ROSATI, P.C, Washington, D.C.,
for Appellees.

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GREGORY, Chief Judge:

In this securities class action suit, the Employees’ Retirement System of the City of

Baton Rouge and Parish of East Baton Rouge represents the class of persons and entities

who acquired shares of common stock in MacroGenics, Inc. (“MacroGenics”) between

February 6, 2019 and June 4, 2019 (the “Class Period”). Plaintiffs initiated this action against

MacroGenics, its president and CEO—Scott Koenig , and its senior vice president and

CFO—James Karrels, (collectively “Defendants”) for alleged violations of sections 10(b)

and 20(a) of the Securities Exchange Act of 1934, Securities and Exchange Commission

(“SEC”) Rule 10b–5, and sections 11, 12(a), and 15 of the Securities Act of 1933.

In their Amended Complaint, Plaintiffs alleged that after purchasing MacroGenics’

stock, they experienced economic harm proximately caused by Defendants’ material

misrepresentations, misleading statements, or omissions concerning MacroGenics’ clinical

trial drug, Margetuximab. The district court granted Defendants’ motion to dismiss after

concluding that Plaintiffs had failed to sufficiently allege any actionable misrepresentations

or omissions that would give rise to Defendants’ duty to disclose, and that most of

Defendants’ statements were also immunized from suit. This appeal followed.

Finding the district court’s analysis persuasive, we affirm.

I.

A.

MacroGenics is a public, clinical-stage biopharmaceutical company that trades

under the ticker symbol “MGNX.” Striving to advance new and improved treatments, the

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company developed Margetuximab, an antibody treatment for patients with metastatic

breast cancer. MacroGenics designed Margetuximab to target the HER2 oncoprotein,

which is found on the surface of some cancer cells and causes tumors to grow. The HER2

oncoprotein is often associated with an aggressive form of the disease and a poor prognosis

for patients. Margetuximab was the company’s first treatment to progress to the crucial

Phase 3 clinical trial, named “SOPHIA.” The SOPHIA clinical trial was intended to

compare how Margetuximab (in addition to chemotherapy) performed against the current

standard-of-care therapeutic antigen, Trastuzumab (in addition to chemotherapy) in HER2-

positive metastatic breast cancer patients who had previously undergone anti-HER2-

targeted therapy treatments.

SOPHIA’s clinical trial required two primary “endpoints,” which are pre-determined

key measures of the study’s success. SOPHIA’s two endpoints were: (1) prolongation of the

progression free survival (“PFS”) and (2) prolongation of the overall survival (“OS”) of

patients. PFS evaluates “how long patients enrolled in a given treatment arm of a clinical

trial continue to survive, post-enrollment, without progression of the disease.” J.A. 17. In

other words, it tracks how many months “during and after the treatment of . . . breast

cancer[] that a patient survives with the disease without the disease getting worse.” J.A.

26. OS, on the other hand, measures “how long such patients survive for any reason and

without regard to whether they experienced any post-enrollment progression of their

disease[].” J.A. 17. More specifically, its focus is on “the length of time from either the

date of diagnosis or the start of treatment for . . . breast cancer[] that patients diagnosed

with the disease are still alive.” J.A. 26. Beginning in 2016, SOPHIA enrolled 536

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patients—i.e., the intent-to-treat (“ITT”) population—who were divided into two arms of

the trial: (1) Margetuximab with chemotherapy or (2) Trastuzumab with chemotherapy.

MacroGenics’ primary objective “was to . . . show that the Margetuximab-based treatment

delivered meaningfully superior PFS and OS results compared to the Trastuzumab-based

treatment.” J.A. 26.

In a February 6, 2019 press release (the “February 6 Press Release”), which was

published prior to the market’s opening, MacroGenics revealed that, as of October 10,

2018, SOPHIA had reached its first PFS-related endpoint (having hit 265 PFS events 1) and

stated that:

The SOPHIA clinical trial met the primary endpoint of prolongation of
progression-free survival (PFS) in patients treated with the combination of
margetuximab plus chemotherapy compared to trastuzumab plus chemotherapy.

Patients in the margetuximab arm experienced a 24% risk reduction in PFS
compared to patients in the trastuzumab arm (HR=0.76, p=0.033). Notably,
approximately 85% of patients in the study were carriers of the CD16A
(FcγRIIIa) 158F allele, which has been previously associated with
diminished clinical response to HERCEPTIN [the trade name for
Trastuzumab] and other antibodies. In this pre-specified subpopulation,
patients in the margetuximab arm experienced a 32% risk reduction in PFS
compared to patients in the trastuzumab arm (HR=0.68, p=0.005). Results
of the SOPHIA study are being prepared for submission for publication and
presentation later this year at a major scientific conference. Follow-up for
determination of the impact of therapy on the sequential primary endpoint of
overall survival (OS) is ongoing, as pre-specified in the study protocol and
recommended by the trial’s independent Data Safety Monitoring Committee
....

“We are pleased with the SOPHIA clinical results . . .” said Scott Koenig . . .
“Our Fc-engineered, immune-enhanced molecule has demonstrated a

1
Post-enrollment in the SOPHIA trial, the PFS endpoint will be satisfied when 265
patients—or events—will survive without progression of their metastatic breast cancer. Whereas
the OS endpoint will be fulfilled when 385 patients—or events—will, inevitably, pass away.
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superior outcome in a head-to-head study against HERCEPTIN
[Trastuzumab]. We look forward to additional opportunities to develop
margetuximab in other HER2-positive breast and gastric cancer
populations.”

J.A. 28–29 (emphasis added)

Later that same day, MacroGenics held a conference call to discuss the results (the

“February 6 Call”). There, Koenig reiterated that the endpoint data for OS was “ongoing.”

J.A. 29. He also expressed that the results from the SOPHIA study were being prepared

“for publication and presentation later this year at a major scientific conference,” as

“MacroGenics demonstrated a superior outcome in a head-to-head study against

HERCEPTIN, and [they were] anticipating submitting a BLA to the U.S. FDA in the

second half of 2019.” J.A. 29–30. The “major scientific conference” referred to the

upcoming June 2019 American Society of Clinical Oncology (“ASCO”) Conference. The

deadline to submit abstracts for presentations for this conference was February 12, 2019.

Also on the February 6 Call, after being asked about the progression of OS, Koenig

explained that although filing with the FDA was not dependent on this data, “the trending

for OS has been positive in the direction of margetuximab, but we just don’t have enough

events to be able [] to have significance here.” J.A. 30. Due to the February 6 Press Release

and Call, Plaintiffs allege that MacroGenics’ common stock ascended from $11.11 to

$15.49 in one day.

On February 12, 2019, MacroGenics announced that it would conduct another

public common stock offering. The following day, the Company sold 6.325 million shares

of common stock at an offering price of $20 per share. The Amended Complaint posits

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that investors paid over $126 million to acquire these shares and MacroGenics’ net

proceeds approximated $118.7 million. After the offering, MacroGenics filed a Prospectus

Supplement (the “Prospectus”), to their Form S-3 Registration Statement and initial

prospectus filed on November 2, 2016 with the SEC. Plaintiffs refer to these documents

collectively as the “Offering Documents.” The language found in the Offering Documents

incorporated the February 6 Press Release, detailed above. The Offering Documents also

disclosed a “Risk Factors” Section which emphasized:

We may publicly disclose topline or interim data from time to time, which is
based on a preliminary analysis of then-available data, and the results and
related findings and conclusions are subject to change following a more
comprehensive review of the data related to the particular study or trial. For
example, we recently announced top line data for the SOPHIA trial of
margetuximab for the treatment of certain metastatic breast cancer patients.
We make assumptions, estimations, calculations and conclusions as part of our
analyses of data, and we may not have received or had the opportunity to fully
and carefully evaluate all data. As a result, the topline results that we report
may differ from future results of the same studies, or different conclusions or
considerations may qualify such results, once additional data have been
received and fully evaluated. Top line data also remain subject to audit and
verification procedures that may result in the final data being materially
different from the preliminary data we previously published. In addition, the
achievement of one primary endpoint for a trial does not guarantee that
additional co-primary endpoints or secondary endpoints will be achieved. For
example, the achievement by margetuximab of its co-primary endpoint for
progression-free survival events in the SOPHIA trial does not indicate whether
the co-primary endpoint of overall survival will be achieved.

J.A. 64 (emphasis added). In its Annual Form 10-K (“2018 10-K”) submitted to the SEC

on February 26, 2019, MacroGenics incorporated language previously detailed and further

asserted that:

In February 2019, we announced positive results from SOPHIA, our Phase 3
clinical trial of margetuximab in HER2-positive metastatic breast cancer
patients . . . Results of the SOPHIA study have been submitted for

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presentation later this year at a major scientific conference. Follow-up for
determination of the impact of therapy on the sequential second primary
endpoint of overall survival (OS) is ongoing, as prespecified in the study
protocol and recommended by the trial’s independent Data Safety
Monitoring Committee.

J.A. 33 (emphasis added). The same day, the Company held a conference call (“February

26 Call”) where Koenig and Karrels discussed SOPHIA’s PFS endpoint results and, in

passing, the interim OS results:

As noted in our earlier announcement, it is too early to evaluate the sequential
secondary primary endpoint to overall survival, as OS events continue to
accrue in the study population. We plan to meet with the FDA in the first half
of 2019 and anticipate submitting a biologics licensing application to the FDA
on the basis of the PFS results in the second half of 2019. We have already
submitted an abstract containing previously disclosed as well as additional
results to the ASCO meeting in June. In this regard, we are currently reviewing
options and strategies for commercialization, assuming margetuximab
receives FDA approval in this indication.

J.A. 34 (emphasis added). MacroGenics then issued a press release on May 1, 2019 (“May

1 Press Release”) which noted, in relevant part, that the PFS results were prolonged with

Margetuximab in comparison to Trastuzumab, and that these results were to be presented

at the ASCO Conference where an “abstract containing data from SOPHIA was selected

for presentation.” J.A. 34. Also on May 1, MacroGenics held its quarterly earnings

conference call (“1Q2019 Call”) where Koenig and an analyst had the following dialogue:

[Analyst:] Can you please help set investor expectations ahead of the ASCO
update, and specifically what sort of data will be presented, and will you have
survival data in the ASCO presentation?

[Koenig:] . . . Obviously we’re very excited about being able to disclose
additional data from the SOPHIA trial. There will be obviously an abstract
coming out in mid-May, and this will be followed up obviously with a
presentation on the morning of June 4. Our expectation is obviously to provide
a recapping of the data we presented on the intent-to-treat population, on

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various subset populations, particularly looking at the F allele 158 population
where we’ve seen the significant response rate. And we will likely present the
OS data at that point, which was disclosed or examined at the time of February
5 when we had our initial data. There will be analysis of different subsets that
were defined as secondary endpoints. And I presume that — that data
presentation has not obviously been put together yet, but it should be very
revealing in terms of where we think the promise of this drug is.

J.A. 35 (emphasis added). Koenig also asserted that “it is too early to evaluate the second

sequential primary endpoint of overall survival as OS events continue to accrue in the

study population.” Id. (emphasis added).

On May 15, 2019, after the markets closed, MacroGenics issued a subsequent press

release (“May 15 Press Release”), which discussed—for the first time in detail—the OS

data that was accumulated from the October 10, 2018 cut-off date, the same day SOPHIA

achieved its PFS endpoint. The May 15 Press Release declared:

At the time of the primary PFS analysis, overall survival (OS) data based on
158 events were immature. The median OS at that time was prolonged by
1.7 months in patients treated with margetuximab and chemotherapy
compared to patients treated with trastuzumab and chemotherapy. For the
exploratory subpopulation of patients carrying the CD16A 158F allele, the
median OS was prolonged by 6.8 months in the margetuximab arm compared
to the trastuzumab arm . . . .

The activity observed to date in SOPHIA is promising. Of note, this is the
first randomized Phase 3 study that was designed to examine the potential
benefit of Fc modification and the role of Fc-gamma receptor genotypes on
anti-HER2 antibody efficacy. For overall survival, we anticipate the
preliminary positive trend in favor of Margetuximab to continue, although
subsequent results could fluctuate as additional events accrue.

J.A. 36 (emphasis added). These 158 OS events—or deaths—encompassed only forty-one

percent of the overall population, and the data was premature given the early stage of the

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data cut-off. The OS data were interim, and therefore not complete, as they had not yet

reached their second endpoint.

Following the May 15 press release, MacroGenics witnessed a successive surge in

its stock, which increased from $16.25 per share at the close of May 15 to $18.00 on May

16 and $18.71 on May 17. This raise “represented a one-day increase of $1.73 (or more

than 10.6%) and a two-day increase of $2.44 (or 15.0%).” J.A. 36.

On June 4, 2019, MacroGenics presented the SOPHIA data from the October 10, 2018

cut-off at the ASCO Conference. The company declared the data depicted a “statistically

significant improvement in PFS” for the patients in the Margetuximab cohort compared to the

Trastuzumab cohort of the ITT population. J.A. 36–37. MacroGenics also presented a visual

depiction of the interim OS data plotted on this Kaplan-Meier curves graph 2:

2
The Amended Complaint asserts that “[t]o graph Kaplan-Meier curves, one simply
needs to have the study data concerning the number of ITT patients who, over a relevant
time interval, have either survived or died.” J.A. 39. For the SOPHIA trial’s Kaplan-Meier
curves specifically, Plaintiffs further allege that “one need only know: (a) the number of
patients originally enrolled in each arm of the trial . . . and (b) whether those patients were
still alive or had died as of a particular cut-off date.” Id.
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J.A. 38. Dr. Rugo—one of the SOPHIA trial’s independent investigators who presented

this data at the ASCO Conference—expressed that the Kaplan-Meier curve graph

demonstrated “the median OS was 18.9 months in the Margetuximab arm versus 17.2

months in the Trastuzumab arm” and “in the . . . subpopulation of patients carrying the

CD16A 158F allele, the median OS was 23.6 months in the Margetuximab arm versus 16.9

months in the Trastuzumab arm.” J.A. 37–38. Plaintiffs allege that, as the Kaplan-Meier

curves graph shows, the “curves that grow closer together” or “cross” are “unfavorable, as

they constitute a clear indication that the OS data is not on track to generate a meaningful

or statistically significant OS result when the data is fully matured and a red flag for

investors.” J.A. 41 (internal quotation marks omitted). Specifically, Plaintiffs claim that

(a) the curves either overlapped or “crossed” at multiple points in time as one
moves left-to-right along the x-axis; and (b) the curves not only crossed, but
began to separate favorably to Trastuzumab and unfavorably against
Margetuximab after roughly 24 months (two years). Both the overlapping
and crossing of the two arms, as well as the fact that Trastuzumab was
producing much better OS results than Margetuximab after 24 months, were
materially adverse facts that were not disclosed to the public until the June
2019 ASCO Conference, but were known to Defendants throughout the Class
Period.

J.A. 41–42. Following the ASCO Conference, and multiple analyst reports and articles 3,

MacroGenics’ stock plummeted, representing a “two-day decline of nearly 22%.” J.A. 43.

3
Plaintiffs focus on the following: Evercore ISI’s analyst report describing
SOPHIA’s OS data as “underwhelming . . . so far,” J.A. 42; Cowen Inc.’s analyst report
commenting “[w]e believe the stock weakness after the presentation was due to investor
concern about the magnitude of PFS benefit and initial OS signal, which only included
41% of required events[,]” Id.; and a Vantage article stating “[t]he sting in this case came
in the form of survival curves . . . [which] separated relatively late in the analysis and
crossed several times,” J.A. 43.
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B.

Plaintiffs brought this securities class action against Defendants on September 13,

2019. They later filed an Amended Complaint which asserted violations of § 10(b) of the

Exchange Act and Rule 10b-5 (Count I); § 20(a) of the Exchange Act (Count II); § 11 of

the Securities Act (Count III); § 12(a) of the Securities Act (Count IV); and § 15 of the

Securities Act (Count V).

Defendants filed a motion to dismiss for failure to state a claim pursuant to Federal

Rules of Civil Procedure 9(b) and 12(b)(6) on November 30, 2020. Defendants asserted

that the class had failed to allege any materially false or misleading statements or omissions

that give rise to an inference of scienter, as required by the Private Securities Litigation

Reform Act (“PSLRA”). In support of this argument Defendants attached twenty exhibits

to their motion to dismiss, which they claimed were either referenced in Plaintiffs’

Amended Complaint or served as explanatory tools for their motion.

The district court granted Defendants’ motion to dismiss. In determining whether

Defendants’ statements contained misleading representations or omitted material

information and whether they had a duty to disclose, the court analyzed the statements in

four groups: (1) statements about PFS results; (2) statements of “superior outcome” or

“positive results”; (3) cautionary statements and Risk Factors; and (4) statements about the

interim OS data.

Under the first bucket, the court held that, looking at the “total mix of information”

given to investors during the Class Period, reasonable investors “upon hearing of the PFS

results, would [not] be left with a mistaken impression that OS results were definitely ‘on

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track’ and that Margetuximab was ensured to reach its secondary endpoint.” J.A. 468. As

to the second category, the court determined that these positive statements were mere

puffery and not actionable. Concerning the third set of statements, the court concluded that

the cautionary statements and Risk Factors were not misleading because it was unclear

whether or not failure was inevitable, even if Defendants had full access and knowledge of

the OS interim data. Finally, the court concluded that the statements about the interim OS

data put investors on notice “that [MacroGenics] did not have a clear picture of the OS

data.” J.A. 472. Further, the court characterized Plaintiffs’ frustration with Defendants’

belated release of the Kaplan-Meier curves as a “mere disagreement with [the] defendant’s

methodology, interpretation of the data, or expressions of optimism,” rather than a

securities violation. Id. (internal citations omitted).

The court then determined that Plaintiffs failed to sufficiently plead scienter, the

required second step for prevailing on Exchange Act claims, because Defendants did not

have the state of mind necessary to defraud investors. The district court thus dismissed

Count I. And because Count II, Plaintiffs’ derivative § 20(a) claim, required “a primary

violation of the securities laws,” Svezzese v. Duratek, Inc., 67 F. App’x 169, 174 (4th Cir.

2003), the district court also dismissed this claim.

The court also dismissed Plaintiffs’ §§ 11 and 12(a) Securities Act claims (Counts III

and IV), finding that they rested on the same Exchange Act assertions as Counts I and II.

Finally, the district court dismissed Plaintiffs’ derivative § 15 claim (Count V), which could

not survive after the dismissal of Counts III and IV. Plaintiffs’ timely appeal followed.

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II.

We review de novo a district court’s decision to dismiss a plaintiff’s complaint

under Federal Rule of Civil Procedure 12(b)(6). In re PEC Solutions, Inc. Sec. Litig., 418

F.3d 379, 387 (4th Cir. 2005). In order to survive a motion to dismiss, Plaintiffs’ “private

securities fraud actions must clear the hurdle of the PSLRA,” which imposes a heightened

pleading standard. Id. (cleaned up). This Court must “accept all factual allegations in the

complaint as true” and “consider the complaint in its entirety, as well as other sources

courts ordinarily examine when ruling on Rule 12(b)(6) motions to dismiss.” Tellabs, Inc.

v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007).

III.

A.

Section 10(b) of the Securities Exchange Act prohibits any individual from the

“us[ing] or employ[ing], in connection with the purchase or sale of any security, . . . any

manipulative or deceptive device or contrivance of such rules and regulations as the [SEC]

may prescribe as necessary or appropriate in the public interest or for the protection of

investors.” 15 U.S.C. § 78j(b). Rule 10b–5, which incorporates § 10(b), provides that, in

connection with the sale of a security, it is unlawful “[t]o employ any device, scheme, or

artifice to defraud,” “[t]o 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” or “[t]o engage in any act,

practice, or course of business which operates or would operate as a fraud or deceit upon

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any person.” 17 C.F.R. § 240.10b–5. We have explained that the purpose of the Exchange

Act and its accompanying regulations is to ensure companies’ disclosure of “the

information necessary for investors to make informed investment decisions.” Yates v. Mun.

Mortg. & Equity, LLC, 744 F.3d 874, 884 (4th Cir. 2014).

In order for Plaintiffs’ claims to prevail under § 10(b) and Rule 10b–5, they must

sufficiently allege: “(1) a material misrepresentation or omission by the defendant; (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; (6) and

loss causation.” Stoneridge Inv. Partners, LLC v. Scientific–Atlanta, Inc., 552 U.S. 148,

157 (2008).

To establish a “misrepresentation” (misleading statement) or “omission,” under the

PSLRA’s heightened pleading requirement, Plaintiffs’ Amended Complaint must “specify

each statement alleged to have been misleading, the reason or reasons why the statement

is misleading, and, if an allegation regarding the statement or omission 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). A challenged statement or omission must also be “factual”—

“that is, one that is demonstrable as being true or false”; “the statement must be false, or

the omission must render public statements misleading”; and “any statement or omission

of fact must be material.” Longman v. Food Lion, Inc., 197 F.3d 675, 682 (4th Cir. 1999).

For a fact to be considered material, there must be a “substantial likelihood that a

reasonable purchaser or seller of a security (1) would consider the fact important in

deciding whether to buy or sell the security or (2) would have viewed the total mix of

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information made available to be significantly altered by disclosure of the fact.” SEC v.

Pirate Inv’r LLC, 580 F.3d 233, 240 (4th Cir. 2009). Although Rule 10b–5 “prohibit[s]

any misrepresentation of a fact deemed material” it does not “prohibit any

misrepresentation—no matter how willful, objectionable, or flatly false—of immaterial

facts, even if it induces reactions from investors that, in hindsight or otherwise, might make

the misrepresentation appear material.” Greenhouse v. MCG Capital Corp., 392 F.3d 650,

656 (4th Cir. 2004) (cleaned up). “Ultimately, the inquiry is whether, read as a whole, the

statements or omissions would have misled a reasonable investor about the nature of the

securities.” Lerner v. Nw. Biotherapeutics, 273 F. Supp. 3d 573, 586–87 (D. Md. 2017)

(quoting Shah v. GenVec, Inc., No. DKC 12–0341, 2013 WL 5348133, at *12) (D. Md.

2000) (emphasis added).

B.

On appeal, Plaintiffs allege that their claims meet this heightened pleading standard

for two reasons. First, they argue that Defendants’ February 2019 written statements

referencing SOPHIA’s PFS results put the study’s interim OS results “in play,” and their

subsequent oral and written statements that positively characterized SOPHIA’s OS data

triggered a duty to disclose because they contained either materially false and misleading

statements or omissions. Second, they posit that none of Defendants’ statements contained

immaterial puffery, inactionable opinion, or risk warnings which would immunize them

from liability. We address each argument in turn.

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1.

In analyzing the “total mix of information” available to investors, the district court

determined that MacroGenics’ release of the PFS data did not address the interim OS

results by releasing the PFS data, and that a reasonable investor could not have received

from MacroGenics’ statements the mistaken impression that the interim OS results would

inevitably satisfy the OS endpoint based solely on the PFS results. Plaintiffs posit that the

district court erroneously narrowed Defendants’ written statements to the PFS data, rather

than SOPHIA trial’s overall progress. Plaintiffs also contend Defendants’ positive oral

statements concerning the interim OS results unambiguously put the data in play. Finding

these arguments unpersuasive, we agree with the district court.

a.

To begin, we consider whether Defendants’ written and oral statements concerning

the SOPHIA trial’s PFS results—prior to the May 15 Press Release—put the trial’s interim

OS results “in play,” thereby triggering Defendants’ duty to disclose the OS Kaplan-Meier

curves graph.

A company’s duty to disclose all material information may emerge when it “chooses

‘to speak about a material subject to investors.’” In re Amarin Corp. PLC Sec. Litig., No.

21-2071, 2022 WL 2128560, at *3 (3d Cir. June 14, 2022) (quoting City of Edinburg

Council v. Pfizer, Inc., 754 F.3d 159, 174 (3d Cir. 2014)). Further, a company is required

to disclose under § 10(b) and Rule 10b–5 when “necessary to make statements made, in

light of the circumstances under which they were made, not misleading.” Matrixx

Initiatives, Inc. v. Siracusano, 563 U.S. 27, 44 (2011) (cleaned up).

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Defendants did not have a duty to disclose the interim OS results because their

written and oral statements prior to the May 15 Press Release, did not “speak” about the

OS data. In these statements, Defendants primarily focused on the SOPHIA trial’s success

in reaching its first PFS endpoint. Any language concerning the OS endpoint was

preliminary and focused on the ongoing nature of the OS data’s accumulation. For

instance, in the February 6 Press Release, Defendants mentioned that SOPHIA had “met

the primary endpoint of prolongation of [PFS],” then proceeded to offer an overview of the

PFS’s endpoint results. J.A. 28–29. In brief reference to the OS endpoint, the Press

Release explicitly stated that “[f]ollow-up for determination of the impact of . . . (OS) is

ongoing.” J.A. 29 (emphasis added). Reading this statement “as a whole,” Shah, 2013

WL 5348133, at *12, this clearly indicated to all reasonable investors that, although the

PFS results experienced success, one could not (and should not) draw a conclusion on the

OS data’s performance as MacroGenics continued to track OS performance.

Plaintiffs attempt to rebut this by shifting focus to the February 6 Press Release’s

title, “MacroGenics Announces Positive Results from Pivotal Phase 3 SOPHIA Study of

Margetuximab.” J.A. 28. They contend that the title, along with Koenig’s statement that

Defendants were “pleased with the SOPHIA clinical results,” put all of SOPHIA’s results

in play. Opening Br. at 25. Not so.

In re Amarin Corp., which bears stark similarities to the case at bar, is instructive.

That Third Circuit case concerned the Phase 3 trial of “REDUCE-IT,” which evaluated

whether Vascepa—a drug intended to treat heart disease—could reduce major adverse

cardiac events. 2022 WL 2128560, at *1. After announcing topline results through a press

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release and a subsequent conference call, the company’s shares skyrocketed; it further

informed the public that the full conclusive results of the trial would be disclosed at a

conference later that year. Id. After Amarin revealed the full results, a group of health

field professionals expressed concerns that the mineral oil placebo utilized in the trial was

not inert, which, if true, could have significantly inflated REDUCE-IT’s results and

Vascepa’s efficacy. Id.

Following these comments and the Corporation’s disclosure of the full trial data,

Amarin’s stock plummeted. Id. Plaintiffs then pursued a class action suit alleging violations

of §§ 10(b) and 20(a) of the Exchange Act, asserting that Amarin’s press release and

conference call announcing REDUCE-IT’s topline results were materially misleading. Id.

They further alleged that Amarin had a duty to disclose information surrounding the mineral

oil placebo because discussion of the topline results put this information in play. Id. at *2.

The Third Circuit determined that even though Amarin referenced the placebo group in its

discussion of the topline results, the Corporation did not put the full trial data or information

regarding the mineral oil placebo in play because it did not express “any affirmative

characterizations regarding the effectiveness of the mineral oil placebo.” Id. at *3.

So too, here. Although the title of the MacroGenics February 6 Press Release did

not qualify that the positive results were specifically related to PFS, that much was

delineated by the text of the press release. See Kleinman v. Elan Corp., PLC, 706 F.3d

145, 153 (2d Cir. 2013) (holding that “given the context of the statements, no reasonable

investor could have understood the headline to mean anything other than the positive

subgroup results”). Even more, a company’s mere reference to full trial data in a discussion

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of top-line results “does not trigger a duty to disclose the full results of a study.” In re

Amarin Corp. PLC Sec. Litig., No. 3:19-cv-06601, 2021 WL 1171669, at *15 (D.N.J. Mar.

29, 2021). Thus, Defendants’ reference to the accumulation of OS data when announcing

the PFS top-line results did not put this interim information in play.

b.

Next, Plaintiffs allege that Defendants’ oral statements (made during the initial

February 6 Call and other occasions up to and including the May 15 Press Release)

characterizing the OS data positively, unambiguously put the OS data in play and thereby

triggered a duty to disclose the “material adverse facts.” Opening Br. at 26. We disagree.

Defendants did not have a duty to disclose the Kaplan-Meier curves graph because

they orally communicated the OS interim data prior to the graph’s inaugural appearance at

the June ASCO Conference. “Where a company accurately reports the results of a

scientific study, it is under no obligation to second-guess the methodology of that study.”

Lerner, 273 F. Supp. 3d at 587–88. It would be a stretch for us to find the existence of

false or misleading statements where “a defendant’s competing analysis or interpretation

of data is itself reasonable,” regardless of Plaintiffs’ disagreement with the study’s

“researchers and scientists.” Kleinman, 706 F.3d at 154.

Plaintiffs do not challenge the OS interim data itself, but they contest Defendants’

interpretation of it. According to Plaintiffs, the Kaplan-Meier curves graph was

inconsistent with Defendants’ positive statements. But as indicated by the graph’s

depiction, and despite the Plaintiffs’ stressed importance on the graph’s visual crossing,

Defendants accurately interpreted the OS interim data. The message of the May 15 Press

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Release and the graph was the same: of the 158 events (41% of the OS population)

collected at the October 2018 cut-off, Margetuximab exhibited a prolongation of life over

Trastuzumab. Though the Kaplan-Meier curves graph was not presented alongside the

May 15 Press Release, the data was consistent; the only difference is how and when the

information was provided. At bottom, the Kaplan-Meier curves graph was not a fact

contrary to Defendants’ positive statements. Because Defendants’ positive OS-related

statements were not false or misleading, or an omission of the interim OS data, we cannot

conclude that they had a duty to disclose the graph itself.

Assuming—without deciding—that Defendant’s statements were material, the

graph’s depiction of the OS data was not a material fact requiring disclosure. Defendants

distinguish a handful of cases where we, and the Supreme Court, have found that material

adverse facts properly triggered a duty to disclose.

In Matrixx, the Supreme Court determined that disclosure was required where a

manufacturer informed the market of specific revenue projections and was cognizant of,

but denied, the causal link between defendant’s drug and the significant risk of losing the

sense of smell. 563 U.S. at 44–47. Unlike the defendant in Matrixx, Defendants here did

not offer any specific revenue projections and clearly informed the public of all risks

associated with purchasing MacroGenics’ stock based on the interim results of the

SOPHIA trial.

Turning to our precedent, in Zak v. Chelsea Therapeutics International, Ltd., 780 F.3d

597, 609 (4th Cir. 2015), we concluded that disclosure was necessary when defendant’s

public statements conflicted with its awareness of non-public information concerning a new

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drug’s application status and the FDA’s expectation for additional, successful efficacy

studies prior to the drug’s approval. Contrary to Zak, here, Defendants’ alleged awareness

of the Kaplan-Meier curves graph did not conflict with their public statements. Instead,

Defendants accurately depicted the data the graph later illustrated while also warning that

these results were not indicative of Margetuximab’s overall success.

Finally, in Singer v. Reali, 883 F.3d 425, 440 (4th Cir. 2018), we determined that

defendants’ disclosure was crucial when they had chosen to inform the market that they were

training surgeons on how to obtain reimbursements but failed to disclose that it was doing

so through a fraudulent reimbursement scheme operation. Here, Plaintiffs failed to allege

that Defendants acted deceptively in issuing the positive OS-related statements. Rather,

based on the facts pleaded, Defendants’ optimism appears to have been warranted given how

the Margetuximab cohort’s PFS endpoint and OS interim results out-performed the

Trastuzumab cohort. Given this instructive precedent, we conclude that Defendants did not

have a duty to disclose the Kaplan-Meier curves graph prior to the ASCO Conference.

2.

We also agree with the district court that a handful of Defendants’ statements, some of

which have been previously discussed, are also inactionable as a matter of law because they

amount only to puffery or inactionable opinion, warrant protection under the PSLRA’s Safe

Harbor Provision, or are sufficiently hedged with cautionary statements and risk warnings.

a.

We start with puffery. Although a statement of “opinion or puffery will often not

be actionable, in particular contexts when it is both factual and material, it may be

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actionable.” Longman, 197 F.3d at 683. Yet, “expressions of puffery and corporate

optimism” generally do not constitute securities violations. Kleinman, 706 F.3d at 153.

Defendants’ statements on the February 6 Call, May 1 Call, and in the May 15 Press

Release, respectively, vocalized: “trending for OS has been positive in the direction of

margetuximab,” J.A. 30; “we’re very excited about being able to disclose additional data

from the SOPHIA trial,” J.A. 35; and “[t]he activity observed to date in SOPHIA is

promising” and “[f]or [OS] we anticipate the preliminary positive trend in favor of

Margetuximab to continue,” J.A. 36. These statements are nothing more than expressions

of optimism. Defendants’ use of the words “positive,” “excited,” and “promising” are

textbook examples of puffing statements that reasonable investors cannot rely upon in the

hopes of a grand slam, when the bases aren’t even fully loaded.

Also, Plaintiffs have failed to demonstrate how these positive statements

misrepresented the interim OS data. Much of their assertions rest on the belief that the

Kaplan-Meier curves graph was “objective, adverse data that materially undercut”

Defendants’ positive statements. Opening Br. at 34. However, and as discussed, Plaintiffs

have failed to demonstrate with specificity how or why they arrived at this crossroad. And

without specific allegations to support their position, we cannot reasonably infer it is

correct. Indeed, Plaintiffs’ Amended Complaint failed to sufficiently allege when the

Kaplan-Meier curves graph was created and known to Defendants. Even more,

Defendants’ May 15 Press Release accurately portrayed the interim OS data that was later

displayed on the Kaplan-Meier curves graph. At bottom, Defendants’ words were merely

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“soft, puffing statements,” Longman, 197 F.3d at 686, that were supported by their

interpretation of the OS interim data.

Moreover, Defendants consistently qualified their expressions of optimism with

warnings that the OS endpoint could still fail. See J.A. 29 (“[f]ollow-up for determination

of the impact of therapy on the sequential primary endpoint of [OS] is ongoing”); J.A. 30

(“the trending for OS has been positive in the direction of margetuximab, but we just don’t

have enough events to be able – to have significance here”); J.A. 35 (“it is too early to

evaluate the second sequential primary endpoint of [OS] as OS events continue to accrue

in the study population”). In short, each of Defendants’ statements was hedged with

guarded and restrained positivity. Looking at these statements in full, a reasonable investor

could not have exclusively clung to these statements when deciding to purchase

MacroGenics’ stock. See Longman, 197 F.3d at 685–86.

b.

Defendants’ positive statements about the interim OS data can also be classified as

inactionable opinions, affording them further protection from suit. Unlike statements of

fact, statements of opinion do not “express[] certainty about a thing.” Omnicare, Inc. v.

Laborers Dist. Council Const. Indus. Pension Fund, 575 U.S. 175, 183 (2015). “Opinions

are only actionable under the securities laws if they are not honestly believed and lack a

reasonable basis.” Pfizer,754 F.3d at 170; see also Lerner, 273 F. Supp. 3d at 591 (holding

that statements of opinion can be actionable only if they were “both false and not honestly

believed when they were made.”). For purposes of this subsection, we will focus on

Defendants’ February 6 Call and May 15 Press Release.

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Plaintiffs’ negative interpretation of the Kaplan-Meier curves graph is merely a

difference of opinion, which is insufficient to establish a securities law violation.

“Interpretations of clinical trial data are considered opinions.” Pfizer, 754 F.3d at 170. As

explained, Plaintiffs’ claims boil down to their interpretation of the Kaplan-Meier curves

graph and Defendants’ alleged failure to disclose it prior to the ASCO Conference. In

Plaintiffs’ eyes, the Kaplan-Meier’s crossing curves were unfavorable to Margetuximab

and demonstrated that the OS ultimately was not on track to be superior to the standard-of-

care drug, Trastuzumab. However, Defendants’ interpretation resides on greener pastures.

Standing by their May 15 Press Release, Defendants appropriately assert that the Kaplan-

Meier curves graph demonstrate the superior interim OS results for the Margetuximab

cohort. There, they stated that “[t]he median OS at the time was prolonged by 1.7 months

in patients treated with margetuximab and chemotherapy compared to patients treated with

trastuzumab and chemotherapy.” J.A. 36. Also that, “[f]or the exploratory subpopulation

of patients carrying the CD16A 158F allele, the median OS was prolonged by 6.8 months

in the margetuximab arm compared to the trastuzumab arm.” Id. This was accurately

demonstrated on the Kaplan-Meier curves graph which presented “for the ITT patient

population, the median OS was 18.9 months in the Margetuximab arm versus 17.2 months

in the Trastuzumab arm” and “of patients carrying the CD16A 158F allele, the median OS

was 23.6 months in the Margetuximab arm versus 16.9 months in the Trastuzumab arm.”

J.A. 37–38.

In their motion to dismiss, Defendants directly refuted that the initial crossing of the

Kaplan-Meier curves was typical for the delayed immunological effect of Margetuximab.

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J.A. 93. As the district court correctly noted, the May 15 Press Release did “indeed show[]

an early positive trend.” J.A. 472. Just because Plaintiffs looked to and relied upon research

disparaging the crossing curves of a Kaplan-Meier graph, it does not follow that Defendants’

statements were materially misleading or contained omissions. It is much to the contrary, as

the Kaplan-Meier curves graph undoubtedly portrayed the data that provided the basis for

the positive opinions the company expressed in the May 15 Press Release.

We cannot instruct the district court to proceed with this case due to a difference of

opinion because “[s]ecurities law is simply not a vehicle through which courts will police

disagreements in the cancer research community or the parameters of clinical trials.”

Zagami v. Cellceutix Corp., No. 15 Civ. 7194 (KPF), 2016 WL 3199531, at *13 (S.D.N.Y.

June 8, 2016). Thus, Plaintiffs’ allegation that Defendants’ positive statements were

material misrepresentations of current facts fails because the statements were inactionable

opinions based on accruing data.

Plaintiffs have failed to sufficiently allege that Defendants did not believe their

general positivity and enthusiasm about the results of the interim OS data. Even so, for the

reasons stated above, Defendants’ interpretation of the interim OS data displayed on

Kaplan-Meier curves graph was accurate. This was indicated on the graph itself, which

effectively transferred Defendants’ verbal statements to a visual aid.

The mere fact that Plaintiffs interpreted the data in the graph differently does not

make Defendants’ statements actionable. An opinion “is not necessarily misleading when

an issuer knows, but fails to disclose, some fact cutting the other way.” Omnicare, 575

U.S. at 189. Thus, in considering the facts in the light most favorable to Plaintiffs and

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assuming that Defendants had possession of the Kaplan-Meier curves graph when they

issued the May 15 Press Release, we still cannot conclude that Defendants were obligated

to disclose this visual representation.

Biopharmaceutical clinical trial drug companies constantly find themselves in the

hot seat. Not only does their longevity depend on the creation of ground-breaking,

experimental drugs designed to combat the world’s deadliest illnesses, i.e. Cancer, but also

a significant portion of their success turns on the amount of capital raised to explore these

unchartered waters, making investors an integral part of the equation. Therefore, we cannot

admonish these companies for issuing positive and accurate opinions while “weighing . . .

competing facts,” and must remind investors to “not expect that every fact known to an

issuer supports its opinion statement.” Id. at 190. It would be a great disservice to stifle

biopharmaceutical companies’ pursuit of medical advancements by failing to safeguard

against an inundation of lawsuits alleging securities-law violations.

With that in mind, Plaintiffs have failed to allege that Defendants’ Kaplan-Meier

curves graph did not support its previous vocalization of the interim OS data. As stated,

this contention demonstrates little more than a difference of opinion of the data and does

not present any falsity or lack of reasonable basis. Further, apart from a brief historical

discussion and a self-developed analogy, the Amended Complaint fails to allege why the

Kaplan-Meier curves graph is the preferred method of analysis. Thus, Defendants’ positive

opinions are not material misrepresentations or omissions for which suit can be brought

because “Defendants, like any other company wishing to publicly discuss the results of a

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scientific study, had to make a judgment as to which specific bits of information about the

study and its conclusions to disclose.” Lerner, 273 F. Supp. 3d at 590.

c.

Defendants’ May 15 Press Release statement is further shielded from liability as a

forward-looking statement under the PSLRA’s “Safe Harbor” provision.

Forward-looking statements under the PSLRA include, inter alia, “projections of

future performance, plans and objectives for future operations, and assumptions underlying

statements about future financial, economic or operational performance.” In re Aetna, Inc.

Sec. Litig., 617 F.3d 272, 279 (3d Cir. 2010). Future performance projections that are not

phrased “as guarantees are generally not actionable” under § 10(b) and Rule 10b–5 claims.

Raab v. Gen. Physics Corp., 4 F.3d 286, 290 (4th Cir. 1993) (quoting Krim v. Banctexas

Grp., Inc., 989 F.2d 1435, 1446 (5th Cir. 1993)). Forward-looking statements will be

protected by the Safe Harbor if (1) they are “accompanied by meaningful cautionary

language,” or (2) if “Plaintiffs have failed to plead that the speaker had actual knowledge

of the statements’ falsity at the time the statements were made.” In re DXC Tech. Co. Sec.

Litig., No. 1:18cv01599, 2020 WL 3456129, at *5 (E.D. Va. June 2, 2020) (citing 15 U.S.C.

§ 78u–5(c)(1)); see also Slayton v. Am. Express Co., 604 F.3d 758, 765–66 (2d Cir. 2010).

MacroGenics’ statement “anticipat[ing] the preliminary positive trend [of OS] in

favor of Margetuximab to continue,” J.A. 36, is covered by the projection-of-future-

performance bucket, as this forward-looking statement articulated the Company’s

expectation that the OS data would continue to show longevity in the Margetuximab cohort

over the Trastuzumab cohort. Moreover, Defendants’ statement cannot be interpreted as a

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representation of present facts, which is not covered by the Safe Harbor provision. See In

Re Aetna, 617 F.3d at 279–80. Although Defendant’s statement uses “anticipate” in the

present tense, the verb itself has a forward-looking definition. See Anticipate, Merriam-

Webster Online Dictionary, https://www.merriam-webster.com/dictionary/anticipate (last

viewed Feb. 17, 2023) (defining the term as “to speak or write in knowledge or expectation

of later matter”) (emphasis added). The same analysis applies to the statement’s present

tense use of “continue.” This word, meaning “to remain in existence,” Continue, Merriam-

Webster Online Dictionary, https://www.merriam-webster.com/dictionary/continue (last

viewed Feb. 17, 2023) offers the perception of a state that is currently occurring. But, looking

at the full context of the phrase allows us to infer that the word “continue” is reliant upon the

Defendants’ hope that the current positive results will remain the same as time elapses. This

present tense portion of Defendants’ statement does not prohibit the Safe-Harbor Protection

from applying because it cannot “meaningfully [be] distinguished from” Defendants’ goals:

to reach the OS endpoint with Margetuximab’s superiority over the standard of care drug,

Trastuzumab. Thus, the statement—read in its entirety—is forward-looking.

d.

Finally, Plaintiffs argue that Defendants’ warnings were independently actionable

misstatements that also omitted material information concerning the interim OS data (i.e.,

the Kaplan-Meier curves graph). We reject Plaintiffs’ argument and agree with the district

court’s holding that Defendants’ statements are immune from liability because they

contained ample cautionary statements and Risk Warnings. Here, we consider all oral and

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written statements from the February 6 Call through the May 15 Press Release, including

Defendants’ Offering Documents and the 2018 10-K filing.

As this Court has held, “[a]ll investments carry risk, particularly in a field like

biopharmaceuticals.” Cozzarelli v. Inspire Pharm. Inc., 549 F.3d 618, 627 (4th Cir. 2008).

Investors must, when making reasonable investment decisions, “read[] each statement, . . .

whether of fact or of opinion, in light of all its surrounding text, including hedges, disclaimers,

and apparently conflicting information.” Omnicare, 575 U.S. at 190. However, “[a] generic

warning of a risk will not suffice when disclosed facts on the ground would substantially affect

a reasonable investor’s calculations of probability.” Singer, 883 F.3d at 442.

Each of Defendants’ statements—when read in full and alongside any

accompanying language—included a breadth of cautionary statements and risk warnings.

For example, the Offering Documents (which incorporated the February 6 Press Release),

had their own Risk Factors Section stating: “results and related findings and conclusions

are subject to change following a more comprehensive review of the data related to the

particular study or trial”; “the topline results that we report may differ from future results

of the same studies, or different conclusions or considerations may qualify such results,

once additional data have been received and fully evaluated”; and the topline results “may

result in the final data being materially different from the preliminary data we previously

published. In addition, the achievement of one primary endpoint for a trial does not

guarantee that additional co-primary endpoints or secondary endpoints will be achieved.”

J.A. 64. And, most relevant to Plaintiffs’ allegations, “the achievement by margetuximab

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of its co-primary endpoint for [PFS] events in the SOPHIA trial does not indicate whether

the co-primary endpoint of [OS] will be achieved.” Id.

Risk warnings and cautionary statements were either found in Defendant’s

statements or sufficiently crystalized in follow-up remarks. Take, for instance, the 2018

10-K the company filed on February 26, 2019 with the SEC. There, Defendants cautioned

investors that the OS interim data was “ongoing.” Later that same day, they emphasized

on the February 26 Call that “it [was] too early to evaluate the sequential secondary primary

endpoint to overall survival, as OS events continue[d] to accrue in the study population.”

J.A. 34. Similar cautionary statements are apparent in the February 6 Call, the May 1 Press

Release and 1Q2019 Call, and the May 15 Press Release. Ultimately, Defendants’

statements sufficiently warned investors and the public that the interim OS data was not

final and had not reached (and may never reach) its predetermined endpoint, and that it was

far too early to draw conclusions of Margetuximab’s overall superiority over Trastuzumab.

Because Defendants did not omit the interim OS data (as previously determined)

and their warnings were “extensive, specific and tailored” to the “very complaints”

Plaintiffs raise, they are not actionable under the relevant securities laws. See Paradise

Wire & Cable Defined Benefit Pension Plan v. Weil, 918 F.3d 312, 319 (4th Cir. 2019).

* * *

In sum, Plaintiffs’ Amended Complaint has failed to sufficiently allege any

actionable false, misleading material statements, misrepresentations, or omissions from

Defendants. Given that, Defendants did not have a duty to disclose the interim OS data or

its accompanying Kaplan-Meier curves graph. In so holding, we agree with the district

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court and affirm their dismissal of Plaintiffs’ suit. Because it is sufficient to affirm on these

grounds alone, we decline to address the district court’s finding that Plaintiffs’ Amended

Complaint failed to support a strong inference of scienter. 4

In affirming the district court’s dismissal of Plaintiffs’ § 10(b) and Rule 10b–5

claims, we must also affirm its dismissal of Plaintiffs’ derivative § 20(a) claims. See

Svezzese, 67 F. App’x at 174 (observing that § 20(a) claims “must be based upon a primary

violation of the securities laws”).

C.

Finally, we assess the remainder of Plaintiffs’ claims arising under §§ 11, 12(a), and

15 of the Securities Act and Items 303 and 105 5 of SEC Regulation S-K. 6

The district court determined that these claims failed because Plaintiffs failed to

plead sufficient facts showing that Defendants made materially false or misleading

statements or omissions. On appeal, Plaintiffs devote little attention to challenging the

dismissal of their § 11 and § 12(a) claims. Instead, they narrowly argue that Defendants

4
Plaintiffs briefly argue that the district court could not consider the twenty exhibits
attached to Defendants’ motion to dismiss because the exhibits were not integral to the
Amended Complaint. We decline to address this issue because we need not rely on the
exhibits to affirm the district court’s dismissal of the Plaintiffs’ claims.
5
When the district court issued its decision, Item 503(c) remained active. In an
attempt to modernize, the SEC has since adopted Item 105 to replace Item 503(c)’s risk
factors disclosure requirement.
6
These claims arise from MacroGenics’ second public offering on February 13,
2019. J.A. 57. Plaintiffs brought the §§ 11 and 12(a) claims against all Defendants, and
the § 15 claim solely against Koenig and Karrels.
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violated the Securities Act by “breaching their independent ‘duty to speak’ under Items

303 and 105 of SEC Regulation S-K.” Opening Br. at 53.

Finding Plaintiffs’ arguments unpersuasive, we affirm the district court’s decision

dismissing their Securities Act claims.

1.

Plaintiffs have insufficiently pled Defendants’ alleged violation of §§ 11 and 12(a) of

the Securities Act. The “basic purpose” of the Securities Act of 1933 is “to provide greater

protection to purchasers of registered securities.” Yates, 744 F.3d at 894 (quoting Herman

& MacLean v. Huddleston, 459 U.S. 375, 383 (1983)). “Sections 11 and 12(a)(2) of the

Securities Act apply to registration statements and prospectuses for securities, respectively.

Both provisions prohibit materially false statements or omissions, although proof of scienter

is not required.” Cozzarelli, 549 F.3d at 628 (citing 15 U.S.C. §§ 77k, 77l)).

Section 11 specifically provides that “any person acquiring such security” has a civil

cause of action when a registration statement “contain[s] an untrue statement of a material

fact or omit[s] to state a material fact required to be stated therein or necessary to make the

statements therein not misleading.” 15 U.S.C. § 77k(a). It “creates two ways to hold

issuers liable for the contents of a registration statement—one focusing on what the

statement says and the other on what it leaves out.” Omnicare, Inc., 575 U.S. at 179 (citing

Huddleston, 459 U.S. at 381–82). Section 12(a) asserts that a “person purchasing [a]

security” has a civil claim when a prospectus “includes an untrue statement of a material

fact or omits to state a material fact necessary in order to make the statements . . . not

misleading.” 15 U.S.C. § 77l(a).

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As we have explained, Plaintiffs have not adequately pled a misrepresentation or

omission of material facts concerning Defendants’ Offering Documents. Here, Plaintiffs

reiterated the Offering Documents’ “Risk Factors” section, as well as the documents’

incorporation of the February 6 Press Release. Their Amended Complaint also restated their

belief that these statements were materially untrue, misleading, or were omissions because

Margetuximab was not on track to superiority and the risks Defendants sought to warn about

“had already come to pass.” Opening Br. at 65. However, for the reasons discussed at length

above, Plaintiffs have failed to demonstrate any materially false, misleading representations

or omissions in Defendants’ statements. Because Plaintiffs’ §§ 11 and 12(a)(2) claims are

inextricably intertwined with the alleged misstatements and omissions raised under their

Exchange Act claims, their Securities Act claims cannot prevail.

2.

Plaintiffs’ assertion under Item 303 meets the same fate. 7 The purpose of Item 303

is to “provide material information relevant to an assessment of the financial condition and

results of operations of the registrant.” 17 C.F.R. § 229.303(a). The Item requires

disclosure of “any known trends . . . events or uncertainties that will result in or that are

reasonably likely to result in the registrant’s liquidity increasing or decreasing in any

material way.” 17 C.F.R. § 229.303(b)(1)(i). To assert that Defendants failed to comply

with Item 303’s disclosure provisions, Plaintiffs must allege that (1) “a registrant knew

about [a trend, event, or uncertainty] before an offering”; (2) “the known [trend, event, or

7
The Plaintiffs rightly point out that the district court conflated its Item 303 and 105
analyses. Yet, Plaintiffs’ assertions nevertheless fail under proper consideration.
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uncertainty] is reasonably likely to have material effects on the registrants’ financial

condition or results of operation”; and (3) “the offering documents failed to disclose the

known [trend, event, or uncertainty].” Silverstrand Inv. v. AMAG Pharm., Inc., 707 F.3d

95, 103 (1st Cir. 2013) (internal quotation marks omitted).

The allegations in the Amended Complaint do not plausibly meet this test, failing at

the first step. Although the Amended Complaint informs us that Defendants’ interim OS

data was cut off in October 2018 when SOPHIA accomplished its PFS endpoint, we cannot

infer that Defendants believed SOPHIA’s interim OS data created an overall “trend” that

forecasted “uncertainty” about the OS data’s final results. Actually, it is quite the opposite.

At the time, Defendants did disclose the only trend of which they were aware. They were

excited because—per their analysis—the interim OS data did demonstrate a positive trend

of longevity over Trastuzumab at that time. Therefore, it appears that no “uncertainty”

surrounded the results of the interim OS data.

However, despite their satisfaction with these interim results, Defendants clearly

disclosed in the February 6 Press Release (which was later incorporated into the Offering

Documents) that “uncertainty” remained concerning whether the OS endpoint would ever

reach full fruition. The Press Release stated: “The SOPHIA clinical trial met the trial’s

first primary endpoint of [PFS] in patients treated with . . . margetuximab . . . [f]ollow-up

for determination of the impact of therapy on the sequential second primary endpoint of

[OS] is ongoing.” J.A. 62 (emphasis added). Thus, Plaintiffs’ do not prevail under their

Item 303 claim.

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3.

Plaintiffs’ Item 105 claim reaches the same dead end. Under Item 105, “a discussion

of the material factors that make an investment in the registrant or offering speculative or

risky,” when appropriate, should be provided under a section entitled “Risk Factors.” 17

C.F.R. § 229.105(a). It also provides that the “discussion must be organized” to discuss

each risk factor individually, with a concise explanation indicating “how each risk affects

the registrant or the securities being offered.” 17 C.F.R. § 229.105(a)–(b). Since the Risk

Factors should describe how such risks would impact the offered securities, “generic or

boilerplate discussions” will not inform investors “how the risks may affect their

investment.” Silverstrand, 707 F.3d at 103. To prevail under an Item 105 claim, a

plaintiff’s complaint must allege that, at the time of the offering in question, the registrant

knew “(1) a risk factor existed; (2) the risk factor could adversely effect [sic] the

registrant’s present or future business expectations; and (3) the offering documents failed

to disclose the risk factor.” Id. For the sake of efficiency, we focus only on the third step.

Looking at the Amended Complaint, it is evident that the Offering Documents

clearly asserted the risk factors associated with the SOPHIA trial, particularly the OS data

and its related secondary endpoint. As the district court properly held, Defendants’ Risk

Factors were appropriately “thorough” and went beyond being “generic or boilerplate.”

J.A. 479. In its Offering Documents’ Risk Factors Section, Defendants specifically stated:

• “we recently announced top line data for the SOPHIA trial . . . We make
assumptions, estimations, calculations and conclusions as part of our
analyses of data, and we may not have received or had the opportunity to
fully and carefully evaluate all data,” J.A. 64 (emphasis added);

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• “results and related findings and conclusions are subject to change following
a more comprehensive review of the data,” also, “the achievement of one
primary endpoint for a trial does not guarantee that . . . secondary endpoints
will be achieved,” for instance, “the achievement by margetuximab of its co-
primary endpoint for [PFS] events in the SOPHIA trial does not indicate
whether the co-primary endpoint of [OS] will be achieved.” Id. (emphasis
added); and

• Defendants also transparently referred to the volatility of its stock price,
which they believed was determined by the “results and timing of” their
clinical trials. J.A. 65.

Plaintiffs’ allegation that these warnings are generic enough to apply to any

pharmaceutical company is misplaced. Defendants’ risk warnings are explicit and directly

relevant to Margetuximab’s SOPHIA trial. We cannot infer otherwise. 8

4.

Because Plaintiffs’ §§ 11 and 12(a)(2) claims fail, we also affirm the dismissal of its

§ 15 claim. Much like the Exchange Act’s § 20(a), § 15 of the Securities Act is a derivative

claim that depends on parent statutes (§§ 11 and 12(a)(2)), and § 15 claims are “properly

dismissed if the parent statutes fail to state a claim upon which relief may be granted.”

Greenhouse, 392 F.3d at 656 n.7. Because Plaintiffs have failed to plead a primary violation

of the Securities Act, they have consequently failed to plead a § 15 violation.

8
In passing, Plaintiffs further assert that Defendants’ risk warnings were insufficient
because their cautionary language could not combat events that had already occurred. This
argument is unavailing. We cannot reasonably infer from the Amended Complaint that, at
the time of the February 2019 offering, adverse events were in swing. Rather, Defendants
were pleased with how the interim OS data sat. It was not until 2021, two years after the
offering in question, that the failure to achieve the final OS endpoint could be assessed,
after the pre-specified number of deaths had occurred. See J.A. 86, 471 n.12.
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IV.

Plaintiffs ask us, in the alternative, to grant leave to amend “any matters . . . pled

with insufficient particularity.” Opening Br. at 56. Much like we witnessed in Cozzarelli,

Plaintiffs failed to file a motion for leave to amend before the district court, only making

their request in a footnote in response to Defendants’ motion to dismiss, and did not present

the district court with a proposed amended complaint. See Cozzarelli, 549 F.3d at 630; see

also Willner v. Dimon, 849 F.3d 93, 114 (4th Cir. 2017) (finding no abuse of discretion in

district court’s denial of leave to amend where Plaintiff made no formal move and failed

to file any indication of the specific amendments sought). Because Plaintiffs have not met

the requirements for filing a request for leave to amend under Federal Rules of Civil

Procedure 7(b) and 15(a), the district court did not abuse its discretion in denying their

request.

For the reasons provided herein, the district court’s decision to dismiss Plaintiffs’

Amended Complaint is

AFFIRMED.

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