Case 2:20-cv-03754-JMV-JBC Document 18 Filed 03/22/21 Page 1 of 23 PageID: 1498
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`Not for Publication
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`UNITED STATES DISTRICT COURT
`DISTRICT OF NEW JERSEY
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`Civil Action No. 20-3754
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`OPINION
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`SCHWAB CAPITAL TRUST on behalf of its
`series SCHWAB TOTAL STOCK MARKET
`INDEX FUND, SCHWAB HEALTH CARE
`FUND, SCHWAB DIVIDEND EQUITY FUND,
`SCHWAB LARGE-CAP GROWTH FUND,
`SCHWAB S&P 500 INDEX FUND, SCHWAB
`CORE EQUITY FUND, SCHWAB HEDGED
`EQUITY FUND, SCHWAB U.S. LARGE-CAP
`GROWTH INDEX FUND, and SCHWAB
`FUNDAMENTAL US LARGE COMPANY
`INDEX FUND; et al.;
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`Plaintiffs;
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`v.
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`CELGENE CORPORATION; et al.;
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`Defendants.
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`John Michael Vazquez, U.S.D.J.
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`Plaintiffs filed this matter after deciding not to participate as a class member in In re
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`Celgene Corporation Securities Litigation, Civil Action No. 18-4772 (the “Class Action”), a class
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`action presently pending before this Court. Plaintiffs in both matters allege that Celgene
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`Corporation (“Celgene”) and several of its officers and/or employees engaged in fraud under
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`Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 (the “Exchange Act”), 15
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`U.S.C. § 78a et seq., as to public statements relating to two drugs in Celgene’s new product
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`pipeline. Currently pending before the Court is Defendants’ motion to dismiss Plaintiffs’
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`Complaint for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6), as well
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`as the Private Securities Litigation Reform Act of 1995 (“PSLRA”), 15 U.S.C. § 78u et seq. D.E.
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`6. The Court reviewed the parties’ submissions in support and in opposition,1 and decided the
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`motion without oral argument pursuant to Fed. R. Civ. P. 78(b) and L. Civ. R. 78.1(b). For the
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`reasons stated below, Defendants’ motion is GRANTED in part and DENIED in part.
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`I.
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`INTRODUCTION
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`A. Background
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`Plaintiffs’ allegations here mirror those pled in the Class Action. In fact, the vast majority
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`of Plaintiffs’ Complaint is copied from the operative Complaint in the Class Action (the “Class
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`Action Complaint”). As a result, the Court incorporates the detailed factual background from its
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`December 19, 2019 Opinion that granted in part and denied in part the motion to dismiss the Class
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`Action Complaint, D.E. 75, into the present Opinion.
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`Briefly, Celgene manufactures and sells the multiple myeloma drug Revlimid, which
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`between 2014 and 2016, accounted for more than sixty percent of Celgene’s total net sales.2
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`Compl. ¶ 1. The Revlimid patent expires in 2022. Id. Plaintiffs allege that Defendants3 made
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`1 Defendants’ moving brief will be referred to as “Defs. Br.,” D.E. 6-1; Plaintiffs’ opposition will
`be referred to as “Plfs. Opp,” D.E. 10; and Defendants’ reply will be referred to as “Defs. Reply,”
`D.E. 17.
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` 2
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` The facts are derived from Plaintiffs’ Complaint. D.E. 1. When reviewing a Rule 12(b)(6)
`motion to dismiss, the Court accepts as true all well-pleaded facts in the complaint. Fowler v.
`UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). Additionally, a district court may consider
`“exhibits attached to the complaint and matters of public record,” as well as “an undisputedly
`authentic document that a defendant attaches as an exhibit to a motion to dismiss if the plaintiff’s
`claims are based on the document.” Pension Ben. Guar. Corp. v. White Consol. Indus., Inc., 998
`F.2d 1192, 1196 (3d Cir. 1993).
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` 3
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` The defendants in this matter are Celgene; Scott A. Smith, Celgene’s President and Chief
`Operating Officer from April 1, 2017 until April 2, 2018, Compl. ¶ 52; Terrie Curran, President of
`the Global Inflammatory & Immunology (“I&I”) franchise during the time frame at issue, id. ¶ 53;
`and Philippe Martin, Managing Director of Receptos and Celgene’s Corporate Vice President
`during the relevant time frame, id. ¶ 54.
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`2
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`material misrepresentations and omissions about two drugs, Otezla and Ozanimod, which Celgene
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`touted as products to lessen the anticipated revenue drop following the Revlimid patent expiration.
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`Otezla is an oral medication used to treat psoriatic arthritis and psoriasis that was approved
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`by the FDA in March 2014. Id. ¶¶ 95-96. In a January 12, 2015 press release, Celgene set out its
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`five-year strategic growth plan, in which Celgene maintained that “Otezla net product sales would
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`grow to between $1.5 billion and $2 billion in 2017.” Id. ¶ 97. Throughout 2015 and 2016,
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`Defendants publicly represented that Celgene was on-track to meet the 2017 sales projection. Id.
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`¶¶ 120-23, 131. Internally, however, Defendants purportedly received explicit warnings that the
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`2017 projection was unattainable. See, e.g., id. ¶¶ 123-28, 146. On October 26, 2017, Celgene
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`“stunned the market by announcing that, in light of the dismal Otezla sales numbers, the Company
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`had slashed the 2017 guidance by more than $250 million” and lowered the 2020 I&I guidance by
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`over $1 billion. Id. ¶ 152. After this announcement, the price of Celgene common stock declined
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`more than 16%. Id. ¶ 158.
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`Ozanimod is the second drug at issue in this matter. On July 14, 2015, Celgene purchased
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`Receptos, a company that initially developed Ozanimod, for $7.2 billion. Id. ¶ 159-60. Clinical
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`studies indicated that Ozanimod could be useful in treating ulcerative colitis and relapsing multiple
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`sclerosis. In announcing the acquisition, Celgene “projected annual Ozanimod sales of up to $6
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`billion.” Id. ¶ 160. Ozanimod was not approved by the U.S. Food and Drug Administration
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`(“FDA”) when Celgene acquired Receptos, but Celgene anticipated filing a New Drug Application
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`(“NDA”) for Ozanimod with the FDA in 2017. Id. ¶¶ 164, 69.
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`Through a Phase I trial that Celgene started in October 2016, Celgene identified a
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`metabolite named CC112273 (the “Metabolite”), “which triggered the need for the additional
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`testing described in the FDA guidance,” before FDA approval. Id. ¶ 186. Despite the need for
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`3
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`additional testing after discovery of the Metabolite, Defendants continued to represent that Celgene
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`was on track to submit the NDA before the end of 2017 and failed to disclose information about
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`the Metabolite. See, e.g., id. ¶¶ 190, 195-96, 201. Even after the FDA expressly informed Celgene
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`that it needed to include the Metabolite testing results with its NDA submission, Celgene continued
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`to move forward with its plan to submit the NDA in December 2017 without the Metabolite study
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`results. Id. ¶¶ 210-12.
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`As planned, Celgene submitted the NDA in December 2017. Id. ¶ 213. But on February
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`27, 2018, Celgene disclosed that it received a refuse to file (“RTF”) letter from the FDA in
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`response to its NDA submission. An RFT letter indicates that the FDA “identifie[d] clear and
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`obvious deficiencies” in the NDA. Id. ¶¶ 217-18. As a result of the RFT announcement, Celgene’s
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`common stock fell from $95.78 per share on February 27, 2018 to $87.12 per share on February
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`28, 2018. Id. ¶ 224. Then on April 29, 2017, Plaintiffs allege that the market learned through a
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`Morgan Stanley report that additional testing on the Metabolite was required, which could delay
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`the refiling of the Ozanimod NDA by up to three years. Id. ¶ 226. Celgene’s common stock fell
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`again, from $95.78 per share on April 27, 2018 to $87.10 per share on April 30, 2018. Id.
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`B. Procedural History
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`Plaintiff the City of Warren General Employees’ Retirement System filed the initial
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`complaint in the Class Action on March 29, 2018. Civ. No. 18-4772, D.E. 1 (D.N.J. Mar. 29,
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`2018). On May 3, 2018, Plaintiff Charles H. Witchcoff filed a class action complaint asserting
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`similar securities fraud claims against Celgene and certain Celgene executives. By May 29, 2018,
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`ten parties had filed motions to consolidate the cases and appoint a lead plaintiff. On September
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`26, 2018, this Court consolidated the two cases; appointed AMF Pensionsforsakring AB (“AMF”)
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`as the lead plaintiff; and appointed class counsel. Civ. No. 18-4772, D.E. 36 (D.N.J. Sept. 26,
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`4
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`2018). AMF filed the Class Action Complaint on February 27, 2019, alleging violations of Section
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`10(b) and Rule 10b-5, and Section 20(a) of the Exchange Act. Civ. No. 18-4772, D.E. 57 (D.N.J.
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`Feb. 27, 2019).
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`Defendants filed a motion on February 8, 2019 seeking to dismiss the Class Action
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`Complaint, in its entirety, pursuant to Rule 12(b)(6) and the PSLRA. Civ. No. 18-4772, D.E. 52
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`(D.N.J. Feb. 8, 2019). On December 19, 2019, the Court granted in part and denied in part
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`Defendants’ motion to dismiss (the “MTD Opinion”). The Court dismissed AMF’s Section 20(a)
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`claim and narrowed the Section 10(b) and Rule 10b-5 claim, as the Court determined that many of
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`the alleged misrepresentations and omissions were not actionable. Civ. No. 18-4772, D.E. 75, 76
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`(D.N.J. Dec. 19, 2019).
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`Shortly after, on May 7, 2020, Plaintiffs filed this action. D.E. 1. Plaintiffs would have
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`been class members in the Class Action. Plaintiffs’ Complaint asserts claims against four
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`Defendants from the Class Action, pursuant to Section 10(b) and Rule 10b-5 of the Exchange Act,
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`based on alleged misrepresentations regarding Otezla and Ozanimod. With respect to Otezla, the
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`alleged misstatements involve Celgene’s ability to meet its 2017 sales projections. All but one of
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`the alleged Otezla misrepresentations are asserted in the Class Action Complaint. As for
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`Ozanimod, Plaintiffs allege that Defendants’ statements about the plan to submit an NDA for
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`Ozanimod by the end of 2017 were false or misleading because they failed to disclose Celgene’s
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`discovery of the Metabolite and need for additional Phase I testing. All the alleged misstatements
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`involving Ozanimod in Plaintiffs’ Complaint also appear in the Class Action Complaint.
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`Defendants responded with the instant motion to dismiss. D.E. 6. Defendants seek to
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`dismiss the Complaint in its entirety and largely rely on the MTD Opinion as the basis for
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`dismissal. Because this matter is virtually identical to the Class Action, Defendants are correct
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`that the MTD Opinion provides a guide for this Opinion. Accordingly, the Court references and
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`incorporates portions of the MTD Opinion into its analysis below. In addition, on November 29,
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`2020, this Court granted AMF’s motion for class certification in the Class Action (the “Class Cert.
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`Opinion”). D.E. 114, 115, Civ. No. 18-4772 (D.N.J. Nov. 5, 2020). Certain issues addressed in
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`the Class Action Opinion also guide the Court’s analysis here.
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`II.
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`LEGAL STANDARD
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`A. Rule 12(b)(6)
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`Defendants seek to dismiss the Complaint pursuant to Rule 12(b)(6) and the PSLRA. Defs.
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`Br. at 9. Rule 12(b)(6) permits a defendant to move to dismiss a count for “failure to state a claim
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`upon which relief can be granted[.]” To withstand a motion to dismiss under Rule 12(b)(6), the
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`plaintiffs must allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl.
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`Corp. v. Twombly, 550 U.S. 544, 570 (2007). A complaint is plausible on its face when there is
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`enough factual content “that allows the court to draw the reasonable inference that the defendant
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`is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Although the
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`plausibility standard “does not impose a probability requirement, it does require a pleading to show
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`more than a sheer possibility that a defendant has acted unlawfully.” Connelly v. Lane Const.
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`Corp., 809 F.3d 780, 786 (3d Cir. 2016) (internal quotation marks and citations omitted). As a
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`result, the plaintiffs must “allege sufficient facts to raise a reasonable expectation that discovery
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`will uncover proof of [their] claims.” Id. at 789.
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`In evaluating the sufficiency of a complaint, a district court must accept all factual
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`allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiffs.
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`Phillips v. County of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008). A court, however, is “not
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`compelled to accept unwarranted inferences, unsupported conclusions or legal conclusions
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`disguised as factual allegations.” Baraka v. McGreevey, 481 F.3d 187, 211 (3d Cir. 2007). If,
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`after viewing the allegations in the complaint most favorable to the plaintiffs, it appears that no
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`relief could be granted under any set of facts consistent with the allegations, a court may dismiss
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`the complaint for failure to state a claim. DeFazio v. Leading Edge Recovery Sols., LLC, No. 10-
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`2945, 2010 WL 5146765, at *1 (D.N.J. Dec. 13, 2010).
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`B. PSLRA
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`The PSLRA imposes further pleading requirements. “The PSLRA established heightened
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`pleading requirements for a plaintiff to meet in order to plead a cause of action successfully in
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`class actions alleging securities fraud.” Rahman v. Kid Brands, Inc., 736 F.3d 237, 241 (3d Cir.
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`2013). The PSLRA “requires that a complaint state with particularity both the facts constituting
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`the alleged violation, and the facts evidencing scienter, i.e., the defendant's intention to deceive,
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`manipulate, or defraud.” Id. at 241-42 (quoting Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551
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`U.S. 308, 313 (2007)) (internal quotations omitted). In other words, the plaintiffs bringing a claim
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`involving an allegedly false or misleading statement must “(1) ‘specify each statement alleged to
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`have been misleading [and] the reason or reasons why the statement is misleading,’ 15 U.S.C. §
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`78u-4(b)(1), and (2) ‘state with particularity facts giving rise to a strong inference that the
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`defendant acted with the required state of mind,’ § 78u-4(b)(2).” Rahman, 736 F.3d at 242
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`(quoting Tellabs, 551 U.S. at 321).
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`Both provisions of the PSLRA pleading standard require that facts be pled “with
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`particularity,” echoing the requirement set forth in Federal Rule of Civil Procedure 9(b).4 Id. at
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`4 Rule 9(b) provides that when “alleging fraud or mistake, a party must state with particularity the
`circumstances constituting fraud or mistake . . . [m]alice, intent, knowledge, and other conditions
`of a person’s mind may be alleged generally.” Fed. R. Civ. P. 9(b). Defendants do not separately
`move pursuant to Rule 9(b). As a result, the rule and its requirements are not discussed herein.
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`241 n.3. The standard “requires plaintiffs to plead the who, what, when, where and how: the first
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`paragraph of any newspaper story.” Institutional Inv'rs Grp. v. Avaya, Inc., 564 F.3d 242, 253 (3d
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`Cir. 2009). Section 78u-4(b)(1) also adds the requirement that where “an allegation regarding [a
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`defendant’s] statement or omission is made on information or belief,” the plaintiffs must “state
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`with particularity all facts on which that belief is formed”; that is, they must describe the sources
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`of information with particularity, including “the who, what, when, where and how of the sources,
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`as well as the who, what, when, where, and how of the information those sources convey.” Id.;
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`see 15 U.S.C. § 78u-4(b)(1).
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`As to the second element, under the PSLRA, the court must evaluate whether all the facts
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`in the complaint as alleged, taken collectively, give rise to a “strong inference of scienter” – not
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`whether any individual allegation viewed in isolation meets that standard. Tellabs, 551 U.S. at
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`323. In determining whether the pleaded facts give rise to a strong inference of scienter, the court
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`must “take into account plausible opposing inferences.” Id. This involves a comparative inquiry
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`that evaluates how likely one conclusion is as compared to others, in light of the pleaded facts. Id.
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`Thus, the court must consider plausible, nonculpable explanations for the defendant’s conduct as
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`well as inferences favoring the plaintiffs. Id. at 324. Although the inference that the defendant
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`acted with scienter need not be irrefutable, the inference must be more than merely “reasonable”
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`or “permissible.” Id. A complaint will survive only if a reasonable person would “deem the
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`inference of scienter cogent and at least as compelling as any opposing inference one could draw
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`from the facts alleged.” Id.
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`III. ANALYSIS
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`As discussed, Plaintiffs’ one-count Complaint alleges that Defendants violated Section
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`10(b) and Rule 10b-5. To state a securities fraud claim pursuant to Section 10(b) and Rule 10b-5,
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`the plaintiffs “must allege (1) a material misrepresentation or omission, (2) scienter, (3) a
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`connection between the misrepresentation or omission and the purchase or sale of a security, (4)
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`reliance upon the misrepresentation or omission, (5) economic loss, and (6) loss causation.” City
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`of Edinburgh Council v. Pfizer, Inc., 754 F.3d 159, 167 (3d Cir. 2014). Defendants’ arguments in
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`their motion to dismiss focus solely on the first and second elements.
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`As to the first element, plaintiffs must “identify a false representation of material fact or
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`omission that makes a disclosed statement materially misleading.” In re NAHC, Inc. Sec. Litig.,
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`306 F.3d 1314, 1330 (3d Cir. 2002) (citing In re Burlington Coat Factory Sec. Litig., 114 F.3d
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`1410, 1419 (3d Cir. 1997)). “[A] fact or omission is material only if ‘there is a substantial
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`likelihood that it would have been viewed by the reasonable investor as having significantly altered
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`the “total mix” of information’ available to the investor.” Id. (quoting Basic Inc. v. Levinson, 485
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`U.S. 224, 231-232 (1988)). In other words, courts must “examine statements in the full context of
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`the documents which they are a part” and not engage in a “selective reading” of the statements.
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`Pfizer, Inc., 754 F.3d at 168-69 (citing Burlington Coat Factory, 114 F.3d at 1426; Tellabs, 551
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`U.S. at 322).
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`Again, except for one new misrepresentation regarding Otezla, Plaintiffs pull their
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`allegations from the Class Action Complaint. To the extent Plaintiffs’ allegations are premised on
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`misrepresentations that the Court previously determined were actionable in the Class Action,
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`Plaintiffs’ claims are also actionable here. In fact, Defendants concede that certain statements of
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`the Complaint are actionable based on the MTD Opinion. See Defs. Br. at 10 (stating that one
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`Otezla statement survived the MTD Opinion), id. at 16 (recognizing that AMF pled scienter for
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`certain statements involving Ozanimod). The parties, however, appear to have a different
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`understanding of the scope of the MTD Opinion. Accordingly, the Court discusses specific alleged
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`misrepresentations below, including the new Otezla allegation. The Court also addresses
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`Defendants’ scienter arguments.
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`A. Otezla
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`1. September 12, 2016 Statement
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`In the MTD Opinion, the Court determined that Smith’s statement on September 12, 2016
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`(pled at paragraph 397 of the Class Action Complain) constitutes puffery. MTD Opinion at 34.
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`Now, Plaintiffs argue that not all of Smith’s September 12 statement should be construed as
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`puffery. Plfs. Opp. at 7.
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` In response to an analyst’s question about Celgene’s 2020 financial guidance, Smith
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`stated as follows:
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`Otezla is moving along very nicely at this point in time. Looks like
`$1 billion in sales this year. Again, launches all over the world next
`year. I feel really great about where we are going and the numbers
`both in 2017 and 2020 that we put out there . . . . But we feel great
`about all the guidance it is been giving, the trajectory, and I am just
`excited to get it launched geographically, and there is lots of
`different places we can take the molecule. So we are very, very
`excited about where we are with OTEZLA right now.
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`Compl. ¶ 237.
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`In the MTD Opinion, the Court determined that Smith’s statement amounted to puffery
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`because of the words “I feel really great” and “I am just excited.” MTD Opinion at 34. The Court
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`also noted that Smith did not discuss detailed financial numbers when responding to the question.
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`Id. Plaintiffs parse this phrase and argue that while some aspects of Smith’s answer may be
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`puffery, the statement that “Otezla is moving along nicely at this point in time” is actionable.
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`Plaintiffs contend that this statement cannot be puffery because Smith was not describing his
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`feelings. Plfs. Opp. at 7. Plaintiffs, however, provide no legal support for their assertion that
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`puffery must describe feelings.
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`As discussed in the MTD Opinion, puffery amounts to “vague and non-specific expressions
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`of corporate optimism on which reasonable investors would not have relied.” In re Aetna, Inc.
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`Sec. Litig., 617 F.3d 272, 284 (3d Cir. 2010); see also Pfizer, Inc., 754 F.3d at 172 (“Moreover,
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`the adjective ‘spectacular’ is the kind of vague and general statement of optimism’ that ‘constitutes
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`no more than puffery and is understood by reasonable investors as such.’” (quoting In re Advanta
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`Corp. Sec. Litig., 180 F.3d 525, 538 (3d Cir. 1999))). The statement “moving along very nicely at
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`this time” is a vague general statement reflecting optimism with Otezla’s progress. Moreover,
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`courts must not engage in a “selective reading” of statements. Pfizer, Inc., 754 F.3d at 168-69
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`(citing Burlington Coat Factory, 114 F.3d at 1426; Tellabs, 551 U.S. at 322). When read in
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`combination with Smith’s statements that “I feel great” and “I am just excited,” a reasonable
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`investor would construe the entire answer pled at paragraph 237 as puffery. Accordingly,
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`Defendants’ motion to dismiss is granted on these grounds.
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`2. October 27, 2016 Statement
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`Next, Plaintiffs contend that the Court incorrectly considered cautionary language to
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`determine that Smith’s October 27, 2016 statement was protected by the PLSRA Safe Harbor.5
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`Plfs. Opp. at 9-12. The PSLRA Safe Harbor “immunizes from liability any forward-looking
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`statement, provided that: the statement is identified as such and accompanied by meaningful
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`cautionary language; or is immaterial; or the plaintiff fails to show the statement was made with
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`actual knowledge of its falsehood.” Avaya, 564 F.3d at 254 (citing 15 U.S.C. § 78u-5(c)). To fall
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`within the Safe Harbor, Defendants must have included “meaningful cautionary language” that is
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`“extensive and specific.” Id. at 254, 256 (internal quotations omitted). “To suffice, the cautionary
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`5 The October 27, 2016 statement was pled in the Class Action Complaint at paragraph 398 and
`appears in paragraph 239 of Plaintiffs’ Complaint.
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`statements must be substantive and tailored to the specific future projections, estimates or opinions
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`in the prospectus which the plaintiffs challenge.” Id. (quoting GSC Partners CDO Fund v.
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`Washington, 368 F.3d 228, 243 n.3 (3d Cir. 2004)). Finally, “[c]autionary statements disclosed in
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`SEC filings may be incorporated by reference; they ‘do not have to be in the same document as
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`the forward-looking statements.’” In re Aetna, 617 F.3d at 282 (quoting In re Merck & Co. Sec.
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`Litig., 432 F.3d 261, 273 n.11 (3d Cir. 2005)). Oral forward-looking statements must also be
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`accompanied with a cautionary statement or appropriate reference to a written cautionary
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`statement. In re Anadigics, Inc., Sec. Litig., No. 08-5572, 2011 WL 4594845, at *18 (D.N.J. Sept.
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`30, 2011).
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`Smith made the statement at issue on October 27, 2016 during a conference call with
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`investors. Compl. ¶ 239. In the Class Action, Defendants provided the Court with the PowerPoint
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`presentation for the October 27, 2016 conference call. The deck included a slide that had
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`meaningful cautionary language. See Lustberg Class Action Decl., Ex. 37, D.E. 52-39, Civ. No.
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`18-4772 (D.N.J. Feb. 8, 2019). Defendants, however, did not provide a transcript of the October
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`27, 2016 call. Plaintiffs contend that this deck was not referenced in the Class Action Complaint
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`and should not have been considered. Plaintiffs continue that the Court, therefore, erred in
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`concluding that the statement was protected by the Safe Harbor due to the cautionary language in
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`the deck. Plfs. Opp. at 9. Plaintiffs finally argue that because Defendants cannot establish that
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`there was meaningful cautionary language through the Complaint alone, Smith’s October 27, 2016
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`statement is not protected by the Safe Harbor. Id.
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`Defendants, however, provide a transcript of the call as an exhibit to their reply brief. See
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`Lustberg Decl., Ex. 1. In deciding a motion to dismiss, a court ordinarily considers only the factual
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`allegations, exhibits attached to the complaint, and matters of public record. A court may also rely
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`Case 2:20-cv-03754-JMV-JBC Document 18 Filed 03/22/21 Page 13 of 23 PageID: 1510
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`on “a document integral to or explicitly relied upon in the complaint.” U.S. Express Lines Ltd. v.
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`Higgins, 281 F.3d 383, 388 (3d Cir. 2002) (emphasis in original) (citation omitted). A document
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`is integral if a “claim would not exist but-for the existence of the document.” Dix v. Total
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`Petrochemicals USA, Inc., No. 10-3196, 2011 WL 2474215, at *1 (D.N.J. June 20, 2011). Because
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`Plaintiffs rely on a statement from the October 27, 2016 call to establish an actionable
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`misstatement, the Court can consider the full transcript in deciding this motion, as it is integral to
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`the Plaintiffs’ pleadings.6
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`The transcript shows that at the beginning of the call, non-party Patrick E. Flanigan
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`explained that “during today’s call we will be making forward-looking statements regarding our
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`financial outlook . . . and product development plans.” Lustberg Decl., Ex. 1 at 2. He further
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`explained that “[t]hese statements are subject to risks and uncertainties” and referenced the
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`cautionary statement “in our most recent 10-K on file with the SEC.” Id. The Court already
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`addressed the cautionary language contained in Celgene’s 10-Ks and concluded that it constituted
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`meaningful cautionary language under the Safe Harbor. Accordingly, the Court incorporates this
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`analysis into this Opinion to conclude that there was meaningful cautionary language for Smith’s
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`October 27 statement. See MTD Opinion at 31-32. Thus, the Court again concludes that this
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`statement is protected by the Safe Harbor. Defendants’ motion, therefore, is granted on these
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`grounds.
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`6 The fact that the transcript was submitted with Defendants’ reply brief is immaterial. See, e.g.,
`Rao v. Anderson Ludgate Consulting, LLC, No. 15-3126, 2017 WL 684517, at *2 n.3 (D.N.J. Feb.
`21, 2017) (relying on document that was provided as an exhibit to a reply brief in deciding a motion
`to dismiss).
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`3. April 27, 2017 Statements
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`In the MTD Opinion, the Court determined that Curran’s statement on April 27, 2017, pled
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`at paragraph 409 of the Class Action Complaint, was actionable. MTD Opinion at 34, 42.
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`Plaintiffs here also allege that this statement is a misrepresentation, see Compl. ¶ 247, and
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`Defendants do not seek to dismiss this statement through the instant motion to dismiss. Plaintiffs
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`argue that additional statements made April 27, 2017 statements are also actionable.7
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`Plaintiffs contend that a statement in Celgene’s Form 8-K, which is attributed to Mark J.
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`Alles, is actionable. Alles stated that Celgene’s 2017 sales guidance for Otezla was unchanged
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`and that “[o]ur significant first quarter operational, financial and strategic progress strengthen our
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`confidence and outlook[.]”8 Id. ¶¶ 246, 247. During the same call, Smith stated that “[t]he
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`momentum we see in Q2 across a number of fronts gives us confidence that we will deliver on our
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`full year 2017 guidance.” Id. ¶ 248. In the MTD Opinion, the Court concluded that the
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`“unchanged” statements and Smith’s statement were forward looking and fell into the Safe Harbor.
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`MTD Opinion at 32. Next, the Court determined that the remainder of Alles’ statement was an
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`accurate discussion of Celgene’s first quarter sales. Accordingly, this aspect of the statement did
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`not constitute a misrepresentation or omission. Id. at 33. Plaintiffs appear to miss the Court’s
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`specific references to each of these statements in the MTD Opinion. As a result, the Court
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`incorporates its analysis from the MTD Opinion and concludes that none of the April 27, 2017
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`statements are actionable misrepresentations or omissions. Defendants’ motion is also granted on
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`these grounds.
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`7 These statements are pled at paragraphs 405, 407, and 408 of the Class Action Complaint.
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` The Court also notes that despite arguing that Alles made an actionable misstatement, he is not
`named as a Defendant in this matter.
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`4. “On Track Statements”
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`Next, Plaintiffs maintain that statements that Celgene was “on-track” to meet its 2017
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`Otezla target are not forward looking.9 Plfs. Opp. at 14-15. Plaintiffs provide no legal analysis
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`for this argument, which the Court addressed at length in the MTD Opinion. MTD Opinion at 29-
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`32. Therefore, because Plaintiffs fail to identify any reason for the Court to change its previous
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`analysis and conclusion, the Court incorporates this aspect of the MTD Opinion into the instant
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`Opinion. Defendants’ motion is also granted on these grounds.
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`5. September 12, 2016 Statement
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`Plaintiffs’ new allegation with respect to Otezla involves a statement made by Smith during
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`a September 12, 2016 conference call. Specifically, in response to a question about Otezla pricing,
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`Smith stated that “[w]e believe that we should increase price and we’ve got the value and the data
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`to support increasing utilization, and [an] increasing value.” Compl. ¶ 238. Plaintiffs argue that
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`this statement is a misrepresentation because Smith concealed that Celgene was pursuing a pay-
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`to-play strategy. Plfs. Opp. at 15-16. Defendants maintain that this is a non-actionable opinion.
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`Defs. Br. at 8. The Court agrees with Defendants. In arguing that Smith’s comment is not an
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`opinion, Plaintiffs focus on the second half of the statement, beginning with the “we’ve got the
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`value and the data to support increasing utilization” and essentially ignore the first half of the
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`sentence. Plfs. Opp. at 16. But reading the comment as a whole, the second half of Smith’s
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`representation is an explanation of why Smith “believes” that the price should increase.
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`Accordingly, the court views the comment, as a whole, to be an opinion.
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`9 These statements are pled at paragraphs 241-43 and 251-52 of the Complaint, and paragraphs
`400-02 and 412-13 of the Class Action Complaint.
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`“Opinions are only actionable under the securities laws if they are not honestly believed
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`and lack a reasonable basis.” Pfizer, Inc., 754 F.3d at 170.10 Here, Plaintiffs plead sufficient facts
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`to suggest that Smith’s opinion lacked a reasonable basis and that he did not honestly believe that
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`a price increase was appropriate. Namely, Plaintiffs allege that beginning in 2014, Smith was
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`repeatedly warned that the pay-to-play strategy was flawed but Smith said that he would do
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`“whatever it takes to get the business.” Compl. ¶ 103. Moreover, the I&I Executive Committee
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`(“IIEC”), of which Smith was a member, was informed about the “lack of growth in Otezla sales
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`and its fundamental causes . . . by no later than the third quarter of 2016.” Id. ¶