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`Case 3:17-cv-08945-MAS-DEA Document 79 Filed 02/26/21 Page 1 of 7 PageID: 3557
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`UNITED STATES DISTRICT COURT
`
`DISTRICT OF NEW JERSEY
`
`CHAMBERS or
`MICHAEL A. SHIPP
`UNITED STATES DISTRICT JUDGE
`
`NOT FOR PUBLICATION
`
`cmnxsos s FISHER FEDERAL
`BUILDING a LS. cm RTIIOUSE
`402 EAST STATE STREET
`TRENTON. NJ. 08608
`6(19-989-2009
`
`February 26, 202|
`
`LETTER OPINION
`
`VIA CMfECF
`
`All counsel of record
`
`Re:
`
`Randy Smith v. Amares Pharma, Inc, et (1].,
`Civil Action No. l7-8945 (MAS) {DEA}
`
`Dear Counsel:
`
`This matter comes before the Court upon Defendants Antares Pharma, lnc.'s ("Antares" or
`the “Company”), Robert Apple, Fred Powell, and Leonard Jacob’s (collectively, “Defendants")
`Motion to Dismiss the Consolidated Third Amended Class Action Complaint. (ECF No. 72.) Lead
`Plaintiff Serghei Lungu ("Plaintiff") opposed (ECF No. 76) and Defendants replied (EC F No. 78).
`The Court has carefully considered the parties’ submissions and decides the matter without oral
`argument pursuant to Local Civil Rule 78.]. For the reasons set forth herein, Defendants' Motion
`is granted.
`
`Background
`
`The parties are familiar with the factual and procedural history of this matter, and therefore
`the Court only recites those facts necessary to resolve the instant motion. Plaintiff seeks to
`represent a class of persons who purchased Antares common stock between December 21, 2016
`and October l2, 2017, both dates inclusive (the “Class Period"). (Cons. Third Am. Class Action
`Compl. ("TAC") "I
`l, ECF No. 66.) Antares is a company that develops, manufactures, and
`commercializes therapeutic products using drug delivery systems. (1d. 11112-3.) The non-Company
`Defendants were executives at Antares during the Class Period. (See id. 121127-29, I22.)
`
`This action principally arises from statements that Defendants allegedly made during the
`Class Period. Plaintiff alleges that Defendants misled investors by downplaying and misstating
`the incidence of certain adverse events'—hypertension, suicidality, and depression—observed in
`two Phase 3 clinical studies1 of Antares‘s lead product. QuickShot Testosterone (“QST”).
`(Id.
`
`' "Adverse event means any untoward medical occurrence associated with the use of a drug in
`humans, whether or not considered drug related." 2| C.F.R. § 3 |2.32.
`
`3 Phase 3 studies "are performed after preliminary evidence suggesting effectiveness of the drug
`
`

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`It
`11 7.) QST is an auto-injector product designed for testosterone replacement therapy. (id. 114.)
`is currently approved by the Food and Drug Administration ("FDA”) and marketed as Xyosted.
`(id. 111] 4, 167.)
`
`to investors throughout the Class Period, but
`According to Plaintiff, “[u]nbeknOWnst
`known at all relevant times within the Company, the incipient [QST] [New Drug Application
`("NDA”)] was facing serious risks in regard to (a) the clinically meaningful increase noted in blood
`pressure (i.e., hypertension); and (b) the instance of suicidality [and] depression."
`(id. 1] 97.)
`Defendants allegedly knew of QST’s hypertension risk, "yet consciously sought to downplay its
`significance instead of disclosing the direct link between QST and elevated blood pressure that the
`FDA would ultimately force the Company to acknowledge.” (id. 1] 102.) Defendants are also
`alleged to have inaccurately reported the instances of suicide and depression. (1d. 11 105.) Plaintiff
`alleges that Antares, accordingly, "overstated the approval prospects for [QST]," (id. 111] I36, 139,
`I43, I45, I47, 150, 156), and artificially inflated Antares share prices (id. 11125, 188, 192-93).
`
`in a previous complaint, Plaintiff challenged eight instances in which Defendants allegedly
`made false or misleading statements in violation of Rule lOb—S and Sections lO(b) and 20(a) of
`the Securities Exchange Act of 1934 (the “Exchange Act”). Smith v. Antares Pharma, inc, No.
`17-8945, 2020 WL 2041752, at *4 (D.N.J. Apr. 28, 2020). These included: (I) a press release
`dated December 21, 2016; (2) a press release dated February 27, 2017; (3) a form lO-K dated
`March 14, 2017; (4) a press release dated April 3. 2017; (5) a conference call on May 9, 2017; (6)
`a form lO-Q dated May 9, 2017; (7) a conference call on August 8, 2017; and (8) a form lO-Q
`dated August 8, 2017.
`id.
`
`After considering the Second Amended Complaint's (“SAC”) allegations regarding these
`statements, the Court found that Plaintiffs Section lO(b) claims failed for a variety of reasons.
`For example, the Court found that Plaintiff "fai|[ed] to plead economic loss and loss causation.
`[t
`is not enough to allege an ‘artificially inflated purchase price' as an economic loss.” id. at *10
`(quoting Dara Pharm.. inc. v. Brando, S44 U.S. 336, 347 (2005)). The Court also found that
`Plaintiff failed to plead facts that gave rise to a strong inference of scienter with respect to the
`foregoing statements.
`1d. at *8-9. Additionally, the Court found that for all but one of these
`statements, Plaintiff failed to adequately plead facts showing that they were false or misleading
`for the purposes ofSection lO(b) and Rule 1013—5 liability.
`id. at "'5-7.3 Nevertheless, the Court
`found that even if Plaintiff had adequately alleged that any of these statements were false or
`misleading, Plaintiff had failed to plead facts showing that these statements were material. (id. at
`*7-8.) Finally, the April 28, 2020 Opinion also dismissed Plaintiffs Section 20(a) claims because
`
`safety that is needed to evaluate the overall benefit-risk relationship of the drug and to provide an
`adequate basis for physician labeling.” 21 C.F.R. § 312.2l(c).
`
`3 The SAC cited “Apple’s statement during the August 8, 2017 conference cail that 'anyone who
`is diagnosed with testosterone deficiency, we believe, is the perfect candidate for Xyosted."'
`id.
`at *7 (quoting SAC 11 145. ECF No. 46) "Apple also stated, ‘1 think that there isn’t any particular
`patient population that has testosterone deficiency that we're excluding or that we think is a better
`candidate.’” id. (quoting SAC 11 146). The Court found "that these statements could be misleading
`considering hypersensitive patients are excluded from" one of the relevant studies.
`id.
`
`

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`Section 20(a) liability is predicated on successfully pled Section l0(b) claims.
`Rahmcm 1:. Kid Brands, Inc, 736 F.3d 237, 247 (3d Cir. 2013)).
`
`[(1. at * [0 (citing
`
`Although the Court dismissed Plaintiffs Second Amended Complaint, Plaintiff was
`granted leave to file a Third Amended Complaint.“I
`(ECF No. 65.) Plaintiffs Third Amended
`Complaint is virtually identical to the Second Amended Complaint. (See generally TAC; Redline,
`Ex.
`I to Defs.‘ Mot. to Dismiss, ECF No. 72-3.)
`
`The Third Amended Complaint does, however, add new allegations relating to the scienter
`element of Plaintiffs Section 10(b) claim. According to Plaintiff, a confidential witness, CW2,
`who was the director of Quality Assurance for Antares from November 2012 to June 20| 7, alleges
`that "everyone at the Company knew about the safety issues with Xyosted because they had to
`postpone the launch and do an additional safety study (QST-lS-OOS).” (TAC 1] l2].) According
`to CW2, "[t]here were only twenty-five (25) to thirty (30) employees at the Ewing headquarters,
`making it so it would have been impossible for CEO Apple and CFO Powell[] not to know about
`the safety issues that ultimately resulted in boxed warning." (1d) Furthermore, CW2 alleges that
`“when company employees started hearing about Phase 3 clinical trial-patients having elevated
`blood pressure, committing suicide, and exacerbating depression, they discussed those issues at
`the regular, weekly meetings” held by CWZ's team.
`(Id. iili l29-30.) Plaintiff also alleges that
`"for the second, six-month study (QST-IS-OOS), monitoring devices for blood pressure were used
`so if someone tested high, they were not allowed into the study, and questions about depression
`[were] included in the questionnaire to exclude anyone with a history of depression.” (10’. 1] I32.)
`
`Moreover. although the SAC previously challenged certain statements in the December 2|,
`20|6 and February 27, 20]? press releases, (see SAC 1F I28, 131), the TAC takes issue with
`additional statements contained within these documents.
`In the now-operative TAC, Plaintiff
`asserts that in the December 2 l , 2016 press release. “Defendant Apple further claimed that another
`‘benefit to patients is a virtually painless treatment experience as demonstrated by the pain data
`collected in our phase 3 program."‘
`(TAC ‘ll I34). “We will work closely with the FDA during
`the regulatory review process towards a potential approval with the goal of bringing this new
`treatment option to men diagnosed with hypogonadism.” (Id) With respect to the February 27,
`2017 press release, “[t]he company further stated that 'the study data also showed patients had a
`virtually painless treatment experience using the device. We will work closely with the FDA
`during the regulatory review process toward a potential approval."’ (Id. 1] I37).
`
`Legal Standard
`
`A district court must conduct a three-part analysis when considering a motion to dismiss
`pursuant to Federal Rule of Civil Procedure 12(b)(6). See ill/[aliens v. George, 64l F.3d 560, 563
`(3d Cir. 20l l). The Court must take note of the elements a plaintiff must plead to state a claim;
`review the complaint to strike conclusory allegations; and accept as true all ofthe plaintiffs well-
`pled factual allegations while “constru[ing] the complaint in the light most favorable to the
`
`4 The Second Amended Complaint was itself filed after the Court dismissed an even earlier
`complaint that failed to adequately plead securities fraud. See Smith v. Antares Phat-ma, Inc. No.
`l7-8945, 20l9 WL 2785600, at *ll (D.N.J. July 2. 20l9).
`
`

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`plaintiff.” Fowler v. UPMC Shadvside, 578 F.3d 203, 210 (3d Cir. 2009) (citation omitted). The
`Court “must then determine whether the facts alleged in the complaint are sufficient to show that
`the plaintiff has a ‘plausible claim for relief."' Id. at 2| 1 (quoting Ashcroft v. Iqbal, 556 L'.S. 662.
`679 (2009)). A facially plausible claim "allows the court to draw the reasonable inference that the
`defendant is liable for the misconduct alleged." Id. at 210 (quoting Iqbal, 556 US. at 678).
`
`Because Plaintiff alleges fraud, Plaintiff "must state with particularity the circumstances
`constituting fraud or mistake.” Fed. R. Civ. P. 9(b). The Private Securities Litigation Reform Act
`("PSLRA”) also imposes a heightened standard "to curb frivolous, lawyer-driven litigation, while
`preserving investors’ ability to recover on meritorious claims.” Tellabs. Inc. v. Mnkor Issues &
`Rights, Ltd, 551 US. 308, 322 (2007).
`
`III.
`
`Discussion
`
`A plaintiff bringing an action under Section |0(b) and Rule |0b—5 must plead: “(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; and (6) loss causation.” Matrixx. Initiatives.
`Inc. v. Sirocztsano, 563 US. 27, 37-38 (201 l) (quoting Stoneridge Inv. Partners. LLC v. Scientific-
`Atlcmta. Inc, 552 US. 148, 157 (2008)).
`“[T]he PSLRA imposes greater particularity
`requirements concerning alleged material misrepresentations and scienter.” Fan v. StoneMor
`Partners LP, 927 F.3d 710, 714 (3d Cir. 2019).
`
`A.
`
`The TAC’s New Factual Assertions Relating to Falsity and Materiality
`
`The Court finds that Plaintiff‘s new factual assertions regarding QST’s "virtually painless
`treatment experience” fail to support the falsity or materiality elements of Section |0(b) liability.
`
`“[Section] 10(1)) and Rule |0b-5(b) do not create an affirmative duty to disclose any and
`all material information. Disclosure is required .
`.
`. only when necessary ‘to make .
`.
`. statements
`made, in the light ofthe circumstances under which they were made, not misleading'” Motrixx,
`563 U.S. at 44 (quoting 17 C.F.R. § 240.10b—5(b)). "[Defendants’] statements are only actionable
`if, when read in light of all the information then available to the market or a failure to disclose
`particular information, [Defendants] conveyed a false or misleading impression." Fan, 927 F.3d
`at 715 (internal citations and quotation marks omitted). Under the PSLRA, a complaint must
`"specify each statement alleged to have been misleading, the reason or reasons why the statement
`is misleading, and, ifan allegation .
`.
`. is made on information and belief, .
`.
`. state with particularity
`all facts on which that belief is formed.“ Cit)» ofEdinburgh Council v. Pfizer, Inc, 754 F.3d 159,
`166 (3d Cir. 2014) (quoting 15 U.S.C. § 78u-4(b)(1)(B)).
`
`"Interpretations of clinical trial data are considered opinions. Opinions are only actionable
`under the securities laws if they are not honestly believed and lack a reasonable basis.” Edinburgh.
`754 F.3d at 170 (internal citations omitted). A company's press release releasing “positive" study
`results is not misleading where the plaintiff fails to allege that the opinion lacked a reasonable
`basis. See. e.g., Biondoli'flo v. Roche Holding Ag, No. 17—4056, 2018 WL 4562464, at *5 (D.N.J.
`Sept. 24, 2018); cf In re Merck & to. Sec. Derivative. & ERISA Ling. 201 l WL 3444199. at
`
`

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`*15 (D.N.J. Aug. 8, 201 l) (finding alleged facts showed the company had no reasonable basis for
`and disbelieved its public characterization of the study results).
`
`Furthermore, Plaintiff must plead that Defendants' statements were “misleading as to a
`material fact.” Motrin, 563 U.S. at 38. "[T]o fulfill the materiality requirement there must be a
`substantial
`likelihood that the disclosure of the omitted fact would have been viewed by the
`reasonable investor as having significantly altered the total mix of information made available.”
`Basic Inc. v. Levinson, 485 U.S. 224, 23I-32 (1988) (citing TSC Indus. Inc. v. Northn-wy, Inc, 426
`U.S. 438, 449 (1976)) (internal quotation marks omitted); In re Aetna, Inc. Sec. Litig, 6| 7 F.3d
`272,283 (3d Cir. 2010).
`
`“Assessing the materiality of adverse event reports is a fact-specific inquiry that requires
`consideration of the source, content, and context of the reports." Marri'cr, 563 U.S. at 43 (internal
`citation and quotation marks omitted). Nevertheless, “complaints alleging securities fraud often
`contain claims of omissions or misstatements that are obviously so unimportant that courts can
`rule them immaterial as a matter of law at the pleading stage.” In re Burlington Coat Factory Sec.
`Litig,
`l 14 F.3d 1410, 1426 (3d Cir. 1997). Relatedly, "[m]aterial representations must be
`contrasted with statements of subjective analysis or extrapolations. such as opinions, motives[,]
`and intentions, or general statements of optimism[.]" Aema, 6| 7 F.3d at 283 (citation omitted).
`“[V]ague and general statements of optimism .
`.
`. are not material [because] a reasonable investor
`would not base decisions on such statements." Fan, 927 F.3d at 716.
`
`Just as the SAC challenged statements in the December 21, 2016 and February 27, 2017
`press releases, the TAC again challenges statements in these documents. See Smith, 2020 WL
`2041752, at *5. 1n the now-operative TAC, Plaintiff asserts that in the December 21. 2016 press
`release, "Defendant Apple further claimed that another ‘benefit to patients is a virtually painless
`treatment experience as demonstrated by the pain data collected in our phase 3 program.” (TAC
`‘ 134). Similarly, with respect to the February 27, 2017 press release, "[t]he company further
`stated that ‘the study data also showed patients had a virtually painless treatment experience using
`the device.'" (Id. T 137).
`
`Plaintiff argues that these statements reporting study results were false or misleading in
`light of Defendants‘ knowledge of adverse events related to hypertension and suicide. Here, the
`press releases offer interpretations of the clinical trial data and are considered opinions. See
`Edinburgh, 754 F.3d at 170. But because Plaintiff fails to plead facts that show that Defendants
`did not have a reasonable basis for their opinions that QST was "virtually painless." Plaintiff has
`not demonstrated that these statements are actionable. With respect to materiality, as Defendants
`persuasively argue, "[a]ny reasonable investor would understand this statement
`to be a
`commentary on injection pain—not safety or adverse events." (Defs.' Moving Br. 25. ECF No.
`71-1 (citations omitted).)
`
`B.
`
`The TAC’s New Factual Assertions Relating to Scienter
`
`CW2's allegations do not establish that any of the Defendants‘ challenged statements were
`made with the scienter necessary to establish Section 10(b) violations. Scienter is "a mental state
`embracing intent to deceive, manipulate, or defraud," tlzIatritzr, 563 U.S. at 48 (citing Taliabs. 551
`
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`U. S at 319), or encompassing reckless or conscious behavior, Institutional luv:5 Clip v. Avaya,
`Inc, 564 F. 3d 242, 267 (3d Cir. 2009). To plead a''knowing or reckless state of mind' in the
`securities context, Plaintiff must plead'an extreme departure from the standards of ordInary care.
`1d. at 252, 267 n42.
`
`"[T]he plaintiffs pleadings [must] conjure a ‘strong inference’ that the defendant[s] acted
`with the .
`.
`. intent to defraud shareholders." Fun, 927 F.3d at 717-18 (quoting 15 U.S.C. § 78u-
`4(b)(2)(A)). A court “must analyze the complaint holistically" and "not whether any individual
`allegation, scrutinized in isolation, meets that standard." In re Herr: Glob. Holdings Inc, 905 F.3d
`106, 1 14 (3d Cir. 2018) (quoting Tellabs, 551 US. at 323). A plaintiffonly clears the high hurdle
`imposed by the PSLRA if‘a reasonable person [would] deem the inference of scienter at least as
`strong as any opposing inference." Tellabs, 551 U. S. at 326.
`
`CW2 alleges that Defendants were aware of risks to patients using QST because, “for the
`second, six-month study (QST-15-005), monitoring devices for blood pressure were used so if
`someone tested high, they were not allowed into the study, and questions about depression [were]
`included in the questionnaire to exclude anyone with a history of depression.” (TAC 1] 132.) But
`the Court has already considered and rejected similar allegations in the SAC.
`(See, e.g., SAC 1]
`I47 (‘Defendants had themselves excluded patients with high blood pressure from QST-15-
`005’).) And as Plaintiff pleadsIn the TAC, "Antares finalized and submitted the [005 Study]
`protocol.
`.and enrolled patients [in the study].
`.pursuant to the FDA' 5 recommendations."
`(TAC1]80.) As the Court previously held when considering similar allegations1n the SAC,‘'[t]he
`FDA, therefore, approved the study design and would presumably approve QST on the data from
`this study.
`Indeed, QST was ultimately approved, albeit with a black box warning and an
`additional warning and precaution. The exclusion of certain patients from the 005 Study does not.
`therefore, support a finding of scienter,“ where the exclusion was done on the FDA’s
`recommendation. Smith, 2020 WL 2041752. at *9.
`
`CW2'5 allegation that "everyone at the Company knew about the safety issues with
`Xyosted because they had to postpone the launch and do an additional safety study (QST-l 5-005)"
`is similarly unavailing. (TAC 1] 121.) According to CW2, “'[t]here were only twenty-five (25) to
`thirty (30) employees at the Ewing headquarters, making it so it would have been impossible for
`CEO Apple and CFO Powel|[] not to know about the safety issues that ultimately resulted in boxed
`warning.”
`(1d) Here, as in prior opinions, "the Court steeply discount[s] [the confidential
`witness s] allegations for failing to satisfy the PSLRA s stringent pleading requirements.Smith,
`2020 WL 2041752, at *2 n.5, Smith v Antares Pharma. Inc. No. 17- 8945, 2019 WL 2785600. at
`*8-9 (D.N..l. July 2, 2019). Such generalized, conclusory allegations do not plead particularized
`facts that give rise to a strong inference of scienter. Edinburgh, 754 F.3d at 166 (citing 15 U.S.C.
`§ 78u—4(b)(|)(B)) (requiring plaintiffs to "plead the who, what, when, where, and how: the first
`paragraph of any newspaper story").
`
`CW2 also suggests that the Defendants had knowledge of the adverse events because
`sometime after July 2014, "when company employees started hearing about Phase 3 clinical trial-
`patients having elevated blood pressure. committing suicide, and exacerbating depression, they
`di5cussed those issues at the regular, weekly meetings" held by CW2’s team.
`(TAC 1]] 129-30.)
`But these allegations are also insufficient to establish a strong inference ofscienter. Similar to the
`
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`allegations by CW] dismissed in an earlier opinion, CW2’5 allegations about who, what, when,
`and how the Defendants knew about the adverse events are “ambiguous.” Smith, 2020 WL
`204l752, at *2 n.5, 9 (citations omitted). Once again, "Plaintiff does not allege that the FDA
`thought or communicated to Defendants [that] the occurrence of adverse events threatened or
`would delay QST’s approval. To the contrary, the alleged facts suggest that Antares informed
`investors of the delay in approval immediately after receiving the FDA’s October II, [2017]
`Letter.” 1d. at *9 (citations omitted). Nor do Plaintiff or CW2 allege that Defendants “believed
`the occurrence of these adverse effects rendered QST unsafe or would negatively affect QST's
`approval prospects." 1d. at * 2 n.5.
`
`C.
`
`The Previous Factual Allegations Brought in the SAC and Reasserted in the
`TAC
`
`The TAC reasserts that the eight statements previously rejected by the Court violated
`Section |0(b). (Compare TAC 111] 134-56, with SAC 1H] l28-50.) As Defendants correctly argue,
`however, the Court has already examined each of these statements and held that Plaintiff failed to
`satisfy the elements of a Section 10(b) claim. Previously, those claims failed because Plaintiff
`failed to plead facts demonstrating economic loss, loss causation, scienter, materiality, and falsity.
`Smith, 2020 WL 204l752, at * 6-10. For the reasons set forth above, Plaintiffs new allegations
`regarding scienter do not redeem these claims. And as Defendants note, the TAC makes no effort
`to redress the SAC’s failure to plead economic loss or loss causation. (Defs.’ Moving Br. 36-3735
`The falsity and materiality deficiencies associated with each of the previously rejected eight
`statements remain unaddressed. Accordingly, the Court will again dismiss Plaintiff‘s Section
`l0(b) claims to the extent that they rely on these eight statements.6
`
`IV.
`
`Conclusion
`
`For the foregoing reasons, Defendants’ Motion to Dismiss is granted. An order consistent
`with this Letter Opinion will be entered.
`
`[1": L2 '-
`IPP
`MICHAEL A.
`UNITED STATES DISTRICT JUDGE
`
`5 The Court finds that Plaintiff also fails to plead economic loss and loss causation with respect to
`the TAC‘s added factual allegations that Defendants misleadingly described QST as "virtually
`painless.”
`
`6 Because the TAC fails to plead a Section |0(b) violation, Plaintiffs Section 20(a) claim will be
`dismissed as well. See Smith, 2020 WL 204] 752. at *lO (finding that "[l]iabi|ity under Section
`20(3) ‘is derivative ofan underlying violation ofSection |0(b) by the controlled person‘“ (quoting
`Rahman v. Kid Brands, Inc. 736 F.3d 237, 247 (3d Cir. 20 l 3))).
`
`