IN THE UNITED STATES DISTRICT COURT
`FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
`
`
`
`
`JEFFREY D. FISHER, Individually
`and on Behalf of All Others Similarly
`Situated,
`
`
`Plaintiff,
`
`
`
`v.
`
`
`FENNEC PHARMACEUTICALS
`INC., ROSTISLAV RAYKOV, and
`ROBERT ANDRADE,
`
`
`Defendants.
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`
`
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`1:22-CV-115
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`
`
`
`MEMORANDUM OPINION AND ORDER
`
`Catherine C. Eagles, District Judge.
`
`The defendants Fennec Pharmaceuticals, Inc. and two of its officers, CEO
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`Rostislav Raykov and CFO Robert Andrade, move to dismiss this securities fraud class
`
`action brought by the plaintiff Jeffrey D. Fisher for failure to state a claim. Because the
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`complaint does not adequately plead actionable statements or omissions or scienter under
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`the applicable heightened pleading standards, the motion will be granted. The
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`defendants’ motions to consider and to take judicial notice are denied, as it is unnecessary
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`to consider these materials to grant the defendants’ substantive motion.
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`I. Allegations in the Complaint
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`Mr. Fisher bought stock in Fennec while Fennec’s application for approval of a
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`new prescription drug was pending with the Food and Drug Administration. See Doc. 24
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`at ¶¶ 22, 7–16. He contends that in its public statements about this process beginning on
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`Case 1:22-cv-00115-CCE-JLW Document 40 Filed 10/12/22 Page 1 of 17
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`FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
`
`
`
`
`JEFFREY D. FISHER, Individually
`and on Behalf of All Others Similarly
`Situated,
`
`
`Plaintiff,
`
`
`
`v.
`
`
`FENNEC PHARMACEUTICALS
`INC., ROSTISLAV RAYKOV, and
`ROBERT ANDRADE,
`
`
`Defendants.
`
`
`
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`
`1:22-CV-115
`
`
`
`
`
`
`
`
`
`
`
`MEMORANDUM OPINION AND ORDER
`
`Catherine C. Eagles, District Judge.
`
`The defendants Fennec Pharmaceuticals, Inc. and two of its officers, CEO
`
`Rostislav Raykov and CFO Robert Andrade, move to dismiss this securities fraud class
`
`action brought by the plaintiff Jeffrey D. Fisher for failure to state a claim. Because the
`
`complaint does not adequately plead actionable statements or omissions or scienter under
`
`the applicable heightened pleading standards, the motion will be granted. The
`
`defendants’ motions to consider and to take judicial notice are denied, as it is unnecessary
`
`to consider these materials to grant the defendants’ substantive motion.
`
`I. Allegations in the Complaint
`
`Mr. Fisher bought stock in Fennec while Fennec’s application for approval of a
`
`new prescription drug was pending with the Food and Drug Administration. See Doc. 24
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`at ¶¶ 22, 7–16. He contends that in its public statements about this process beginning on
`
`
`
`
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`Case 1:22-cv-00115-CCE-JLW Document 40 Filed 10/12/22 Page 1 of 17
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`
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`May 28, 2021, Fennec misled investors about the likelihood the application would be
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`approved. Id. at ¶¶ 2–3. These misrepresentations and omissions, he contends, violated
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`§ 10(b) of the Exchange Act and a related regulation known as Rule 10b-5. Id. at ¶ 18.
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`A. Fennec and Pedmark
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`Fennec is a biotech company with its principal place of business in Research
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`Triangle Park, North Carolina. Doc. 24 at ¶¶ 1, 23. The company’s main focus is the
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`development of the new drug known as Pedmark, a formulation of sodium thiosulfate that
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`purports to prevent hearing loss in children undergoing certain types of chemotherapy
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`treatment. Id. at ¶¶ 1, 48. Because Pedmark is a new pharmaceutical drug, the FDA
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`requires Fennec to seek and obtain approval for Pedmark through the FDA’s New Drug
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`Application (NDA) process before Fennec can sell, market, and distribute P edmark for
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`commercial use in the United States. Id. at ¶ 32.
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`B. New Drug Application Process Generally
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`The NDA process provides the FDA with the information it needs to determine
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`whether the drug is safe and effective, its benefits outweigh its risks, its proposed labeling
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`is appropriate, and “the methods used in manufacturing the drug and the controls used to
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`maintain the drug’s quality are adequate to preserve the drug’s identity, strength, quality
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`and purity.” Id. As part of this process, drug sponsors such as Fennec must make a
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`detailed showing about “Chemistry, Manufacturing and Controls” for the drug and the
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`manufacturing facility so “that pharmaceutical drug products are consistently effective,
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`safe and high quality for consumers.” Id. at ¶ 34. If a sponsor changes its drug
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`2
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`manufacturer, it must demonstrate to the FDA that the change will not adversely impact
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`the quality, safety, and efficacy of the drug. Id. at ¶ 35.
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`As part of the NDA process, the FDA will monitor the manufacturer of the drug
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`and conduct a pre-approval inspection of the facilities to assess readiness for commercial
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`manufacturing and conformance to the application, as well as to conduct a data integrity
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`audit. Id. at ¶¶ 41–43. At the end of the inspection, FDA inspectors will conduct an exit
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`interview to explain any observed violations of FDA standards. Id. at ¶ 44. They also
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`memorialize these violations in a Form 483 issued to the manufacturing facility. Id. The
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`Form 483 is not a final decision, and facility management has 15 days to provide written
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`responses to the Form 483 observations. Id. at ¶¶ 46–47.
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`If the FDA does not approve an NDA, it will send the sponsor a Complete
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`Response Letter (CRL), “which describes all the specific deficiencies that the FDA
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`identified in the NDA and when possible, recommends actions that the sponsor could
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`take to place its NDA in condition for approval.” Id. at ¶ 47. After receiving a CRL, the
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`sponsor may resubmit its NDA. Id.
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`C. Pedmark’s NDA
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`In December of 2018, Fennec filed an NDA with the FDA for Pedmark. Id. at
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`¶ 52. Fennec contracted with Pharmaceutics International, Inc. (PII) to manufacture
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`Pedmark. Id. at ¶ 53. PII had been on the receiving end of several negative regulatory
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`findings by European regulators in 2016, who had “prohibited PII from shipping drugs to
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`Europe” because of manufacturing deficiencies. Id. at ¶ 54. And in October of 2016, one
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`3
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`pharmaceutical company recalled 43,000 bottles of a drug produced by PII because of
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`“failed stability testing for impurity levels.” Id.
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`In July 2020, FDA inspectors issued a Form 483 for both of PII’s facilities “while
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`it was under contract as Fennec’s drug product manufacturer for” Pedmark. Id. at ¶ 55.
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`The FDA saw deficiencies in PII’s equipment maintenance, building conditions, and the
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`prevention of microbiological contamination, among other things. Id. at ¶ 56.
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`In August 2020, the FDA issued a CRL for the Pedmark NDA. Id. at ¶ 57.
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`According to Fennec’s announcement, the FDA did not approve the drug because of the
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`manufacturing deficiencies identified in a Form 483, id., and no concerns about the
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`drug’s safety or efficacy were identified. See id. at ¶¶ 5, 57. Because the problems with
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`Pedmark’s NDA were manufacturing-related and not a result of concerns over efficacy or
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`side effects, analysts were generally positive about Fennec’s stock price. See id. at
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`¶¶ 67–68.
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`Some nine months after the CRL letter, Fennec resubmitted the Pedmark NDA,
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`and, in the first statement at issue in this litigation, Fennec announced the resubmission
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`on May 28, 2021. Id. at ¶ 69.1 Fennec made generally optimistic statements through a
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`press release about efforts to resolve the manufacturing issues that led to the CRL in
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`August 2020 and about Fennec’s progress toward receiving NDA approval. See id.
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`(general optimistic statements on May 28). Fennec and Mr. Raykov repeated generally
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`1 Statements made earlier are not at issue in this lawsuit. See generally, Chapman v. Fennec
`Pharm. Inc., No. 20-CV-812, Docs. 30, 48, 57.
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`4
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`Case 1:22-cv-00115-CCE-JLW Document 40 Filed 10/12/22 Page 4 of 17
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`optimistic public statements on June 22, id. at ¶ 72, and August 10. Id. at ¶¶ 82–83,
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`85–86. Over the early summer of 2021, Fennec’s stock price went up. Id. at ¶¶ 70, 73.
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`On August 11, Mr. Raykov again repeated these generally positive statements.
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`See id. at ¶¶ 89–91. He also affirmatively asserted his belief that the manufacturing
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`deficiencies had been addressed and that Fennec’s “quality department” believed the
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`facility was ready for resubmission, id. at ¶ 89–90, but he qualified that by telling
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`investors that Fennec had a back-up plan for another manufacturer if that turned out not
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`to be the case. Id. at ¶ 91. Beyond these general statements, he said that “I really don’t
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`want to get into the details about the pre-approval proof of inspection because you create
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`expectations.” Id.
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`On September 22, Mr. Raykov again made public statements about the NDA. He
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`led with the observation that that “[y]ou never want to be overly confident with anything
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`when it comes to the FDA.” Id. at ¶ 93. But his statements were generally optimistic that
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`the NDA would be approved, and he specifically said that the plant had made “significant
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`improvements.” Id. He repeated Fennec’s belief that “we think the plant is in good
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`shape to refile,” and stated “we did not do this in a vacuum, we did this based on
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`communication from the plant, we did this in speaking with the FDA on a regular basis.”
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`Id. He asserted that Fennec “expect[ed] approval early next year.” Id. at ¶ 94.
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`The FDA inspected PII facilities on unspecified dates between July 26 and
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`September 29. Id. at ¶ 75. On September 29, PII provided Fennec with the Form 483
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`issued by the FDA documenting its inspections, as well as the FDA’s audit inspection
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`report, also called an EIR. Id. at ¶¶ 79–80. These documents identified numerous
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`5
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`Case 1:22-cv-00115-CCE-JLW Document 40 Filed 10/12/22 Page 5 of 17
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`violations of good manufacturing practices, including cracked vials, unsterilized
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`manufacturing suites, and improper glove protocol; some vials of P edmark were left
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`unsecured and uncapped during a fire alarm. Id. at ¶ 76.
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`In public statements issued on September 29, Mr. Raykov was noticeably less
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`optimistic, though he continued to express hope that the NDA would be approved. Id. at
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`¶ 96. He referenced the possibility of an EIR and implied that FDA inspections had
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`resulted in some negative observations though he did not say so directly; he did
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`affirmatively state that “those observations are not critical, so that this plant can pass”
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`inspection. Id. He repeated that if the plant did not pass inspection, Fennec had a second
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`manufacturer so that it could file another NDA after a short delay. Id.
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`On November 10, Fennec made general statements in a press release that it was
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`spending money on “essential activities in preparation for the launch of” Pedmark. Id. at
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`¶ 98. It made no mention of any problems at the manufacturing facility or of any recent
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`inspections by the FDA. See id. at ¶¶ 98–99. In an SEC filing the same day, it
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`mentioned a “constructive and collaborative” meeting with the FDA about the 2020 CRL
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`issued after Fennec’s first NDA. Id. at ¶ 101.
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`Mr. Fisher bought Fennec stock on November 23. Doc. 16-4 at 4. On November
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`30, Fennec announced that it received another CRL from the FDA for the Resubmitted
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`Pedmark NDA which “was issued as a result of identified manufacturing deficiencies
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`which need to be satisfactorily resolved before the Pedmark NDA can be approved.”
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`Doc. 24 at ¶ 110. As a result of the CRL news, Fennec’s stock price dropped
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`6
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`significantly. Id. at ¶ 112. The FDA had not approved Pedmark at the time Mr. Fisher
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`filed the operative complaint.2
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`II. Jurisdiction
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`The Exchange Act gives the district courts of the United States “exclusive
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`jurisdiction” of violations of the Exchange Act “or the rules and regulations t hereunder.”
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`15 U.S.C. § 78aa(a). Because Mr. Fisher asserts claims under §§ 10(b) and 20(a) of the
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`Exchange Act, this Court has jurisdiction.
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`III. The Elements
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`To make out a claim for fraud under § 10(b), a plaintiff must adequately plead “(1)
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`a material misrepresentation or omission by the defendant; (2) scienter; (3) a connection
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`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
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`causation.” Stoneridge Inv. Partners, LLC v. Sci.-Atlanta, Inc., 552 U.S. 148, 157
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`(2008). “Scienter” in this context is “a mental state embracing intent to deceive,
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`manipulate, or defraud.” Tellabs, Inc. v. Makor Issues & Rts., Ltd., 551 U.S. 308, 319
`
`(2007) (citation omitted).
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`“Section 20(a) of the Exchange Act imposes liability on each person who controls
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`any person liable under any provision of this chapter or of any rule or regulation
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`thereunder.” KBC Asset Mgmt. NV v. DXC Tech. Co., 19 F.4th 601, 614 n.4 (4th Cir.
`
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`2 The defendants have recently filed a second request for judicial notice, asking the Court to
`take notice of a recent FDA press release announcing that Pedmark has been approved. Doc. 35.
`The Court does not need to take judicial notice of this press release to rule on the motion to
`dismiss, so the motion is denied.
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`
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`7
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`Case 1:22-cv-00115-CCE-JLW Document 40 Filed 10/12/22 Page 7 of 17
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`2021) (cleaned up); accord 15 U.S.C. § 78t(a). To make out a claim under § 20(a), then,
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`Mr. Fisher must first make out a claim under § 10(b).
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`IV. The Heightened Pleading Standards
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`Allegations of securities fraud must meet the heightened pleading standards of
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`Federal Rule of Civil Procedure 9(b), requiring that plaintiffs alleging fraud (of any kind)
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`“must state with particularity the circumstances constituting fraud,” and of the Private
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`Securities Litigation Reform Act of 1995 applicable to claims brought under § 10(b).3
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`“The PSLRA provides that in pleading a material misrepresentation or omission, in
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`violation of § 10(b) of the Exchange Act and Rule 10b-5, and the scienter necessary to
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`such a misrepresentation or omission, the plaintiff must plead facts.” Teachers’ Ret. Sys.
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`of LA v. Hunter, 477 F.3d 162, 172 (4th Cir. 2007). If the complaint does not meet these
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`heightened pleading requirements, it shall be dismissed “on the motion of any
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`defendant.” 15 U.S.C. § 78u-4(b)(3)(A); see, e.g., Chapman v. Fennec Pharms. Inc., No.
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`20-CV-812, 2021 WL 7209981 (M.D.N.C. Dec. 16, 2021) (Mag. J., Order and
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`Recommendation), adopted 2022 WL 613378 (M.D.N.C. Mar. 2, 2022).
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`As to scienter, the complaint must “state with particularity facts giving rise to a
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`strong inference that defendant acted with” an “intent to deceive, manipulate, or
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`defraud.” Tellabs, Inc. v. Makor Issues & Rts., Ltd., 551 U.S. 308, 314, 319 (2007).
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`Negligence is not sufficient; to plead scienter a plaintiff must show intentional
`
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`3 The PSLRA was enacted “to prevent Securities Exchange Act claims from being employed
`abusively to impose substantial costs on companies and individuals whose conduct conforms to
`the law.” Singer v. Reali, 883 F.3d 425, 439 (4th Cir. 2018) (cleaned up).
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`8
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`
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`misconduct or recklessness “so highly unreasonable and such an extreme departure from
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`the standard of ordinary care as to present a danger of misleading the plaintiff to the
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`extent that the danger was either known to the defendant or so obvious that the defendant
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`must have been aware of it.” Matrix Cap. Mgmt. Fund, LP v. BearingPoint, Inc., 576
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`F.3d 172, 181 (4th Cir. 2009) (citation omitted).
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`“[R]aising a ‘strong inference’ of scienter is no small burden.” Cozzarelli v.
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`Inspire Pharms. Inc., 549 F.3d 618, 624 (4th Cir. 2008) (citation omitted). Courts
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`“determining whether the pleaded facts give rise to a strong inference of scienter . . . must
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`take into account plausible opposing inferences.” Tellabs, 551 U.S. at 323 (cleaned up).
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`A complaint adequately pleads scienter when, based on the alleged facts, the inference of
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`scienter is “more than merely reasonable or permissible,” Johnson v. Pozen Inc., No.
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`7-CV-599, 2009 WL 426235, at *13 (M.D.N.C. Feb. 19, 2009) (cleaned up) (Mag. J.,
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`Opinion, Recommendation and Order), affirmed and adopted, 2009 WL 10680297
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`(M.D.N.C. Sept. 29, 2009)), and is instead “cogent and at least as compelling as any
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`opposing inference one could draw.” Tellabs, 551 U.S. at 324.
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`V. Analysis
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`A. Section 10(b) Claims
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`Mr. Fisher’s claims center around his assertion that the defendants misled
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`investors about Fennec’s ability to achieve approval from the FDA for its second New
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`Drug Application for Pedmark from late May through November 2021. Fennec, he
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`alleges, misled investors “by knowingly or recklessly failing to disclose known material
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`deficiencies related to its third-party drug manufacturer,” PII, Doc. 24 at ¶ 3, and by
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`9
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`Case 1:22-cv-00115-CCE-JLW Document 40 Filed 10/12/22 Page 9 of 17
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`making “materially false and misleading statements” about (or failing to disclose) these
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`manufacturing deficiencies and their investigation into PII’s efforts to cure those
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`deficiencies. Id. at ¶ 12.
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`To adequately plead a cause of action based on these general assertions, Mr.
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`Fisher must allege (1) facts that identify with particularity actionable false or misleading
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`statements or omissions, and (2) facts giving rise to a strong inference that the defendants
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`made the statements or omissions with an intent to deceive, manipulate, or defraud. See
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`supra pages 8–9. And to be actionable, a statement or omission must be (1) factual, (2)
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`false (or, in the case of omissions, it must render public statements misleading), and (3)
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`material. Hirtenstein v. Cempra, Inc., 348 F. Supp. 3d 530, 553 (M.D.N.C. 2018), aff’d
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`sub nom. Janies v. Cempra, Inc., 816 F. App’x 747 (4th Cir. 2020) (unpublished).
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`For Mr. Fisher to meet the falsity requirement, he must allege facts that show that
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`at the time the statements were made or omitted:
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`- PII did not take adequate steps to correct the manufacturing deficiencies
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`identified in the 2020 CRL and did not follow good manufacturing practices
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`from May through November 2021;
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`-
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`those manufacturing deficiencies at PII were serious enough to impede FDA
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`approval;
`
`-
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`the defendants knew about those deficiencies, knew PII was not taking
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`adequate steps to correct them, and knew that those deficiencies were so
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`serious they were likely to cause problems with the NDA, or the defendants
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`recklessly took no steps to verify PII’s corrective efforts;
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`10
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`- despite this knowledge, or in reckless disregard of the truth, the defendants
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`made generally positive statements about approval of the NDA; and
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`- despite this knowledge, or in reckless disregard of the truth, the defendants
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`failed to disclose the problems with the manufacturing facility.
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`He must also allege facts to show that the defendants acted with an intent to deceive,
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`manipulate, or defraud. See Tellabs, Inc. v. Makor Issues & Rts., Ltd., 551 U.S. 308, 319
`
`(2007).
`
`The allegations of the complaint show that Fennec made generally positive
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`statements about approval of its NDA from May 28 until September 29, the date Mr.
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`Fisher alleges Fennec became aware of the FDA inspection results, after which the
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`statements became somewhat less positive and more qualified. For the statements
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`preceding September 29, the allegations do not lead to a strong inference of falsity, much
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`less scienter.
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`The announcement that the company had resubmitted the NDA to the FDA for
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`approval, a fact Mr. Fisher appears to admit is true, is insufficient to show any
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`misrepresentation or material omission at all. No reasonable investor would read this as
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`an implicit representation that the FDA had no problems with the manufacturing facility
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`or that Fennec was guaranteeing the plant would meet FDA criteria. Mr. Fisher points to
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`no other statements or omissions in these early statements that give rise to a strong
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`inference of scienter. And general statements that Fennec expected or hoped for approval
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`are forward-looking statements shielded by the PSLRA’s safe harbor provision. See
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`Gillis v. QRX Pharma Ltd., 197 F. Supp. 3d 557, 591 (dismissing claims despite
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`11
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`Case 1:22-cv-00115-CCE-JLW Document 40 Filed 10/12/22 Page 11 of 17
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`forward-looking statements made that a drug would receive approval when it eventually
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`did not).
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`The fact that Fennec knew PII had had manufacturing issues five years earlier and
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`again when the first Pedmark NDA was submitted does not give rise to a strong inference
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`that it had not undertaken efforts to resolve those issues by the spring and summer of
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`2021. Even if one could infer that the deficiencies were ongoing, Mr. Fisher has not
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`alleged any facts tending to show that the defendants were aware of those deficiencies at
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`the time they made the statements in May, June, August, and early September. And even
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`if one could infer that knowledge after the first FDA inspection perhaps as early as July
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`26, he has not alleged any facts tending to show that the defendants knew the deficiencies
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`were so serious that they were likely to cause serious problems for the NDA. The fact
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`that the FDA later found those deficiencies to be serious is not sufficient to give rise to a
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`strong inference that Fennec and the individual defendants acted with intent to deceive.
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`Mr. Fisher faults Fennec for not itself auditing PII’s manufacturing procedures or
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`inspecting PII’s facilities, see Doc. 24 at ¶¶ 8, 66, both of which he says would have led
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`to knowledge of PII’s manufacturing problems. While he arguably alleges that no one at
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`Fennec inspected the plant after the July 2020 CRL through January 2021, id. at ¶ 66, he
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`has no specific allegations directed to whether Fennec did or did not inspect the plant in
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`the four months after January 2021 leading up to the resubmission of the NDA or over
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`the course of the summer and fall. And elsewhere, inconsistent with his allegation of no
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`oversight, he alleges that the defendants were in direct and continuous communication
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`with PII concerning Pedmark’s manufacturing and PII’s plan to address deficiencies
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`12
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`identified in the 2020 FDA inspection, id. at ¶¶ 6, 58–61, and were highly incentivized to
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`keep close tabs on PII because FDA approval of Pedmark was important to the company.
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`Id. at ¶¶ 115, 117.
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`Mr. Fisher also points to the August 11 statements by Mr. Raykov that
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`manufacturing deficiencies had been addressed and that Fennec’s “quality department”
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`believed the facility was ready for resubmission, contending that these were not true
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`statements. See id. at ¶¶ 89–92. As with other assertions, however, he points to no facts
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`supporting an inference that Mr. Raykov and Fennec did not believe the deficiencies had
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`been addressed. And he alleges no facts tending to support an inference that other
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`statements made by Mr. Raykov about PII were untrue—for example, that PII had made
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`significant capital improvements and brought in new leadership and additional
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`employees. As noted supra, he himself alleges that Fennec was in continuous
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`communication with PII, id. at ¶¶ 6, 58–61, and he points to no facts tending to show that
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`PII had not made improvements, even if they later turned out to be inadequate.
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`Finally, the statement itself does shows an absence of intent to deceive. Mr.
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`Raykov also told investors that Fennec had a back-up plan for another manufacturer if it
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`turned out not to be the case that the plant passed muster, id. at ¶ 91, signaling that this
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`was a possibility. He also affirmatively disclaimed providing any “details about the pre-
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`approval proof of inspection because you create expectations.” Id.
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`The situation shifts somewhat on September 29, when Mr. Fisher alleges that
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`Fennec received a copy of the EIR and the Form 483 that identified problems with the
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`manufacturing plant, but the needle does not move up to the “strong inference” point.
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`13
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`There are no allegations that the kinds of deficiencies listed in these two forms are the
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`kind that always, or even almost always, lead to CRLs or non-approval, no allegations
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`that anyone at the FDA told or intimated to Fennec that approval was unlikely; no
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`allegations that anyone at PII told Fennec that the problems were of a kind likely to lead
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`to a CRL; and no allegations that anyone at Fennec made statements tending to show they
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`knew a CRL was forthcoming. And Fennec’s statements themselves, on their face,
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`become more qualified about approval on and after that date, with a second specific
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`mention of contingency plans should PII fail preapproval inspection, tending to show an
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`absence of intent to deceive. Id. at ¶ 96.
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`Even if one might plausibly infer that once Fennec received the EIR and Form 483
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`it knew that approval was unlikely and deliberately withheld that information, that
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`inference is not more plausible than the competing inferences that the defendants
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`innocently or negligently failed to realize these facts and their hopeful statements were
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`merely incorrect, not made with the intent to deceive. See Chapman v. Fennec Pharms.
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`Inc., No. 20-CV-812, 2021 WL 7209981, at *14 (M.D.N.C. Dec. 16, 2021 ) (Mag. J.,
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`Order and Recommendation), adopted 2022 WL 613378 (M.D.N.C. Mar. 2, 2022); see
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`also In re Novan, Inc., No. 17-CV-999, 2018 WL 6732990, at *5 (M.D.N.C. Nov. 30,
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`2018) (scienter allegations based on allegation that defendants should have monitored
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`their drug’s clinical trials more closely were not sufficient to plead scienter because
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`“[t]he facts as a whole more plausibly suggest that Defendants were acting innocently or
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`negligently rather than deliberately misreporting material information or recklessly
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`14
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`Case 1:22-cv-00115-CCE-JLW Document 40 Filed 10/12/22 Page 14 of 17
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`disregarding the truth”) (Mag. J., Opinion and Recommendation), aff’d No. 17-CV-999,
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`Doc. 65.
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`Finally, Mr. Fisher points to Fennec’s statements about having another back-up
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`manufacturer on board as misleading, but he does not identify any facts that support the
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`inference that this statement was untrue, other than the fact that no new NDA had been
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`filed as of the date of the complaint. To the extent he contends Fennec omitted facts
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`about difficult regulatory hurdles it would face in switching manufacturers, the complaint
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`itself showed that Fennec explicitly acknowledged the switch would cause a delay.
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`Doc. 24 at ¶ 96.
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`The complaint contains multiple conclusory statements that the defendants acted
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`knowingly or recklessly, id. at ¶¶ 3, 29, 131, but such conclusory allegations are
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`insufficient. See Chapman, 2021 WL 7209981, at *13; see also Krim v. Coastal
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`Physician Grp., Inc., 81 F. Supp. 2d 621, 632 (M.D.N.C. 1998), aff’d, 201 F.3d 436 (4th
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`Cir. 1999) (per curiam) (unpublished). Perhaps the factual allegations support an
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`inference of negligence, but they do not give rise to a strong inference that the defendants
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`acted with an “intent to deceive, manipulate, or defraud” that is “at least as compelling as
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`any opposing inference one could draw.” Tellabs, 551 U.S. at 319, 324.
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`B. Section 20(a) Claims
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`“Section 20(a) of the Exchange Act imposes liability on each person who controls
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`any person liable under any provision of this chapter or of any rule or regulation
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`thereunder.” KBC Asset Mgmt. NV v. DXC Tech. Co., 19 F.4th 601, 614 n.4 (4th Cir.
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`2021) (cleaned up); accord 15 U.S.C. § 78t(a). The defendants’ § 20(a) liability hinges
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`
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`15
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`Case 1:22-cv-00115-CCE-JLW Document 40 Filed 10/12/22 Page 15 of 17
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`
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`on their § 10(b) liability, and Mr. Fisher’s “failure to adequately plead a § 10(b) claim
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`dooms” his § 20(a) claim. KBC Asset Mgmt., 19 F.4th at 614 n.4; see also Chapman,
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`2021 WL 7209981, at *15 (“Here, because Lead Plaintiff has failed to state a claim under
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`section 10(b), Lead Plaintiff’s 20(a) claims must also fail.”).
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`VI. Motion for Judicial Notice and Consideration
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`The defendants asked the Court to consider twelve documents, ten as
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`“incorporated by reference” into the complaint and two upon judicial notice. Doc. 27.
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`But they barely refer to these documents in their briefs, nor does Mr. Fisher’s complaint
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`rely upon them in any meaningful way. There is no need to consider these documents in
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`evaluating whether the Mr. Fisher’s complaint meets the heightened pleading standards
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`of the PSLRA, so the motion is denied.
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`Similarly, the defendants ask the Court to take judicial notice of a recent FDA
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`press release. Doc. 35. Again, consideration of this document is not needed in
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`evaluating Mr. Fisher’s complaint and ruling on the defendants’ motion to dismiss, so the
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`motion is denied.
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`VII. Conclusion
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`Mr. Fisher’s allegations, taken as a whole, do not raise a strong inference that the
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`alleged misrepresentations or omissions were in fact false, or that defendants acted with
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`scienter as to any misrepresentation or omission. The motion to dismiss will be granted.
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`It is ORDERED that:
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`1. The defendants’ motion to dismiss the amended complaint, Doc. 25, is
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`GRANTED.
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`16
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`Case 1:22-cv-00115-CCE-JLW Document 40 Filed 10/12/22 Page 16 of 17
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`
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`2. The defendants’ request for consideration and judicial notice, Doc. 28, is
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`DENIED as moot.
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`3. The defendants’ second request for judicial notice, Doc. 35, is DENIED as
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`moot.
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`4. Final judgment will be entered as time permits.
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` This the 12th day of October, 2022.
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`__________________________________
` UNITED STATES DISTRICT JUDGE
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`17
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`Case 1:22-cv-00115-CCE-JLW Document 40 Filed 10/12/22 Page 17 of 17
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