Arkansas Public Employees Retirement System v. Bristol-Myers Squibb Co., No. 20-3716 (2d Cir. 2022)
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The Second Circuit affirmed the district court's grant of Bristol-Myers's motion to dismiss for failure to state a claim in a securities class action brought by investors. This securities class action arose from a failed clinical trial conducted to ascertain whether a cancer drug in development would be more effective than chemotherapy in treating a specific type of lung cancer. The second amended complaint alleged that the drop in stock price was attributable to the study's failure, and that Bristol-Myers had obscured the risk of such failure by declining to disclose the precise PD-L1 expression threshold in cancer cells and by misrepresenting that the study focused on patients "strongly" expressing PD-L1.
The court concluded that the investors failed to adequately allege a material misstatement or omission or facts giving rise to a strong inference of scienter. In this case, rates of PDL1 expression remained a topic of research throughout the putative class period; there was no generally understood meaning of "strong" expression that contradicted Bristol-Myers’s use of the term to mean 5%; and some observers correctly predicted Bristol-Myers's use of a 5% threshold before it was publicly disclosed. Furthermore, the complaint alleges no facts indicating that Bristol-Myers had an obligation to disclose the precise threshold; Bristol-Myers cautioned the public that it would not do so; and the complaint fails to allege facts giving rise to a strong inference of scienter.
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