On May 23, 2017, the United States Court of Appeals for the Third Circuit, in a non-precedential opinion, affirmed the dismissal of a putative securities fraud class action against Amarin Plc., a biopharmaceutical corporation, and certain of its officers.  In re Amarin Corp. Plc. Sec. Litig., No. 16-2640 (3d Cir. May 23, 2017).  Plaintiff alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”) by intentionally misrepresenting the risk that the U.S. Food and Drug Administration (“FDA”) would require Amarin to complete an “outcomes study” in order to obtain approval of its drug Vascepa for the treatment of patients with elevated triglyceride levels.  In affirming the district court, the Third Circuit found that none of defendants’ statements identified in the complaint were misleading in the context in which they were made because reasonable investors understand there is “a continuous dialogue between the FDA and the proponent of a new drug.”

In 2008, Amarin sought FDA approval of Vascepa to reduce the risk of major adverse cardiac events such as heart attacks by proposing a 12-week trial in which the drug would be used by patients already taking a statin drug like Lipitor (the “short-term study”).  The FDA agreed to the proposed design on the short-term study, but declined to indicate whether the study would ultimately provide an adequate basis for approval as a potential treatment for cardiac risks.  The FDA also required Amarin to initiate an appropriate, long-term outcomes study that was to be “well underway” by the time the FDA began its review of the short-term study.  On October 16, 2013, however, an FDA advisory committee voted to reject the short-term study, finding that there was insufficient data to support the applied for use of Vascepa.  Plaintiff then brought a lawsuit alleging defendants misled investors as to the likely success of the short-term study by failing to disclose the FDA’s reservations about that study.  The district court dismissed the Exchange Act claims in their entirety and plaintiff appealed.

Referring to the district court’s “two comprehensive and thoughtful opinions,” the Third Circuit agreed that defendants’ statements that a long-term trial was “not required” were not misleading when placed in their proper context.  The Court concluded communications between Amarin and the FDA showed the FDA never indicated that a long-term outcomes trial would be required until October 2013.  Indeed, the Third Circuit noted that the FDA “remained open” to Amarin’s short-term study approach and that “no well-pled allegation supports the claim that the FDA reformulated its thinking prior to the [October 16, 2013] advisory committee meeting.”  Moreover, the Court emphasized that Amarin’s contemporaneous public disclosures sufficiently warned investors that the FDA approval process was uncertain and could change.  The Court was similarly unpersuaded by plaintiff’s allegations that Amarin’s optimistic projections of approval were false or misleading, finding that plaintiff failed to allege that defendants did not honestly believe these projections or that defendants lacked a reasonable basis for such a belief.

Securities suits predicated on allegedly misleading disclosures regarding the FDA approval process for pharmaceuticals are very common.  Although the panel designated the decision as not precedential, it is an instructive example of an appellate court drilling down into the specifics of what was actually disclosed about the clinical trial and approval process, and what actually occurred thereafter, in assessing whether a complaint states a claim.