The defendant biotech company submitted an application to the Food and Drug Administration (FDA) to approve one of its drugs. As part of the approval process, an inspection of defendant’s manufacturing facility was conducted, which resulted in the issuance of a “Form 483”, which set forth significant objectionable conditions at the facility. During a conference call held with investors and security analysts after defendant received the Form 483, defendant’s Chief Science Offer stated that “we hosted a good inspection” in response to a question of whether the facilities inspection “passed the muster.”Defendant’s receipt of the Form 483 was not disclosed during the call. Shortly thereafter, the FDA rejected defendant’s approval application, citing defendant’s facility inspection as one of the reasons for doing so. Immediately after the FDA’s rejection, defendant’s stock price fell by more than 60%.  

Plaintiffs sued the defendant company and several of its officers for violating, among other things, section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 based on the “good inspection” comment made during the conference call. The defendant moved to dismiss, arguing that the statement was not actionable because it was a statement of opinion. The court rejected the argument, ruling that projections of optimism are actionable under federal securities laws if the statement is not genuinely believed, if there is not a reasonable basis for that belief, or if the speaker is aware of any undisclosed facts tending to seriously undermine the accuracy of the statement.  

The court held that the defendant’s failure to mention its receipt of the Form 483 was a material omission which, if it had been disclosed, could reasonably be inferred to have resulted in some reasonable investors disagreeing with defendant’s description of the inspection as “good.” The court further held that the plaintiff sufficiently pleaded scienter. The court noted that the totality of defendants’ knowledge of the issuance of the Form 483 (which the parties agreed was a form that was only issued for “significant objectionable conditions”), defendant’s failure to mention the Form 483 and defendant’s “good inspection” comment were sufficient to satisfy the applicable scienter standard under Tellabs. (McGuire v. Dendreon Corporation, 2008 WL 5130042 (W.D. Wash. 2008))