A Texas district court dismissed a securities fraud class action for failure to meet the pleading requirements of the Private Securities Litigation Reform Act. Defendants developed a drug that had been approved for marketing abroad. The drug had not yet been approved by the Food and Drug Administration, although it had issued two letters stating the drug was “approvable.” Plaintiffs alleged that the company made false and misleading statements that caused the price of its stock to be artificially inflated, and identified statements made by defendants in press releases, corporate reports and conference calls with analysts relating to clinical studies and comparisons with a competing drug.
Plaintiffs did not allege that defendants falsified or misstated the status and results of the clinical trial, but rather alleged the statements were false because the supporting trials were “inadequate.” The Court determined that absent a particularized allegation that the company knew its trials were fraudulent, plaintiffs failed to allege a false statement. The Court further determined that the company’s statements that it had a “good shot” at receiving priority review from the FDA were statements concerning the company’s “hopes and expectations” accompanied by appropriate cautionary language and thus were protected by the PSLRA’s “safe harbor” provision which protects such forward-looking statements. (Oppenheim Pramerica Asset Mgmt. S.A.R.l. v. Encysive Pharms., Inc., No. Civ.A.H.-06-3022, 2007 WL 2720074 (S.D.Tex. Sept. 18, 2007