On 27 September 2018, the Sixth Circuit Court of Appeals reversed the dismissal of Dougherty v. Esperion Therapeutics, Inc., et al., a putative securities class action against pharmaceutical company Esperion Therapeutics, Inc. and its CEO. The plaintiffs, investors in Esperion, had alleged that the defendants violated Sections 10(b) and 20(a) of the Exchange Act by falsely stating that, based on feedback received by the company at a meeting with the Food and Drug Administration (FDA), the FDA would not require additional testing of the company's pre-approval anti- cholesterol drug ETC-1002. Esperion's stock price allegedly plummeted when, over a month later, the company issued a press release indicating that, according to the FDA's own final meeting minutes, which had just been provided to the company, additional testing would be required prior to any approval of the drug. The district court, dismissing the plaintiffs' complaint, found that the plaintiffs had failed to adequately plead a strong inference of fraudulent intent (scienter) because they failed to identify facts demonstrating that the defendants actually understood the FDA's communications in a way that was different from what the company had publicly disclosed. The plaintiffs appealed, and the Sixth Circuit reversed.
The Sixth Circuit considered the defendants' argument that the company's August statements regarding the FDA meeting fell within the safe harbour provisions of the Private Securities Litigation Reform Act (PSLRA), under which, the court noted, the defendants are not liable for material forward-looking statements if either the statement is accompanied by meaningful cautionary language identifying important factors that could cause actual results to differ materially, or the plaintiffs fail to prove that it was made with actual knowledge that the statement was false or misleading. The defendants contended that, because the August statements that the FDA had confirmed it would not require completion of additional cardiovascular outcome trial testing (CVOT) prior to approving ETC-1002 occurred prior to the publication of the FDA's minutes, the statements were forward-looking. The court disagreed, and noted that, while Esperion's statements concerned a future event, "that alone does not automatically make them forward- looking statements," and Esperion's statement—that "[w]e know that [ETC-]1002 will not require a [CVOT test] to be completed prior to approval"—was not forward-looking. The Sixth Circuit also disagreed with the district court's conclusion that the contested statements were "assumptions underlying or relating to" a forward-looking statement, and found that, where a defendant makes mixed statements of present fact and future prediction, the statement of present fact can be separated from surrounding forward-looking statements. The Sixth Circuit concluded that Esperion could have ascertained the truth or falsity of its August statements prior to the issuance of those statements, and therefore held that the statements fell outside of the PSLRA safe harbour provisions.
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