In re Ariad Pharmaceuticals, Inc., Securities Litigation

MEMORANDUM AND ORDER

I. INTRODUCTION

This is a shareholder class action brought by Joseph Bradley, the City of Fort Lauderdale Police & Fire Retirement System, Pension Trust Fund for Operating Engineers and Automotive Industries Pension Trust Fund, and William A. Gaul, D.M.D. (collectively, “the Lead Plaintiffs”), on behalf of themselves and all similarly-situated shareholders, against ARIAD Pharmaceuticals, Inc. (“ARIAD”), several officers and directors of ARIAD (Chief Executive Officer Harvey Berger, Chief Financial Officer Edward Fitzgerald, Chief Medical Officer Frank Haluska, and Chief Scientific Officer Timothy Clackson) (“the Individual Defendants,” together with AR-IAD, the “ARIAD Defendants”), and seven underwriters. The underwriter defendants are J.P. Morgan Securities LLC, Cowen and Company, LLC, Jefferies & Company, Inc., BMO Capital Markets Corp., Leerink Swann LLC, RBC Capital Markets, LLC, and UBS Securities LLC (collectively, “the Underwriters”).

The Lead Plaintiffs bring this proposed class action on behalf of themselves and all other persons or entities who purchased or acquired (1) any publicly-traded ARIAD securities between December 12, 2011 arid October 30, 2013 (the “Class Period”), or (2) any of ARIAD’s common stock pursuant or traceable to the secondary offering that occurred on or about January 24, 2013 (“2013 Stock Offering”) and were damaged thereby. Corrected Consol. Compl. Violations Fed. Secs. Laws (“Compl.”) 1, ECF No. 131. They allege that the ARIAD Defendants made a series of false and misleading statements and omissions in regards to the safety, efficacy, and commercial prospects of ARIAD’s main product, a cancer medication called ponatinib, which is used to treat chronic myeloid leukemia. *154Id. As a result of these statements and omissions, the Lead Plaintiffs allege that the price of ARIAD common stock traded at artificially high values, while ARIAD concealed the full extent of adverse events arising from their clinical trials. Id. ¶¶ 56. Arguing that the Individual Defendants knew the full extent of the negative results stemming from the ongoing clinical trials, the Lead Plaintiffs allege that the Individual Defendants engaged in suspicious and unusual stock sales during the Class Period. Id. ¶ 327. They also bring a claim against the ARIAD Defendants and the Underwriters under Section 11 of the Securities Act of 1933 (“Section 11”) for alleged misstatements and omissions in stock offering materials. Id. ¶¶ 416-17.

The ARIAD Defendants and the Underwriters seek dismissal of all claims against them.

A. Procedural History

This litigation began on October 10, 2013 upon the filing of a class action complaint by Jimmy Wang against ARIAD and four of its officers. Class Action Compl. for Violations of Fed. Secs. Laws, ECF No. 1. The case was initially drawn to Judge Joseph Tauro, Elec. Notice, Oct. 11, 2013, ECF No. 3, but was reassigned to this Court shortly thereafter, Elec. Notice, Dec. 10, 2013, ECF No. 38.

On January 9, 2014, the Court entered an order consolidating several related actions into this single litigation, selecting lead plaintiffs, and approving the selection of lead counsel. Order, Jan. 9, 2014, ECF No. 95. The operative complaint was filed as a corrected consolidated complaint by the Lead Plaintiffs on March 25, 2014. Compl. The complaint is divided into two distinct and stand-alone parts, the first of which contains fraud allegations arising under Section 10(b), Rule 10b-5 promulgated thereunder by the United States Securities and Exchange Commission (“SEC”), and Section 20(a) of the Securities Exchange Act of 1934, Compl. ¶¶ 20-415 and the second of which contains allegations and claims arising under Section 11 of the Securities Act of 1933. See Compl. ¶¶ 416-85.

The two motions addressed by the Court here are motions to dismiss for failure to state a claim brought by the ARIAD Defendants and the Underwriters on April 14, 2014. ARIAD Defs.’ Mot. Dismiss Corrected Consol. Compl., ECF No. 147; Mem. Supp. ARIAD Defs.’ Mot. Dismiss Corrected Consol. Compl. (“ARIAD Defs.’ Mem.”), ECF No. 148; Underwriter Defs.’ Mot. Dismiss, ECF No. 144; Underwriter Defs.’ Mem. Law Supp. Mot. Dismiss (“Underwriter Defs.’ Mem.”), ECF No. 145. The Lead Plaintiffs filed an omnibus memorandum of opposition to the motions to dismiss on May 21, 2014. Pis.’ Omnibus Mem. Law Opp. Defs.’ Mot. Dismiss Corrected Consol. Compl. (“Pis.’ Opp’n”), ECF No. 157. On June 4, 2014, the Underwriters submitted a reply in further support of their motion to dismiss, Underwriter Defs.’ Reply Mem. Law Further Supp. Mot. Dismiss (“Underwriter Defs.’ Reply”), ECF No. 162, and on June 5, 2014, the ARIAD Defendants submitted their own reply memorandum. ARIAD Defs.’ Reply Mem. Further Supp. Mot. Dismiss Corrected Consol. Compl. (“AR-IAD Defs.’ Reply”), ECF No. 166.

B. Facts Alleged1

ARIAD is a biotechnology company based in Cambridge, Massachusetts, spe*155cializing in the development and sale of cancer drugs. Compl. ¶ 429. For several years, the company primarily has focused on developing the drug ponatinib, also known as Iclusig, as a treatment for chronic myeloid leukemia (“CML”). Id. In particular, ARIAD focused on developing a front-line drug to compete with existing drugs to treat CML, noting that front-line drugs are more lucrative products than second-line drugs. Id. ¶ 11 (explaining that front-line drugs “typically outsell second-line treatments by many orders of magnitude”). In the course of seeking approval by the U.S. Food and Drug Administration (“FDA”), ARIAD commenced a clinical trial on September 13, 2010, referred to by the parties as the PACE 2 trials. Id. ¶ 47. The trial was “designed to assess the efficacy and safety of ponatinib in a larger subject group” consisting of “second-line” CML patients, meaning those with a demonstrated resistance to other, more established treatments. Id. ¶¶ 47-49, 431. The PACE 2 protocol provided for 449 test subjects to be treated with a recommended daily dose of 45 milligrams of the drug. Id. ¶ 49. Seeking funding for their ongoing clinical trials, ARIAD held its first of two stock offerings in December 2011, raising $258,000,000. Id. ¶ 62.

On June 4, 2012, ARIAD announced favorable interim results at a medical conference, citing “clear evidence of a favorable safety and tolerability profile in ponatinib in resistant or intolerant CML patients.” Id. ¶ 50-51. ARIAD also submitted an interim report to the FDA containing data through the end of July 2012 (the “July 2012 Interim Report”). Id. ¶ 433. The results of this interim report documented adverse cardiovascular events in test subjects, including the incidence of “serious arterial thrombosis” in eight percent of patients. Id. ¶¶ 433, 435.

Shortly after the submission of the July 2012 Interim Report, ARIAD began a new clinical trial (the “EPIC” trial), which “was designed to support FDA approval of ponatinib in newly-diagnosed, never-treated CML patients, a.k.a. ‘front-line’ CML.” Id. ¶ 434. The prescribed dosage for the EPIC trial was also 45 milligrams daily. Id.

On December 14, 2012, ARIAD filed a Form 8-K and announced in a press release that the FDA had granted accelerated approval to market ponatinib for second-line use. Id. ¶¶ 76-79, 435 (noting that the FDA relied on and publicized the data evinced in the July 2012 Interim Report). This press release included the list of serious adverse events that had occurred, including an eight percent occurrence of “serious arterial thrombosis” and four percent occurrence of serious congestive heart failure, with four fatalities. Id. ¶¶ 78-79. The FDA’s approval was conditioned on two requirements: first, that each bottle of ponatinib include a “black box” warning label disclosing the occurrence of serious adverse cardiovascular events in users, and second, that ARIAD submit follow-up PACE 2 data to the FDA. Id. ¶¶ 110, 435-36. A “black box” warning is the strongest warning level for a prescription drug under FDA guidelines. *156Id. ¶¶ 81-82. The same day as the press release, ARIAD’s share price fell twenty-one percent. Id. ¶ 88.

One month later, ARIAD conducted a public secondary offering of common stock (“the Offering”) on January 24, 2013, id. ¶ 439, with the intention that the proceeds of the Offering be earmarked for developing and manufacturing ponatinib, id. ¶ 63. In connection with the Offering, the Underwriters prepared materials, including a prospectus supplement, to accompany existing materials such as a shelf registration statement, a prospectus, and a number of SEC filings (collectively, “the Offering Materials”). Id. ¶ 441. ARIAD issued 15,-307,000 shares in the Offering and raised $310,000,000. Id. ¶¶ 439-40.

In August 2013, ARIAD submitted follow-up data from the PACE 2 trials to the FDA. Id. ¶ 437. The new data, which covered the trial period from August 2012 to August 2013, “showed [among other things] that the rate of serious arterial thrombosis associated with ponatinib had increased from 8 [percent] to 11.8 [percent] in the time since” July 2012. Id.

Two months later, ARIAD announced that the FDA had terminated the EPIC trial, foreclosing ponatinib’s approval for front-line use, which resulted in a stock value drop of forty-one percent. Id. ¶ 17. Shortly thereafter, ARIAD announced that the FDA had suspended marketing of ponatinib, resulting in a further forty-four percent drop in market value. Id. The FDA disclosed a number of serious adverse side effects occurring in ponatinib patients and stated that “[a]t this time, [the] FDA cannot identify a dose level or exposure duration that is safe.” Id. ¶ 438.

After the Class Period ended, ARIAD announced on December 20, 2013 that the FDA was now allowing the marketing and distribution of ponatinib under a new label which included additional language on vascular occlusive events and heart failure. Id. ¶¶ 309-10. This re-labeling significantly narrowed the eligible population of CML-patients, as it was relegated for third and fourth-line usage. Id. ¶ 312. The FDA issued independent safety findings on December 18, noting that “similar rates of serious vascular events have not been observed in several other drugs of this class.” Id. ¶ 313.

II. ANALYSIS: Claims Against the Defendant ARIAD

A. Standard of Review

1. The Motion to Dismiss Standard

Under the Federal Rules of Civil Procedure, a complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). To survive a Rule 12(b)(6) motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A mere recital of the legal elements supported only by conclusory statements is not sufficient to state a cause of action. Id. at 555, 127 S.Ct. 1955.

Relatedly, “courts increasingly insist that more specific facts be alleged where an allegation is conclusory.” Plumbers’ Union Local No. 12 Pension Fund v. Nomura Asset Acceptance Corp., 632 F.3d 762, 773 (1st Cir.2011) (citing Maldonado v. Fontanes, 568 F.3d 263, 266, 274 (1st Cir.2009)). Even at the motion to dismiss stage, “ ‘naked assertionfs]’ devoid of ‘further factual enhancement’ ” are not entitled to a presumption of truth. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S. at 557, 127 S.Ct. 1955). “[I]t is only when ... conclusions are logically *157compelled, or at least supported, by the stated facts, that is, when the suggested inference rises to what experience indicates is an acceptable level of probability, that ‘conclusions’ become ‘facts’ for pleading purposes.” Cooperman v. Individual, Inc., 171 F.3d 43, 47-48 (1st Cir.1999) (quoting Dartmouth Review v. Dartmouth College, 889 F.2d 13, 16 (1st Cir.1989)).

2. Standard of Review in Securities Actions

In many securities actions, a heightened pleading standard applies. This is so because claims alleging fraud are subject to the stricter standards of Federal Rule of Civil Procedure 9(b), and because the Private Securities Litigation Reform Act (“PSLRA”), Pub. L. No. 104-67, codified at 15 U.S.C. § 78u-4, imposes an even more rigorous standard on scienter allegations, a required element of fraud claims under Section 10 of the Exchange Act. See Lenartz v. Am. Superconductor Corp., 879 F.Supp.2d 167, 180 (D.Mass.2012). PSLRA, enacted as a “check against abusive litigation by private parties,” requires that plaintiffs “state with particularity both the facts constituting the alleged violation, and the facts evidencing scienter, i.e., the defendant’s intention ‘to deceive, manipulate, or defraud.’ ” Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 313, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007) (internal citation omitted).

Plaintiffs pleading a violation of Section 11 of the Securities Act, however, typically “need only satisfy the notice-pleading standard of Fed.R.Civ.P. 8(a),” since scienter is not an element of Section 11. Silverstrand Invs. v. AMAG Pharm., Inc., 707 F.3d 95, 102 (1st Cir.2013). The First Circuit recognizes one exception to the “relatively minimal burden” of pleading a Section 11 claim: when the allegations supporting a Section 11 claim sound in fraud, ... they are subject to the heightened requirements of Rule 9(b). Shaw v. Digital Equip. Corp., 82 F.3d 1194, 1223 (1st Cir.1996). “[C]ourts must ensure that [Section 11 allegations] truly do ‘sound in fraud’ before the heightened pleading standard ... attaches.” In re Number Nine Visual Tech. Corp. Sec. Litig., 51 F.Supp.2d 1, 12 (D.Mass.1999).

Here, the Plaintiffs’ Section 10b, Rule 10b-5, and Section 20 claims sound in fraud and must therefore meet the rigorous scienter standards under the PSLRA. The Plaintiffs’ Section 11 claims, however, do not sound in fraud. Compl. ¶ 417 (“Lead Plaintiffs do not allege or intend to allege any claims or assertions of fraud in connection with their claims in this section of the Complaint, which are rooted exclusively in theories of innocent and/or negligent conduct to which the strict liability provisions of the §§ 11 and/or 15 apply----”). Although the first part of the complaint contains extensive allegations of fraudulent representations and concealment by ARIAD and its management, there are no allegations in the second part of the complaint suggesting that any of the Underwriters affirmatively knew of or attempted to cause incomplete and misleading disclosures in the Offering Materials. The second part of the complaint addressing the Section 11 claims, then, is subject to the ordinary pleading standard applicable to a Rule 12(b)(6) motion to dismiss ... See In re WebSecure, Inc. Sec. Litig., 182 F.R.D. 364, 367 (D.Mass.1998) (O’Toole, J.) (holding that Section 11 claims against underwriters do not sound in fraud because “[njowhere in the complaint is there any allegation of scienter with regard to the underwriter defendants”).

B. Count 1: Section 10(b) and Rule 10b-5 Violations

The Plaintiffs allege that ARIAD, throughout the Class Period, provided an *158overly positive outlook on safety and efficacy data from the ongoing PACE 2 trial, describing the drug as “well tolerated” without full disclosure of dosage reductions and serious cardiovascular side effects that occurred in the pre-approval period. See Compl. ¶¶ 146-239. In December 2012, ARIAD’s tune changed with the disclosure of serious adverse events through AR-IAD’s FDA approval announcement, resulting in ARIAD stock price dropping more than twenty percent in a single day. Pis.’ Opp’n 12. The Plaintiffs allege that ARIAD continued to make positive statements in the post-approval period, with the “full truth” only emerging in October 2013. Compl. 16.

Section 10 of the Exchange Act provides:

It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange ... (b) To use or employ,' in connection with the purchase or sale of any security ... any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.

15 U.S.C. § 78j(b). To state a claim under Section 10(b) of the Exchange Act, and Rule 10b-5 promulgated. thereunder, the Plaintiffs must allege that: “(1) in connection with the purchase or sale of securities, (2) the defendant made a false statement or omitted a material fact, (3) with the requisite scienter, and that (4) plaintiff relied on the statement or omission, (5) with resultant injury.” Lenartz, 879 F.Supp.2d at 180-81; see also Dura Pharm., Inc. v. Broudo, 544 U.S. 336, 341, 125 S.Ct. 1627, 161 L.Ed.2d 577 (2005). Materiality requires that there be “a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the ‘total mix’ of information made available.” Basic Inc. v. Levinson, 485 U.S. 224, 231-32, 108 S.Ct. 978, 99 L.Ed.2d 194 (1988) (quoting TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449, 96 S.Ct. 2126, 48 L.Ed.2d 757 (1976)). Because these claims sound in fraud, the Plaintiffs must plead with particularity, pursuant to Rule 9(b) and PSLRA, To survive a motion to dismiss, “the plaintiff must ‘specify each statement alleged to have been misleading [and] the reason or reasons why the statement is misleading,’ ” Hill v. Gozani 638 F.3d 40, 55 (1st Cir.2011) (quoting ACA Fin. Guar. Corp. v. Advest, Inc., 512 F.3d 46, 58 (1st Cir.2008)), and each alleged act or omission must “state with particularity [the] facts giving rise to a strong inference that the defendant acted with the required state of mind.” Id. (quoting 15 U.S.C. § 78u-4).

1. Scienter Requirements

Section 10(b) requires the plaintiff to show scienter, i.e. that the speaker “acted with fraudulent intent or knowing or reckless disregard of his obligation to disclose.” In re Boston Sci. Corp. Sec. Litig., 686 F.3d 21, 29 (1st Cir.2012) (citing Automotive Indus. Pension Trust Fund v. Textron, Inc., 682 F.3d 34, 38-39 (1st Cir.2012)). PSLRA requires that a strong inference of scienter be pled, amounting to a “cogent and at least as compelling as any opposing inference one could draw from the facts alleged.” Tellabs, 551 U.S. at 324, 127 S.Ct. 2499.

The First Circuit in N.J. Carpenters Pension & Annuity Funds v. Biogen IDEC Inc., 537 F.3d 35, 55 (1st Cir.2008), established that “[i]f there is reason to be concerned about material omissions or *159misrepresentations, the presence of insider trading can be used, in combination with the other evidence, to establish scienter.” See also Smith v. First Marblehead Corp., 55 F.Supp.3d 223, 231 (D.Mass.2014) (Saris, J.) (“A strong inference of scienter can also be supported by indirect evidence,” including evidence of “[i]nsider trading, or sudden sales of shares by the defendants,” which is “highly probative of scienter.”); cf. Mississippi Pub. Emps. Ret. Sys. v. Boston Sci. Corp., 649 F.3d 5, 29 (1st Cir.2011) (“Insider trading cannot establish scienter on its own, but rather can only do so in combination with other evidence.”).

The Plaintiffs allege that false and misleading statements were made, essentially by omission, about ponatinib and its adverse cardiovascular effects, widespread dosage reduction, and potential for front-line approval throughout the Class Period, causing ARIAD stock to trade at inflated prices. Pls.’ Opp’n 19. The ARIAD Defendants counter these allegations by arguing that the Plaintiffs are unable to show that “at the time these statements were made, the ARIAD Defendants knew that the statements were false or that additional disclosures were necessary to make them not misleading.” ARIAD Defs.’ Mem. 7. They also posit that alleged omissions surrounding the PACE trial and dosage reductions were, in fact, disclosed and nonmaterial. Id. at 12. Finally, the ARIAD Defendants state that allegations of the Individual Defendants’ insider trading were motivated by normal, financial incentives under allowable “Rule 10b5-l plans,” rather than by a personal profit motive, and do not support an inference of scienter. Id. at 16-17.

Upon review of the alleged misrepresentations regarding serious adverse events, dosage reductions, and forecasts on the long-term safety and efficacy of ponatinib, the Court determines that while certain material misstatements and omissions were indeed made by the ARIAD Defendants, the Plaintiffs fail to establish that they were made with scienter.

2. Pre-Approval Statements: Omissions Regarding Dosage Reduction

In the first ponatinib clinical trial, the FDA approved a maximum dosage of 45 milligrams of ponatinib for late-stage CML patients. Pls.’ Opp’n 7, 23 (resulting from the PACE 1 trial which tested safety and efficacy across different dosage levels). As admitted by Harvey Berger, the chairman and CEO of ARIAD, the only way to ensure ponatinib’s success as a frontline drug would be to have a successful trial using the 45 milligram dosage. Id. at 23-24 (“... if there was widespread reduction of the dosage level below 45 mg, then ponatinib stood virtually no chance of being approved as a ‘front-line’ CML treatment.”).

In December 2012, ARIAD announced it had received FDA approval for ponatinib to treat patients with TKI-resistant or intolerant CML, although they had to publish a strong warning label disclosing serious cardiovascular events and lower dosage levels in the clinical study. Compl. ¶¶ 76-79, 87. The Plaintiffs argue that up to this point, investors had been kept in the dark about the overall rate of dosage reductions (amounting to approximately seventy-three percent) that occurred in the PACE 2 trial. Pls.’ Opp’n 24 (describing ARIAD’s statements on dosage reductions as “vague,” and made in an effort to “convey that dose reductions were a relatively rare occurrence.”). They point to the drop in share price from $23.88 to $18.93 on the day of the announcement as evidence that investors were surprised by the news. Compl. ¶ 88.

*160The ARIAD Defendants counter that dosage reductions had been made known to investors, and that alternatively, the reductions were not material information. ARIAD Defs.’ Mem. 11. It is evident from the Defendants’ own explanation, however, that their disclosures were lacking in substance and delivered in limited fora. The disclosures were described as follows: On December 12, 2011, Chief Medical Officer Frank Haluska mentioned that three dosage levels were used in the PACE 2 trial and that “[i]n some cases, you go down to the next lowest level.” Id. (answering an analyst’s question during a webcast which was later posted to ARIAD’s website). His answer made no mention of the rate of dosage reduction. In June 2012, a clinical investigator stated that “a few” patients had their ponatinib dosages reduced in order to control adverse events. Id. at 1112 (responding to an audience member’s question during an investor event). It is questionable how these two disclosures, the latter of which did not even come from an ARIAD officer, constituted meaningful disclosure of the total rate of dosage reduction affecting more than half the participants in the PACE 2 study.

The ARIAD Defendants also argue that even if the dosage reductions were not disclosed, they did not constitute material information under the “total mix of information” standard, because the overall results of the PACE 2 trial “undisputably showed ponatinib to be efficacious, a conclusion endorsed by FDA when it approved the drug in December 2012.” ARIAD Defs.’ Mem. 12.

This argument, that eventual FDA approval excused the disclosure of certain facts in hindsight, is problematic because it ignores the “total mix” framework for materiality. Although the Plaintiffs concede that adverse event reports were made available (albeit “buried” in the FDA website in July 2012), and were discussed in part in ARIAD’s December 11th press release, the fact that the stock value plummeted twenty-one percent on December 14th, when ARIAD announced that eight percent of patients suffered serious cardiovascular adverse events, suggests that this information had a palpable impact on the market. Compl. ¶¶ 78-79, 88. These specific disclosures omitted material information to ARIAD investors, especially in light of how important the 45 milligram dosage level was for obtaining front-line approval. See Hill, 638 F.3d at 55 (1st Cir.2011) (“[T]he plaintiff must ‘specify each 'statement alleged to have been misleading [and] the reason or reasons why the statement is misleading.’ ”) (quoting ACA Fin. Guar., 512 F.3d at 58). While dosage reduction rates were material information, whether the Plaintiffs have alleged this material misrepresentation with scienter is less clear, and is discussed in Section IIB4 below.

3. Pre-Approval Statements: Positive Forecast on Ponatinib’s Safety and Efficacy

Throughout the pre-approval stage, AR-IAD regularly updated investors regarding the potential approval and marketability of ponatinib, noting ongoing incidents of adverse events in the PACE 2 population. ARIAD’s forecast remained sunny throughout the Class Period, describing adverse events as “manageable” and “well-tolerated.” Compl. ¶ 3. Early in the Class Period, Berger told investors that he expected ponatinib to generate more than $600,000,000 in short-term sales and over $900,000,000 in long-term sales. Pls.’ Opp’n 7. In a December 2011 press release, ARIAD announced that preliminary data from the PACE trial presented a “favorable safety and tolerability profile of ponatinib in resistant or intolerant CML patients,” Compl. ¶ 146-47 (noting that the *161Class Period began on December 12, 2011, one day after the filing of ARIAD’s Form 8-K and press release). This press release listed common adverse events as including “rash,” “thrombocytopenia,” “dry skin,” “abdominal pain,” and “headache,” and noted four on-study deaths as possibly related to ponatinib. Id. ¶ 146 (omitting any mention of cardiovascular side effects). On January 12, 2012, Berger spoke at a healthcare conference “distinguishing] ponatinib from its competitors” as a “new class of drugs.” Pls.’ Opp’n 7-8. On February 13, 2012, Berger commented that “[i]t appears certainly from the preliminary data ... [a]dverse events ... are quite manageable and ... not something the physicians are concerned about.” Compl. ¶ 163.

On December 11, 2012, an investment bank, Cowen and Company, published an analyst report which opined that “[p]onatinib’s profile continues to look very benign, with few worrisome signals.” Compl. ¶233. The most severe side effect discussed was a five percent rate of pancreatitis, but the report noted that “only one patient discontinued therapy because of pancreatitis.” Id.

Emphasizing that Berger and other company officers had “real time access” and “daily data to the patient level,” Pls.’ Opp’n 20, the Plaintiffs argue that the ARIAD Defendants knew of much more severe side effects that were not disclosed until December 2012, including serious arterial thrombosis in eight percent of trial patients, congestive heart failure or left ventricular dysfunction in four percent of patients (with four fatalities), and “treatment-emergent hypertension” in sixty-seven percent of patients, Compl. ¶ 148. These adverse events were reported in the July 2012 Interim Report, which formed the basis of the December 2012 FDA approval and black box warning requirement. Id. ¶¶ 433, 435.

Was ARIAD under an obligation to disclose the serious adverse events to investors prior to the December 2012 press release? This Court concludes that it was. In Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27, 131 S.Ct. 1309, 1321, 179 L.Ed.2d 398 (2011), the Supreme Court affirmed that Section 10(b) “do[es] not create an affirmative duty to disclose any and all material information.” Rather, the plaintiff must prove that “the defendant made a statement that was ‘misleading as to a material fact,’ ” which would have created “a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the ‘total mix’ of information made available.’ ” Id. at 1318 (quoting Basic, 485 U.S. at 231-32, 238, 108 S.Ct. 978; accord Boston Sci. Corp., 686 F.3d at 27 (1st Cir.2012)). Addressing whether the disclosure of specific serious adverse events should have been disclosed, the Supreme Court in Matrixx held that the incidence of anosmia (loss of smell) in users of the drug, Zicam, although not arising to a level of statistical significance, was material information to the reasonable investor and ought thus have been disclosed. Matrixx, 131 S.Ct. at 1321 (“Given that medical professionals and regulators act on the basis of evidence of causation that is not statistically significant, it stands to reason that in certain cases reasonable investors would as well.”).

The ARIAD Defendants argue that they were not obligated to disclose these serious adverse events because there was no proof that ponatinib caused the cardiovascular events at the time ARIAD spoke about ponatinib’s safety and tolerability. ARIAD Defs.’ Mem. 9. Specifically, they argue that serious arterial ischemic events and cardiovascular issues were due to *162preexisting risk factors in the study group and that the trial’s single-arm design did not allow the FDA to conclude whether ponatinib caused the adverse events. Id. They acknowledge that even had they known of the adverse events prior to the December 2012 press release, they (and “independent clinical investigators”) truly believed that ponatinib was not the cause. Id. (citing In re Rigel Pharm. Inc. Sec. Litig., 697 F.3d 869, 880 n. 8 (9th Cir.2012), which held “as long as the omissions do not make the actual statements misleading, a company is not required to disclose every safety-related result from a clinical trial, even if the company discloses some safety-related results and even if investors would consider the omitted information significant.”). Second, the ARIAD Defendants claim that they had “no way of knowing that FDA would ultimately require a boxed warning for adverse events that neither ARIAD nor FDA linked to ponatinib,” id., which as a result, renders their positive statements not misleading.2

Regardless, the Supreme Court has held that serious adverse events and fatalities can be deemed material to investors even at non-significant rates. Matrixx, 131 S.Ct. at 1322-23 (holding that the occurrence of anosmia in approximately ten Zicam users, was deemed material information to investors even though the rate of anosmia was not “statistically significant”). The fact that ARIAD’s stock price dropped more than twenty percent on December 14, 2012 with the “revelation of the significant safety issues,” Pls.’ Opp’n 12, and dropped again on October 9, 2013, with the announcement of more cardiovascular adverse events and the suspension of the EPIC trial, id. at 16, strongly indicates that these adverse events were material to ARIAD investors. See also Compl. ¶¶ 283-85 (the October 2013 disclosure indicated a higher rate of serious arterial thrombosis in 11.8 percent of subjects, and a study-wide dosage reduction to 30 mg of ponatinib). Even analysts noted they were unaware of serious ischemic events until the December 2012 issuance of a black box warning, stating that “the large number of side effects and the severity of the side effects came as a surprise to the investment community.” Pls.’ Opp’n 12-13. Finally, ARIAD itself seemed to treat adverse events as having been caused by ponatinib, as evidenced by how ponatinib use was discontinued in patients experiencing arterial thrombotic events, and by the noted occurrences of “treatment-emergent hypertension” in the trial. Compl. ¶¶ 78-79.

The market’s reaction to the December 2012 disclosures strongly suggests that the rates of serious ischemic events altered the “total mix” of information relied on by investors. Even though ARIAD was not obliged to disclose all adverse events from their clinical trials, Matrixx, 131 S.Ct. at 1321, the market’s sharp reaction to the black box warning, combined with AR-*163IAD’s own assessment of adverse events as having been caused by ponatinib, indicates that the rate of serious cardiovascular events should have been disclosed in a non-misleading manner.

Whether the ARIAD Defendants made these positive statements knowing they were misleading is not explicitly supported in the pleadings. The ARIAD Defendants argue that the Plaintiffs fail to specify when and what information was known at the times pre-approval statements were made to investors. ARIAD Defs.’ Mem. 8. For example, early statements from December 2011 that ponatinib was “well tolerated” may have well been true at the time they were made, because serious ischemic events (disorders related to the deficiency of blood flow to a part of the body) were not observed until a full year later. Id. (citing to the July 23, 2012 “updated data cut-off date” where ischemic events were measured in eight percent of patients). Indeed, the Plaintiffs allege that the July 2012 Interim Report data were “facts contemporaneously known” to ARIAD at the time the statements were made, Compl. ¶ 151, but how this constitutes a “conscious[ ] inten[t] to defraud” or a “high degree of recklessness,” In re Genzyme Corp. Sec. Litig., 754 F.3d 31, 40 (1st Cir.2014) (quoting Mississippi Pub. Emps. Ret. Sys. v. Boston Sci. Corp., 523 F.3d 75, 85 (1st Cir.2008)), is left unexplained. First, the fact that ARIAD was under the close supervision of the FDA in the run-up to its eventual approval cuts strongly against any inference that ARIAD was acting recklessly in hiding serious ischemic events from investors. Second, the complaint is devoid of specific allegations as to how ARIAD or the Individual Defendants actively sought to conceal negative information from investors or the FDA. While this Court views serious ischemic events as material information to investors, the Plaintiffs have not demonstrated how these pre-approval omissions were made with intent to defraud and, as a result, scienter is not here adequately alleged.

4. Post-Approval Statements: Continuing Positive Outlook on Ponatinib’s Success

The Plaintiffs allege that after receiving second-line FDA approval in December 2012, the Defendants continued to make statements attempting to convince the market that the negative announcements regarding the black box warning label were minor setbacks, and that ponatinib was on its way to front-line approval. Pls.’ Opp’n 25. The Plaintiffs claim that partial, misleading disclosures were made in ARIAD’s March 2013 Form 10-K and Form 8-K, in