20-3716-cv Arkansas Public Employees Retirement System v. Bristol-Myers Squibb Co.

United States Court of Appeals for the Second Circuit AUGUST TERM 2021 No. 20-3716-cv

ARKANSAS PUBLIC EMPLOYEES RETIREMENT SYSTEM, LOUISIANA SHERIFFS’ PENSION & RELIEF FUND, ERSTE-SPARINVEST KAPITALANLAGEGESELLSCHAFT MBH, Plaintiffs-Appellants,

JENNIFER TUNG, Individually and on behalf of all others similarly situated, METZLER ASSET MANAGEMENT GMBH, Plaintiffs

v.

BRISTOL-MYERS SQUIBB COMPANY, MICHAEL GIORDANO, FOUAD NAMOUNI, FRANCIS M. CUSS, GIOVANNI CAFORIO, LAMBERTO ANDREOTTI, CHARLES A. BANCROFT, Defendants-Appellees.

ARGUED: OCTOBER 5, 2021 DECIDED: MARCH 11, 2022

Before: LIVINGSTON, Chief Judge, JACOBS, MENASHI, Circuit Judges.

Plaintiffs Arkansas Public Employees Retirement System, Louisiana

Sheriffs’ Pension & Relief Fund, and Erste-Sparinvest Kapitalanlagegesellschaft

mbH appeal from the United States District Court for the Southern District of New York’s (Vyskocil, J.) grant of the motion to dismiss for failure to state a

claim. The appellants fail to plead with particularity facts sufficient to show a

material misstatement or omission or give rise to a strong inference of scienter.

We AFFIRM.

____________________

SALVATORE J. GRAZIANO, Bernstein Litowitz Berger & Grossmann LLP, New York, NY (Lauren A. Ormsbee, Jesse L. Jensen; Javier Bleichmar, Bleichmar Fonti & Auld LLP, New York, NY; William H. Narwold, Motley Rice LLC, Hartford, CT; Robert D. Klausner, Klausner, Kaufman, Jensen & Levinson, PA, Plantation, FL on the brief), for Plaintiffs-Appellants.

YOSEF J. RIEMER, Kirkland & Ellis LLP, New York, NY (Matthew Solum, Daniel R. Cellucci on the brief), for Defendants-Appellees.

DENNIS JACOBS, Circuit Judge:

This securities class action arises from a failed clinical trial conducted to

ascertain whether a cancer drug in development would be more effective than

chemotherapy in treating a specific type of lung cancer. Understanding the

allegations of misstatement in the case requires a rudimentary understanding of

the science.

2 Typically, the protein PD-L1 acts in healthy cells to bind with a second

protein (PD-1) present on immune system T-cells to prevent them from attacking

the healthy cells. This interaction is usually salutary, but when PD-L1 is present

in cancer cells, the interaction can prevent the immune system from responding

to the cancer cells as well.

The new drug, called a PD-1 checkpoint inhibitor, is designed to prevent

the PD-L1/PD-1 interaction in cancer cells, so that they can be rendered

vulnerable to the body’s immune system. Not all cancer cells have the PD-L1

protein. The higher the percentage of cancer cells with PD-L1, the “stronger” the

patient’s PD-L1 “expression,” and the more effective the drug in treating that

patient. One parameter in the clinical trial of a PD-1 checkpoint inhibitor is the

strength of expression in the population targeted by the trial, and that involves a

trade-off. A trial limited to a population with higher expression has increased

odds of success; a trial that also includes patients with lower expression expands

the pool of patients to whom the drug can be prescribed if it succeeds, but such

success may be less likely.

3 Defendant Bristol-Myers Squibb Co. acquired and developed a PD-1

checkpoint inhibitor now known as Opdivo, and disclosed that it was

conducting a clinical trial. The disclosure did not specify the threshold of PD-L1

expression primarily targeted by the study. The disclosure stated generally that

the study would target patients “strongly expressing” PD-L1.

About three years later, when Bristol-Myers publicly announced that the

trial failed, it also disclosed for the first time that it primarily studied a patient

population with PD-L1 expression of at least 5%. The claim in this suit is that 5%

is not a “strong” expression, and that the class was thereby misled to

overestimate the prospect of the trial’s success. Over the ensuing months, the

company and various commentators attributed the failure of the trial to the

selection of a 5% PD-L1 expression threshold, as opposed to a higher level that

would have narrowed the Opdivo trial to fewer patients but may have improved

its chance of success.

Just a few months before the announcement of the results of the Opdivo

trial, one of Bristol-Myers’s principal competitors, Merck & Co., announced the

success of a clinical trial on its comparable drug. Merck had described the

4 parameters of its clinical trial using similar language regarding “strong” PD-L1

expression, but eventually disclosed (prior to the study’s conclusion) that in its

trial, strong expression meant above 50%.

Following Bristol-Myers’s announcement that the trial failed, its stock

price fell. On February 21, 2018, several investors that owned Bristol-Myers

shares in the relevant period filed this suit on behalf of a putative class in the

United States District Court for the Southern District of New York (Vyskocil, J.).

The Second Amended Complaint (the operative complaint, and hereinafter the

“Complaint”) alleges that the drop in stock price was attributable to the study’s

failure, and that Bristol-Myers had obscured the risk of such failure by declining

to disclose the precise PD-L1 expression threshold and by misrepresenting that

the study focused on patients “strongly” expressing PD-L1.

The district court dismissed the Complaint on a motion to dismiss for

failure to state a claim. We affirm.

As the Complaint and documents on which it relies illustrate, rates of PD-

L1 expression remained a topic of research throughout the putative class period;

there was no generally understood meaning of “strong” expression that

5 contradicted Bristol-Myers’s use of the term to mean 5%; and some observers

correctly predicted Bristol-Myers’s use of a 5% threshold before it was publicly

disclosed. The Complaint also alleges no facts indicating that Bristol-Myers had

an obligation to disclose the precise threshold--and Bristol-Myers cautioned the

public that it would not do so.

Further, the Complaint fails to allege facts giving rise to a strong inference

of scienter. The plaintiffs primarily argue that Bristol-Myers’s knowledge of the

industry understanding of PD-L1 expression rendered its misstatements

intentional or reckless, but the Complaint fails to allege such an industry

understanding.

The plaintiffs make two additional arguments. One is that scienter is

evidenced by share sales by certain individual defendants, but those sales were

made at a rate similar to prior periods, or pursuant to stock trading plans or for

other procedural purposes, and the net effect of their transactions was to increase

their total holdings. The other is that scienter is shown by Bristol-Myers’s

alleged reaction to the failure, including candid assessments of why it occurred

6 and the departure of two high-level employees; but these unremarkable

responses to a disappointing result do not signify anything nefarious.

BACKGROUND

Arkansas Public Employees Retirement System, Louisiana Sheriffs’

Pension & Relief Fund, and Erste-Sparinvest Kapitalanlagegesellschaft mbH (the

“Investors”), along with other plaintiffs that did not appeal, bring this putative

class action against Bristol-Myers Squibb Co. and individual officers of the

company (collectively, “Bristol-Myers”). 1 The Investors claim that Bristol-Myers

violated the securities laws with material misrepresentations and omissions in

describing a clinical trial it conducted on its drug Opdivo. The Investors claim

1The individual defendants are (1) Michael Giordano, Senior Vice President and Head of Development for Oncology and Immuno-oncology until July 25, 2016, when he resigned; (2) Fouad Namouni, Head of Oncology Development since July 25, 2016, and previously development lead for Opdivo; (3) Francis M. Cuss, Chief Scientific Officer and Executive Vice President; (4) Giovanni Caforio, Chief Operating Officer until May 5, 2015, and Chief Executive Officer from that date; (5) Lamberto Andreotti, Chief Executive Officer until May 5, 2015, and Executive Chairman of the board from that date through May 2, 2017; and (6) Charles A. Bancroft, Chief Financial Officer. All positions were held during the entire putative class period except where otherwise noted.

7 that Bristol-Myers’s stock dropped precipitously when the trial failed to achieve

its goal, allegedly due to factors concealed by the representations.

Because we assume the Investors’ factual allegations to be true on review

of a dismissal pursuant to Federal Rule of Civil Procedure 12(b)(6), the following

facts are taken from the Complaint and any documents upon which it relies.

Lentell v. Merrill Lynch & Co.,

(2d Cir. 2005).

A. Opdivo and the Clinical Trial

In 2009, Bristol-Myers acquired a pharmaceutical company developing a

drug called “nivolumab,” subsequently marketed as Opdivo. Opdivo is a type of

immuno-oncology treatment referred to as a PD-1 checkpoint inhibitor, which

treats various types of cancer by allowing the patient’s immune system to fight

the cancer directly. Some cancer cells have PD-L1 proteins that bind with PD-1

proteins present on immune-system T-cells, preventing the immune system from

combatting the tumor. PD-1 checkpoint inhibitors block this interaction.

Research on PD-1 checkpoint inhibitors shows that the level of PD-L1 present in

a patient’s cancer cells, referred to as “expression” and rendered as a percentage,

8 is positively correlated with the efficacy of PD-1 checkpoint inhibitors as a cancer

treatment. The higher a patient’s PD-L1 expression, the more effective a

checkpoint inhibitor should be in treating the cancer.

After acquiring Opdivo, Bristol-Myers explored the drug’s efficacy in

treating several cancers, including non-small cell lung cancer (“NSCLC”), the

most common form of lung cancer in the United States. The drug’s use as a

treatment for NSCLC was widely considered the most profitable potential use for

PD-1 checkpoint inhibitors. A clinical study, announced on January 19, 2014,

was commissioned to test Opdivo’s efficacy as a first-line treatment of NSCLC.

Bristol-Myers’s announcement, published on ClinicalTrials.gov, stated that the

Opdivo trial would focus on results among patients “strongly” expressing PD-

L1. 2 Over the course of the study, Bristol-Myers regularly updated the

ClinicalTrials.gov description without specifying the percentage of expression.

2 The putative class period begins on January 27, 2015, when Bristol-Myers updated the trial data on ClinicalTrials.gov without adjusting the description of the primary patient population as those strongly expressing PD-L1, and ends on October 9, 2016, when Bristol-Myers shared full data from the trial for the first time.

9 On August 5, 2016, Bristol-Myers announced that the Opdivo trial failed to

meet its primary goal--i.e., the drug did not show better results than

chemotherapy in those “strongly” expressing PD-L1. The same announcement

disclosed that the company defined “strong” expression in the Opdivo trial as

5% or greater PD-L1 expression. Over the following months, Bristol-Myers and

investment analysts attributed the study’s failure to the selection of 5% as the

threshold for strong PD-L1 expression.

B. Industry Understanding of PD-L1 Expression

A few months after the Opdivo trial was announced, Bristol-Myers’s

competitor, Merck & Co. (“Merck”), announced a clinical study to test

“Keytruda,” Merck’s PD-1 checkpoint inhibitor, as a treatment for NSCLC. In

February 2016, Merck disclosed that, for the purpose of its trial, it defined

“strong” expression as PD-L1 expression greater than 50%. On June 16, 2016,

shortly before Bristol-Myers announced the failure of the Opdivo trial, Merck

announced that Keytruda worked better than chemotherapy in patients with PD-

L1 expression levels greater than 50%.

10 There was little consensus among industry participants and researchers as

to the expression levels constituting “strong” PD-L1 expression and PD-L1

“positivity,” which is the baseline level of expression at which a trial would

consider a patient’s PD-L1 expression as relevant to results. With respect to PD-

L1 positivity, the July 2015 Journal of Thoracic Oncology surveyed the threshold

used for “positive” expression in various studies, noting that many used 5%,

while some used 1% or 10%. The publication showed that in several studies,

Merck considered any expression up to 49% “weak.” Similarly, a May 26, 2016

medical publication stated that “[t]he best cut-off percentage of scored cells to

determine PD-L1 positivity . . . remains an unresolved question” but “the

threshold most often chosen is >5% expression.” JA-735 (Compl. ¶ 54). Several

Opdivo studies conducted by Bristol-Myers prior to the relevant Opdivo trial

defined positivity as greater than 5%, while others used 1%.

Sources also do not agree on the percentage that amounts to “strong”

expression. On March 16, 2015, the journal PLOS One defined “strong

expression” as at least 50%. On March 3, 2016, Translational Oncology defined

“weak positive” as “1% to 49%” and “strong positive” as 50% or more.

11 Beginning with a press release on April 6, 2014, Merck consistently defined

“strong” PD-L1 expression as at least 50%, and--as noted above--disclosed in

February 2016 that it was using that same threshold in its trial.

Throughout the Opdivo trial, investment analysts tried to predict or

discern its threshold for “strong” expression. Two months after Merck disclosed

that its trial used a 50% threshold, an analyst asked if the trial used the same

definition of strong expression. Bristol-Myers refused to disclose its definition of

“strong” expression, but allowed that the “actual level of what strongly

expressing PD-1 is [is] lower than 50%.” JA-759 (Compl. ¶ 112). On March 7,

2016, SVB Leerink issued a report concluding that Bristol-Myers’s “primary

analysis population” “likely represents 30-40%” of lung cancer patients, a figure

that indicated a patient population with PD-L1 expression of at least 25%. In

June 2016, BMO Capital Markets stated with respect to the Opdivo trial that “we

believe [‘strong’] means at least 10%” expression. Goldman Sachs and Alliance

Bernstein each predicted that the Opdivo trial used a 5% cut-off for “strong”

expression. JA-1282, 1296, 1303, 1315.

12 C. The Allegations

The Complaint alleges that Bristol-Myers knew of an industry consensus

that “strong” PD-L1 expression meant 50%, or could not mean 5%, and therefore

misrepresented that the Opdivo trial’s parameters targeted patients “strongly”

expressing PD-L1, and made material omissions by failing to provide the exact

threshold. Second, it is alleged that, in light of the choice to use a threshold of

5%, it was false and misleading for the company to express confidence in the

study, to describe the study as “well-designed,” or otherwise to state that the

study would allow Bristol-Myers to bring Opdivo to market quickly.

It is alleged that these misrepresentations and omissions were made with

the requisite scienter because (1) Bristol-Myers knew of the industry consensus

regarding “strong” PD-L1 expression and acted recklessly or intentionally in

disregarding it, given the likely impact of PD-L1 expression on the success of the

trial and the importance of the trial to Bristol-Myers; (2) after announcement of

the failure, Bristol-Myers implicitly conceded that the study was not designed to

look at patients strongly expressing PD-L1; (3) Bristol-Myers defined 5% as a

marker of minimal PD-L1 positivity in studies prior to and during the class

13 period; (4) certain officers left Bristol-Myers after the failure of the trial; and

(5) certain individual defendants realized almost $55 million in profits by trading

in Bristol-Myers stock during the class period.

The Complaint alludes to statements attributed to former Bristol-Myers

employees, whose identities are kept confidential, and to an expert opinion from

Dr. Ronald H. Blum, a medical oncologist. The former employees allegedly state

that the individual defendants considered the Opdivo trial important and were

personally involved in crafting it; felt PD-L1 expression was a crucial parameter

for the trial; were aware of Merck’s use of a 50% threshold in prior studies; and

selected the 5% threshold after close consideration of its implications for the

trial’s success and Opdivo’s potential profitability. Dr. Blum would allegedly

testify, based on his experience in immuno-oncology and working on PD-1

checkpoint inhibitor research, that “there was an industrywide consensus among

all major participants in the immuno-oncology industry” that 5% expression

meant “low or minimal expression” and 50% expression was “strong”

expression. JA-717 (Compl. ¶ 9).

14 In sum, the Complaint alleges that the misrepresentations and omissions

were made with the requisite scienter and caused the price of Bristol-Myers stock

to drop, that the Investors relied on the misrepresentations in purchasing or

holding Bristol-Myers shares, and that they suffered losses as a result.

D. The Proceedings Below

On September 30, 2019, Judge Oetken dismissed the amended complaint

without prejudice for failing to state a claim, holding that the Investors had not

sufficiently alleged scienter. The Investors filed a second amended complaint

and, on September 30, 2020, Judge Vyskocil (to whom the case had been

transferred) dismissed it with prejudice for failure to state a claim, holding that

the Investors failed to allege (i) material misrepresentations or omissions or (ii)

facts giving rise to a strong inference of scienter.

DISCUSSION

We review de novo a district court’s dismissal of a complaint for failure to

state a claim. Stratte-McClure v. Morgan Stanley,

, 99–100 (2d Cir.

15 2015).

The Investors bring claims under Section 10(b) of the Securities Exchange

Act of 1934, 15 U.S.C. § 78j(b) (the “Exchange Act”), and its implementing

regulation, Rule 10b-5,

.10b–5; Section 20(a) of the Exchange Act;

and Section 20A of the Exchange Act, see Part IV. To state a claim under Section

10(b) and Rule 10b-5, a plaintiff must plead: (1) a misstatement or omission of

material fact; (2) scienter; (3) a connection with the purchase or sale of securities;

(4) reliance; (5) economic loss; and (6) loss causation. Kleinman v. Elan Corp.,

plc,

(2d Cir. 2013). As the Investors failed to adequately allege a

material misstatement or omission or facts giving rise to a strong inference of

scienter, we affirm.

I

The district court properly took judicial notice of investment analyst

reports from Goldman Sachs and Alliance Bernstein that correctly predicted the

Opdivo trial’s use of a 5% threshold for “strong” PD-L1 expression. “[I]t is

proper to take judicial notice of the fact that press coverage, prior lawsuits, or

16 regulatory filings contained certain information, without regard to the truth of

their contents[.]” Staehr v. Hartford Fin. Servs. Grp., Inc.,

(2d

Cir. 2008). When the court takes judicial notice of documents, it must rely on

such documents only for the fact that the statement was made.

The

Complaint refers to analyst reports that predicted a variety of possible PD-L1

expression thresholds higher than 5%, to argue that Bristol-Myers misled the

market by describing a 5% threshold as capturing a population of strong

expressors. The fact that other reports, relying on the same public information,

correctly predicted Bristol-Myers’s use of a 5% threshold is relevant to that

argument and properly considered on this motion to dismiss. See Abdin v. CBS

Broad. Inc.,

, 60 n.2 (2d Cir. 2020) (taking judicial notice of scientific

publications “for the publication of such information and relevant discussion in

the scientific community”).

The Investors also argue that the district court erroneously ruled that one

document, a presentation slide submitted by Bristol-Myers in support of its reply

brief, was incorporated by reference in the Complaint. (The document is

17 described in the margin. 3) The challenge was waived. The Investors raised no

objection to the district court’s consideration of the slide, either at oral argument

or in any subsequent filing. Such silence is sufficient to waive an argument on

appeal. See Bayway Refin. Co. v. Oxygenated Mktg. & Trading A.G.,

The Complaint quoted remarks at an October 8, 2015 presentation from Nektar, a pharmaceutical research company, which referenced Merck’s focus on “PD-L1 expression of more than 50%” as evidence that “[t]he industry at large adopted Merck’s presentation of ‘strong’ PD-L1 expression.” JA-812 (Compl. ¶ 246). In its reply brief on the motion to dismiss, Bristol-Myers submitted a slide displayed during the same presentation which showed that, contrary to the Investors’ characterization, Nektar discussed Merck’s use of 50% among four different definitions of PD-L1 positivity and two different definitions of strong expression, indicating that no industry consensus existed. JA-1934. In holding the slide was incorporated by reference in the Complaint, the district court did not rule on whether the slide was integral to the Complaint, but the slide does contradict the Investors’ selective quotation of the remarks. Although we do not reach the question here, we note that district courts may “permissibly consider documents other than the complaint” for the truth of their contents if they “are attached to the complaint or incorporated in it by reference[.]” Roth v. Jennings,

(2d Cir. 2007). A document that is integral to the complaint and partially quoted therein may be incorporated by reference in full. See San Leandro Emergency Med. Grp. Profit Sharing Plan v. Philip Morris Cos., Inc.,

, 808–09 (2d Cir. 1996).

18 219, 227 (2d Cir. 2000).

II

The Investors failed to allege facts sufficient to show that Bristol-Myers

made any material misstatement or omission in its descriptions of the Opdivo

trial.

Section 10(b) “do[es] not create an affirmative duty to disclose any and all

material information.” Matrixx Initiatives, Inc. v. Siracusano,

(2011). Just because “a reasonable investor would very much like to know [a]

fact” does not create any obligation to speak up. Dalberth v. Xerox Corp.,

(2d Cir. 2014). Disclosure is necessary only if there is a duty to

disclose or “when necessary to make statements made, in the light of the

circumstances under which they were made, not misleading.” Kleinman,

(quoting Matrixx,

(internal quotation marks omitted)).

Bristol-Myers had no obligation to disclose the precise percentage of PD-

L1 expression which defined “strong” expression in the Opdivo trial. The

Complaint confirms that such a disclosure likely would have been unwise.

19 Checkpoint inhibitors for NSCLC were expected to be highly profitable for

pharmaceutical companies, and revealing the precise structure of the Opdivo

trial would allow competitors to copy or undercut Bristol-Myers’s target patient

population (and reap the commercial benefit that Bristol-Myers hoped to realize

from a successful trial). Bristol-Myers’s competitors likely had even more desire

than the Investors to learn the exact parameters of the Opdivo trial--but neither’s

interest created any duty to disclose.

Nor did Bristol-Myers make any false statement, or a statement that was

incomplete, or one that was rendered misleading by the decision to withhold the

exact PD-L1 expression threshold used in the trial. Under the Private Securities

Litigation Reform Act (“PSLRA”) and Federal Rule of Civil Procedure 9(b),

allegations of material misstatements must be “state[d] with particularity” and

must “specify each statement alleged to have been misleading, [and] the reason

or reasons why the statement is misleading.” Tellabs, Inc. v. Makor Issues &

Rts., Ltd.,

(2007) (quoting 15 U.S.C. § 78u-4(b)(1)); Fed. R.

Civ. P. 9(b). In other words, a complaint must, among other requirements,

explain with particularity “why the statements were fraudulent.” Gamm v.

20 Sanderson Farms, Inc.,

(2d Cir. 2019) (emphasis added).

“Allegations that are conclusory or unsupported by factual assertions are

insufficient.” ATSI Commc’ns, Inc. v. Shaar Fund, Ltd.,

(2d Cir.

2007).

The Investors fail to allege with particularity why any of Bristol-Myers’s

affirmative descriptions of the Opdivo trial were false or misleading. The

Investors theorize that in the ClinicalTrials.gov description (and subsequent

public statements) Bristol-Myers misrepresented that a primary goal of the

Opdivo trial was to determine the efficacy of Opdivo on patients “strongly” or

“highly” expressing PD-L1. The Investors argue that, in light of a general

consensus that “strong” expression meant 50% expression or could not mean 5%

expression, it was misleading to use the term while omitting the number. We

disagree.

Bristol-Myers made clear at all times that it would not disclose the exact

threshold or confirm speculation or predictions. And the Complaint directly

contradicts the Investors’ theory: there was no general understanding of what

constituted strong expression, and therefore no reason for the Investors to

21 interpret “strong expression” to mean any specific threshold--nor any reason

why the description was false or misleading. One journal quoted in the

Complaint observed in May 2016 that “[t]he best cut-off percentage . . . to

determine PD-L1 positivity . . . remains an unresolved question.” JA-734

(Compl. ¶ 54). Moreover, the Complaint adduces a wide variety of definitions

used for strong expression, ranging from 10% to 50%. The Investors argue that

strong expression could not mean 5% because the industry and Investors

understood 5% as the threshold for mere PD-L1 positivity or “weak” expression.

But the Complaint details varied thresholds used for PD-L1 positivity, ranging

from 1% to 49%, depending on the study. And the investment analysts at

Alliance Bernstein and Goldman Sachs correctly predicted that Bristol-Myers

defined strong expression as 5%.

“The veracity of a statement or omission is measured not by its literal

truth, but by its ability to accurately inform rather than mislead prospective

buyers.” Operating Loc. 649 Annuity Tr. Fund v. Smith Barney Fund Mgmt.

LLC,

(2d Cir. 2010). Since the Complaint itself reflects the lack of

consensus on the meaning of strong or high expression, Bristol-Myers could not

22 mislead prospective buyers of its shares by using those terms.

Merck’s description of its study as targeting strong expression, while using

a 50% threshold, cannot reasonably be understood to bear upon Bristol-Myers’s

own internal definition of that term. The Merck clinical trial was announced after

the Opdivo trial, and Merck’s disclosure of its threshold occurred years later.

When Merck finally disclosed its definition of strong expression, Bristol-Myers

reiterated that it would not disclose the exact percentage, though it lifted the veil

to disclose that the “actual level of what strongly expressing PD-1 is [is] lower

than 50%.” JA-759 (Compl. ¶ 112) (emphasis added).

Dr. Blum’s expert opinion that there was an industry consensus as to the

definition of strong PD-L1 expression does not change this analysis. Pursuant to

Federal Rule of Evidence 702, an expert may testify “in the form of an opinion,”

and it is well established that “[t]o survive a 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,’” Ashcroft v. Iqbal,

(2009) (emphasis

added) (quoting Bell Atl. Corp. v. Twombly,

(2007)). Although

it is permissible for a plaintiff to bolster a complaint by including a non-

23 conclusory opinion to which an expert may potentially testify, “opinions cannot

substitute for facts under the PSLRA.” Fin. Acquisition Partners LP v. Blackwell,

(5th Cir. 2006). Accordingly, Dr. Blum’s opinion cannot rescue

the Investors’ claims, unless that opinion was based on particularized facts

sufficient to state a claim for fraud. But the only facts on which Dr. Blum relied,

according to the Complaint, are those already considered above and ruled

insufficient. See JA-761 (Compl. ¶ 120) (“Dr. Blum reviewed Bristol-Myers’

representations that [the Opdivo trial] focused on patients that exhibited a

‘strong’ or ‘high positive’ expression of the PD-L1 biomarker, and certain source

documents referenced herein.”).

The remaining statements that the Investors allege were false or

misleading variably described the trial as “the quickest way to bring Opdivo to

first-line patients,” Compl. ¶ 166, a study designed with “great care,” id. ¶ 193,

or one in which Bristol-Myers had “great confidence,” id. ¶ 173. None of these

statements is actionable under the securities laws. Forward-looking statements,

such as predictions regarding the trial’s success and Opdivo’s speed to market,

are protected under the PSLRA if “accompanied by meaningful cautionary

24 statements identifying important factors that could cause actual results to differ

materially from those in the forward-looking statement[.]” 15 U.S.C. § 78u-

5(c)(1)(A)(i). All of the statements identified by the Investors were made on

earnings calls or in presentations in which the relevant risk--that the trial may fail

to reach its primary endpoint--was fully disclosed: for example, “[t]he public

announcement of data from clinical studies . . . is likely to cause significant

volatility in our stock price . . . . [T]he announcement of any negative or

unexpected data . . . will likely cause our stock price to decline significantly.” JA-

1566. This “cautionary statement” identifies the particular risk that the Investors

ran. And although they claim that Bristol-Myers had an obligation to disclose

why the trial might fail--i.e., the selection of a 5% threshold--they cite no law to

support such an argument.

Finally, Bristol-Myers’s statements of subjective opinion, such as that the

Opdivo trial was strongly designed, do not support a claim unless the statements

of opinion “contained one or more embedded factual statements that can be

proven false.” Abramson v. Newlink Genetics Corp.,

, 175 (2d Cir.

2020). The Investors make no allegations that the individual defendants’

25 opinions of the trial’s design meet this standard. Although the Investors argue at

length that the trial was riskier than the Investors (with hindsight) believe was

necessary, they make no claim (and allege no facts indicating) that these

statements of opinion were false. Accordingly, these statements are not

actionable and are insufficient to state a claim.

III

The Investors also fail to allege with particularity facts giving rise to a

strong inference of scienter. To do so, a complaint must allege facts showing “(1)

that defendants had the motive and opportunity to commit fraud, or (2) strong

circumstantial evidence of conscious misbehavior or recklessness.” ECA, Loc.

134 IBEW Joint Pension Tr. of Chi. v. JP Morgan Chase Co.,

(2d Cir. 2009). If no motive or opportunity (other than a generalized business

motive) is shown, the circumstantial evidence of conscious misbehavior “must be

correspondingly greater” and show “highly unreasonable” behavior or that

which evinces “an extreme departure from the standards of ordinary care[.]”

Kalnit v. Eichler,

(2d Cir. 2001) (internal quotation marks and

26 citation omitted).

The Investors allege only one improper motive: the individual defendants’

motive “to keep the price of stock high while selling their own shares at a profit.”

Appellant Br. at 55 (quoting In re Scholastic Corp. Sec. Litig.,

(2d Cir. 2001)). It is alleged that four of the six individual defendants engaged in

stock sales during the putative class period; but the Investors fail to allege

“unusual” stock trades as necessary to raise an inference of bad faith or scienter.

See Scholastic Corp., 252 F.3d at 74–75. “Factors considered in determining

whether insider trading activity is unusual include the amount of profit from the

sales, the portion of stockholdings sold, the change in volume of insider sales,

and the number of insiders selling.”

The trades detailed in the Complaint

generated significant net profits, yet the sales of shares constituted a similar (or

lesser) proportion of the individual defendants’ trades as compared with the

proportion of shares sold by those defendants before the putative class period.

Further, the Investors failed to allege any facts illustrating the proportion of

individual defendants’ stockholdings involved in the sales compared to their

overall holdings, but all four bought more shares than they sold during the

27 putative class period. Finally, the vast majority of the sales were conducted

pursuant to a 10b5-1 trading plan or were executed for procedural purposes, and

therefore could not be timed suspiciously. 4

The Complaint likewise fails to allege “strong circumstantial evidence of

conscious misbehavior or recklessness.” ECA,

. Bristol-Myers did

not act recklessly or with intent in disregarding the industry’s consensus

definition of strong PD-L1 expression, because--taking the Investors’ allegations

as true--no such consensus definition existed. See supra Part II. Nor did the

Investors allege facts indicating that Bristol-Myers knew of such an industry

definition. Bristol-Myers’s occasional prior use of a 5% threshold to show PD-L1

positivity shows only that Bristol-Myers used different parameters in prior

4The Investors allege that Andreotti, the individual defendant responsible for over 80% of the shares sold and the only one to use a 10b5-1 plan, entered into such plan during the putative class period, and therefore “the plan provides no defense to scienter allegations.” Emps.’ Ret. Sys. of Gov’t of the V.I. v. Blanford,

(2d Cir. 2015). But the Complaint fails to “sufficiently allege[] that the purpose of the plan was to take advantage of an inflated stock price,”

so the Investors have failed to allege facts indicating that the plan was not “given or entered into in good faith” or was “part of a plan or scheme to evade the prohibitions” of the regulations.

.10b5–1(c)(1)(ii). Moreover, it is telling that Andreotti bought more shares than he sold during the putative class period.

28 studies. The Investors provide no reason why these studies obligated Bristol-

Myers to use the same parameters in future drug trials. None of the former

employees allege that Merck’s use of a 50% threshold indicated an industry

consensus; indeed, Bristol-Myers made clear to investors they were not using

Merck’s definition. And even assuming Dr. Blum’s opinion alleged a

contemporaneous general consensus, there is no indication anywhere in the

Complaint that Bristol-Myers was aware of the opinion Dr. Blum expresses in

this litigation or that Dr. Blum was personally aware of Bristol-Myers’s

knowledge of such a consensus.

Finally, Bristol-Myers’s actions following the failure of the Opdivo trial

similarly give rise to no strong inference of scienter. Bristol-Myers was candid in

addressing why the trial failed, explaining that they had been confident in their

study design and trial population, but that in hindsight the PD-L1 expression

threshold was set too low. This conclusion was inescapable after the success of

Merck’s comparable trial but provides no information regarding Bristol-Myers’s

state of mind when initially describing the study. Similarly, Bristol-Myers

changed the ClinicalTrials.org description to state that the threshold used was

29 5% expression; but accurately aligning that description with the newly public

PD-L1 threshold was not an admission that the original, less-specific description

was incorrect. And the departure of two high-level employees responsible for

the trial, which occurred close in time to the announcement of the trial’s failure,

may reflect the importance that Bristol-Myers placed on the study’s potential

success, but is no reason to doubt the veracity or intent of Bristol-Myers’s

disclosures.

IV

To state a claim under Sections 20(a) and 20A of the Exchange Act, a

plaintiff must allege a primary violation, such as one under Section 10(b) and

Rule 10b-5. ATSI Commc’ns,

. Because we affirm the district

court’s dismissal for failure to allege material misstatements or omissions or facts

raising a strong inference of scienter, we address only those issues and affirm the

dismissal of the claims under Sections 20(a) and 20A of the Exchange Act for

30 failure to allege a primary violation.

CONCLUSION

For the foregoing reasons, we AFFIRM the district court’s grant of Bristol-

Myers’s motion to dismiss.

31