                  FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT


VICKY NGUYEN, Individually and on          No. 18-56322
behalf of all others similarly situated,
                   Plaintiff-Appellant,       D.C. No.
                                           2:17-cv-00017-
                  v.                          AB-PLA

ENDOLOGIX, INC.; JOHN
MCDERMOTT; VASEEM MAHBOOB,                   OPINION
             Defendants-Appellees.

      Appeal from the United States District Court
         for the Central District of California
      André Birotte, Jr., District Judge, Presiding

        Argued and Submitted February 11, 2020
                 Pasadena, California

                    Filed June 10, 2020

         Before: Jay S. Bybee, Daniel P. Collins,
          and Daniel A. Bress, Circuit Judges.

                  Opinion by Judge Bress
2                    NGUYEN V ENDOLOGIX

                          SUMMARY *


                        Securities Fraud

    Affirming the district court’s dismissal of a putative
securities class action under §§ 10(b) and 20(a) of the
Securities Exchange Act of 1934 and SEC Rule 10b-5, the
panel held that the plaintiff failed sufficiently to plead facts
giving rise to a strong inference that defendants made false
or misleading statements either intentionally or with
deliberate recklessness.

    Plaintiff alleged that a medical device company misled
the investing public about whether the Food and Drug
Administration would approve the company’s new
aneurysm sealing product. Plaintiff’s central theory was that
company executives knew the device had encountered
problems in Europe that would manifest again in U.S.
clinical trials, which would in turn lead the FDA to deny
premarket approval.

    The panel held that allegations that are implausible do
not create a strong inference of scienter under the Private
Securities Litigation Reform Act. Finding persuasive a
decision of the Fourth Circuit, the panel concluded that
plaintiff’s core theory had no basis in logic or common
experience. Based on plaintiff’s complaint, the more
plausible inference was that the company made optimistic
statements about its prospects for FDA approval because its
U.S. testing looked promising, not because the company was

    *
      This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
                   NGUYEN V ENDOLOGIX                       3

quixotically seeking FDA approval for a medical device
application it knew was destined for defeat.


                        COUNSEL

Laurence M. Rosen (argued), The Rosen Law Firm P.A., Los
Angeles, California, for Plaintiff-Appellant.

Jason de Bretteville (argued), Justin N. Owens, Aaron C.
Humes, and Sheila Mojtehedi, Stradling Yocca Carlson &
Rauth P.C., Newport Beach, California, for Defendants-
Appellees.


                         OPINION

BRESS, Circuit Judge:

    In this putative securities class action, the plaintiff
alleges that a medical device company misled the investing
public about whether the Food and Drug Administration
(FDA) would approve the company’s new aneurysm sealing
product.     Plaintiff’s central theory is that company
executives knew the device had encountered problems in
Europe that would manifest again in U.S. clinical trials,
which would in turn lead the FDA to deny premarket
approval. In a securities fraud case, the plaintiff must plead
scienter, namely, that defendants made false or misleading
statements either intentionally or with deliberate
recklessness. In this case, and for all the complaint’s girth,
it lacks a critical ingredient under the Private Securities
Litigation Reform Act (PSLRA): allegations that “state with
particularity facts giving rise to a strong inference that the
4                  NGUYEN V ENDOLOGIX

defendant acted with the required state of mind.” 15 U.S.C.
§ 78u-4(b)(2)(A) (emphasis added).

     Allegations that are implausible do not create a strong
inference of scienter. Under the facts alleged, plaintiff’s
core theory—that the company invested in a U.S. clinical
trial and made promising statements about FDA approval,
yet knew from its experience in Europe that the FDA would
eventually reject the product—has no basis in logic or
common experience. Based on plaintiff’s complaint, the
more plausible inference is that the company made
optimistic statements about its prospects for FDA approval
because its U.S. testing looked promising, not because the
company was quixotically seeking FDA approval for a
medical device application it knew was destined for defeat.
We therefore affirm the district court’s judgment dismissing
the complaint and denying leave to amend.

                               I

    The following factual allegations are taken from
plaintiff’s second amended complaint, which we refer to
generally as the “complaint.” In the present posture, we treat
the complaint’s allegations as true and construe them in the
light most favorable to the plaintiff. Zucco Partners, LLC v.
Digimarc Corp., 552 F.3d 981, 989 (9th Cir. 2009).

                               A

    Defendant Endologix is a publicly traded company that
manufactures and sells medical devices for the treatment of
abdominal aortic aneurysms. The company focuses on
treating disorders of the aorta, the largest artery in the body,
which runs from the chest to the abdomen. One such
disorder is atherosclerosis, a disease that weakens the walls
of blood vessels and can cause them to expand outward.
                   NGUYEN V ENDOLOGIX                       5

This expansion is known as an aneurysm and results in an
unwanted bulge, called an aneurysm sac. An abdominal
aortic aneurysm occurs in the abdominal section of the aorta
and can result in dangerous internal bleeding if the aneurysm
ruptures. Traditional methods of treating abdominal aortic
aneurysms include surgery and endovascular repair. A new,
more innovative method is endovascular sealing.

    Endologix’s endovascular sealing product is called
Nellix. The device is placed directly into a patient and works
somewhat like a stent. But rather than repair the aneurysm
like traditional devices, Nellix instead seals the aneurysm
sac, reducing the likelihood that the aneurysm will rupture.
This method of treatment is thought to reduce post-
procedure complications that can occur with the use of
aneurysm repair devices. Complications include endoleaks,
when blood leaks into the aneurysm sac, and “migration,”
when a device moves from the location where it was initially
placed. Untreated migration can result in blood flow into the
aneurysm sac, further aneurysm expansion, and rupture.
Remember the term “migration,” because it becomes a focal
point in plaintiff’s allegations.

    Endologix first introduced Nellix in Europe in February
2013, after regulators there granted “CE Mark” approval.
Plaintiff acknowledges that “[g]enerally, CE marking is
thought to be a much quicker, less rigorous process than
FDA approval.” Beginning in October 2013, Endologix
tracked the device’s real-world performance through a
global registry. The global registry was designed to include
300 patients in up to 30 international centers. By September
2016, Endologix had acquired two years of data from this
registry.

   So that it could market Nellix in the United States,
Endologix sought premarket approval from the FDA.
6                  NGUYEN V ENDOLOGIX

Premarket approval, or “PMA,” is a stringent process in
which the FDA determines whether scientific evidence
demonstrates that a given device is safe and effective for its
intended use. A premarket approval application must
include a device’s indications for use (“IFU”), which
describe “the disease or condition the device will diagnose,
treat, prevent, cure, or mitigate, including a description of
the patient population for which the device is intended.”
21 C.F.R. § 814.20(b)(3)(i). Nellix initially had a broad IFU
because it was thought to be compatible with all types of
patients, including those with complex anatomies who could
not receive treatment using traditional endovascular repair
devices.

     As part of the FDA process, Endologix in December
2013 received approval from the FDA to conduct a clinical
trial for Nellix. See generally 21 C.F.R. § 812, et seq. This
clinical trial, which the complaint refers to as the “EVAS
Forward IDE,” began in January 2014 and involved
179 patients across 29 centers, approximately 25 of which
were in the United States. After one year of monitoring these
patients, Endologix submitted the clinical trial results to the
FDA. By November 2016, the two-year data were available.
The results of the clinical study are discussed below. But
first, it is necessary to backtrack a little in time and switch
continents to Europe, where Endologix first deployed Nellix.

                              B

    The complaint alleges that device migration in European
patients had “implications for FDA approval of Nellix,”
because “[i]f Nellix was unsafe for European patients it
would prove equally unsafe for U.S. patients.” The
complaint alleges that while the FDA approval process was
ongoing, Endologix, its Chief Executive Officer John
McDermott, and its Chief Financial Officer Vaseem
                   NGUYEN V ENDOLOGIX                         7

Mahboob, became aware that Nellix was migrating in
European patients.

    The complaint identifies several sources for this
allegation. It relies heavily on allegations from Confidential
Witness 1, referred to as “CW1,” a former Endologix
employee who served first as Director of Research and
Development and later as the company’s head of Aortic
Procedure Development. Shortly after plaintiff filed her first
amended complaint citing allegations from CW1, CW1
submitted a declaration in the district court disavowing the
plaintiff’s allegations, denying having “ma[de] many of the
statements attributed to me,” and stating that “most of the
factual assertions attributed to me . . . are contrary to my
understandings of fact and my opinions.” The district court
did not consider this later declaration in granting
Endologix’s motion to dismiss and neither do we. 1

    The complaint alleges that CW1 was involved with the
development of Nellix from the start. According to CW1,
European doctors in 2015 began sending Endologix a
“stream of complaints and incident reports” claiming that
Nellix was migrating in their patients. CW1 alleged that by
the fall of 2015, migration was a “serious problem,” and
McDermott and Mahboob became “very involved.” CW1
characterized the European migration issue as the “biggest
thing we had going at the company” and stated that
McDermott and Mahboob were “given everything” the
company put together in an attempt to solve the problem,
including “thousands of pages of paper with studies and
reports.” In December 2015, McDermott held a series of


    1
      We therefore deny plaintiff’s motion to strike defendant’s
answering brief and supplemental excerpts of record.
8                 NGUYEN V ENDOLOGIX

meetings with senior staff to discuss the migration issue.
Despite these efforts, Endologix could not find a solution.

    Relying still on CW1, the complaint further alleges that
the company’s investigation into migration issues in Europe
revealed that Nellix was dangerous for certain patients,
especially those with thrombosis, a condition that causes
blood clots in blood vessels. In November 2015, CW1 and
two other Endologix employees pushed McDermott to
modify the IFU, but McDermott refused.

    In early 2016, CW1 and others compiled weekly reports
about Nellix migration for McDermott and Mahboob in
preparation for Endologix’s annual symposium, which was
“attended by experts in the field of endovascular aneurysm
sealing.” McDermott signed off on a presentation for this
symposium that documented the scope of the migration
problem. This non-public event was held in London on
March 10–11, 2016, and CW1 attended the presentations and
discussions.

    The complaint alleges that, according to CW1, during
one presentation at this symposium, an Endologix consultant
stated that “[w]e are having some unexplained migrations, a
lot of them.” Another Endologix representative admitted
that the company had no solutions to the problem of Nellix
migration. A Latvian vascular surgeon who had used Nellix
in his patients also gave a presentation in which he stated
that “in a lot of cases” the devices were “slipping” and
“moving.” This surgeon met with CW1 and others after the
presentation and characterized the situation as “urgent,”
saying “look, I’m telling you now, this is not good.” After
the symposium, CW1 and others met with McDermott to
relay these warnings, but McDermott took no action.
                   NGUYEN V ENDOLOGIX                       9

    In addition to relying on CW1, the complaint also points
to two European reports in alleging that Endologix was
aware of Nellix migration in Europe. The complaint alleges
that a 2016 United Kingdom case report “warned of the
ominous risks of migration” of Nellix and discussed one
patient whose Nellix device migrated eleven millimeters.
This case report also cited a 2016 University of Liverpool
study, which examined thirty-five Nellix devices across
eighteen patients. Migration occurred in six of these
devices, resulting in a 17% migration rate. As discussed
further below, however, the Liverpool study used a
definition of migration different than the one used in the
FDA clinical trial.

                              C

    Despite the issues in Europe, the complaint alleges that
Endologix executives repeatedly assured investors that the
FDA would likely approve Nellix. These statements form
the basis for plaintiff’s allegations of securities fraud.

     The statements in question began in May 2016. At a
health care conference on May 5, 2016, Mahboob reported
that the company expected FDA approval of Nellix in the
fourth quarter of 2016 or the first quarter of 2017. On May
9, 2016, Endologix held its first quarter investor conference
call, during which Mahboob stated that “Nellix continues to
do a fantastic performance outside of the U.S.,” and “Nellix
is doing as expected. No surprises.” CW1 alleges that he
and other employees were “disgusted” that migration was
not mentioned on this call, which led to “a race to the door.”
In a press release issued that same day, Endologix stated that
it “remain[ed] on track with our timeline for potential FDA
approval at the end of 2016 or early 2017.” At a health care
conference on May 10, 2016, McDermott reiterated that the
10                 NGUYEN V ENDOLOGIX

company “expect[ed] the [FDA] PMA approval around the
end of this year, first part of next year.”

     On May 26, 2016, Endologix released the data from the
first year of the FDA clinical trial. The complaint alleges
that the results showed a “100% procedural technical
success” and a 94% treatment success rate, achieving the
FDA’s primary safety and effectiveness endpoints. The
device migration rate was 2.3%. Further, the data showed
that after one year, endoleaks were present in 3.1% of
patients, “the lowest rate ever reported” for a clinical study
of an endovascular abdominal aortic aneurysm device.

    Endologix submitted these results to the FDA on June
11, 2016. During a conference call that same day to discuss
the clinical trial data, McDermott addressed the University
of Liverpool study discussed above. Although that study
showed a 17% migration rate, McDermott explained that the
study defined migration as a movement of four millimeters,
which would not qualify as migration under the FDA’s ten-
millimeter definition.

    During Endologix’s second quarter investor call on
August 2, 2016, McDermott stated “we remain very positive
about the likelihood of approval . . . and the significant
growth we expect to drive with Nellix.” McDermott also
addressed the fact that the FDA was considering referring
the Nellix premarket approval to an outside panel of experts,
which would delay FDA approval by about six months. See
generally 21 C.F.R. § 814.44. An analyst asked whether the
prospect of this referral had been driven by any “sort of red
flag raised in terms of data” submitted to the FDA.
McDermott responded that while one reason for panel
referral was “new clinical issues of safety,” in the case of
Nellix “everyone has seen the data so we know there aren’t
any issues there.”
                  NGUYEN V ENDOLOGIX                      11

   In response to another analyst’s inquiry about the types
of questions Endologix received from the FDA after
Endologix submitted its first set of clinical data, McDermott
explained:

       [N]one of the questions we got asked are
       what I would characterize as big surprises.
       There is clarification on some things, some
       requests for additional analysis, some
       additional testing.    Nothing that would
       suggest in our view any question or risk of
       approvability, just some more blocking and
       tackling and clarification of the data we
       submitted. So, we don’t see anything in there
       that’s given us heartburn.

Although he was no longer at the company at this point,
CW1 stated that McDermott’s answer “could not have been
further from the truth” because by the time of this call,
Endologix had been working for seven or eight months on
the migration issue, and McDermott knew about the
situation.

    Endologix held its third quarter investor call on
November 1, 2016. On this call, Endologix revealed that
after providing the FDA with an “updated data cut,”
Endologix had narrowed Nellix’s IFU. McDermott stated:

       Regarding Nellix, we’ve recently ran an
       updated data cut from the IDE clinical
       database and noticed an increase in migration
       in aneurysm enlargement in some patients
       with two-year follow-up. We’re learning that
       migration can occur in patients with small
       flow lumens and a lot of thrombus because
       there isn’t enough space to inject sufficient
12                 NGUYEN V ENDOLOGIX

       polymer to support the stents. Our solution is
       a simple update to the patient’s selection
       criteria that measures the ratio of aneurysm
       diameter to the flow lumen to ensure there is
       enough space for polymer.

McDermott explained that when the company examined the
clinical data for patients with this updated selection criteria,
it saw “extremely positive safety and durability results out to
two years, which gives us confidence that Nellix can be a
leading device in the treatment of abdominal aortic
aneurysms.”

    On this November 1, 2016 call, McDermott further
explained that the company provided the FDA with its
“updated patient selection criteria and have had positive
discussion[s] so far.” He indicated that the FDA “had some
questions about migration,” but emphasized that this issue
was “a very easy situation to address just by narrowing for
those particular anatomies” that did not experience
migration. Finally, McDermott represented that “the Nellix
PMA approval timelines are unchanged, although we think
a panel is more likely now given the updated indications.”
McDermott estimated that a panel meeting would occur in
April or May of 2017, “which would lead to a potential PMA
approval in the third quarter of 2017,” several months later
than Endologix had initially estimated.

    On November 16, 2016, however, Endologix issued a
press release disclosing that the FDA would not approve
Nellix within the timeline the company had previously
presented. Instead, the FDA had requested that Endologix
provide it with two years of follow-up data for patients in the
clinical trial. As a result, PMA approval could not occur
until the second quarter of 2018 at the earliest, an eighteen-
                   NGUYEN V ENDOLOGIX                      13

month delay from what Endologix originally announced.
That day, Endologix’s share price fell more than 20.5%, or
$2.02 per share.

    Endologix held its 2016 investor meeting the next day.
There, McDermott explained that, although the clinical trial
showed a 2.3% migration rate after year one, the migration
rate increased in year two. He noted “[i]t was the increase
in the rate from year one to year two” that “drove the
discussion” with the FDA and led to the FDA’s request for
additional data. The complaint alleges that McDermott
presented this discovery as new information when, in reality,
the company was aware that Nellix experienced increased
migration after more than one year in use, based on
Endologix’s experience with Nellix in the European
commercial channel.

    On May 17, 2017, Endologix announced that it would
not seek FDA approval of Nellix at all. Instead, the company
decided to focus its efforts on a second-generation Nellix
device, which it estimated would not receive FDA approval
until 2020. That same day, Endologix’s share price fell more
than 36%, or $2.47 per share.

    Two months later, the Securities and Exchange
Commission (SEC) initiated an investigation into the events
surrounding Nellix’s FDA approval. After Endologix
revealed this investigation in a public filing in August 2017,
one of its executives resigned. Plaintiff’s complaint does not
allege the status of the SEC investigation, but according to
Endologix, the SEC has closed it.

                              D

    On January 3, 2017, Vicky Nguyen filed this putative
class action against Endologix, McDermott, and Mahboob,
14                 NGUYEN V ENDOLOGIX

alleging securities fraud. Following her appointment as lead
plaintiff, Nguyen filed a first amended complaint. The
district court dismissed this complaint for failure to state a
claim, but granted Nguyen leave to amend. Nguyen then
filed a second amended complaint, the operative complaint
here, on behalf of persons who bought or acquired Endologix
securities between May 5, 2016 and May 18, 2017.

    The complaint alleged violations of §§ 10(b) and 20(a)
of the Securities Exchange Act of 1934 and SEC Rule 10b-
5. See 15 U.S.C. §§ 78j(b), 78t(a); 17 C.F.R. § 240.10b-5.
The thrust of the complaint is that the defendants made
statements about Nellix migration and the prospects of FDA
approval that were false and misleading in light of
Endologix’s knowledge of Nellix migration in Europe.

    The district court dismissed the second amended
complaint under Federal Rule of Civil Procedure 12(b)(6)
because Nguyen had not satisfied the PSLRA’s heightened
pleading standard for scienter. The district court also denied
Nguyen’s request for leave to amend to file what would have
been her fourth complaint. Nguyen timely appealed.

                              II

    Reviewing de novo and construing the allegations in the
complaint in the light most favorable to the plaintiff, Zucco
Partners, 552 F.3d at 989, we agree with the district court
that plaintiff has not adequately alleged a “strong inference”
of scienter. 15 U.S.C. § 78u-4(b)(2)(A). The precedents of
the Supreme Court and this court teach that the PSLRA’s
heightened pleading requirements are meaningful ones,
requiring courts carefully to evaluate securities fraud
complaints to ensure compliance with the statute’s elevated
pleading standards. See, e.g., Tellabs, Inc. v. Makor Issues
& Rights, Ltd., 551 U.S. 308, 321 (2007); Dura Pharm., Inc.
                   NGUYEN V ENDOLOGIX                       15

v. Broudo, 544 U.S. 336, 345–46 (2005); Zucco Partners,
552 F.3d at 990–91; Ronconi v. Larkin, 253 F.3d 423, 437
(9th Cir. 2001). We hold that in this case, the complaint does
not pass muster under the PSLRA.

                              A

    Section 10(b) of the Securities Exchange Act of 1934
provides that it is unlawful for any person “[t]o use or
employ, in connection with the purchase or sale of any
security registered on a national securities exchange . . . any
manipulative or deceptive device or contrivance in
contravention of such rules and regulations as the [SEC] may
prescribe as necessary or appropriate in the public interest or
for the protection of investors.” 15 U.S.C. § 78j(b). The
SEC in turn promulgated Rule 10b-5, which provides that it
is unlawful for any person:

       (a) To employ any device, scheme, or artifice
       to defraud,

       (b) To make any untrue statement of a
       material fact or to omit to state a material fact
       necessary in order to make the statements
       made, in the light of the circumstances under
       which they were made, not misleading, or

       (c) To engage in any act, practice, or course
       of business which operates or would operate
       as a fraud or deceit upon any person,

       in connection with the purchase or sale of any
       security.

17 C.F.R. § 240.10b-5. Section 20(a) of the Act makes
certain “controlling person[s]” liable for violations of
16                NGUYEN V ENDOLOGIX

§ 10(b) and Rule 10b-5. 15 U.S.C. § 78t(a); see also Zucco
Partners, 552 F.3d at 990.

    To plead a claim under § 10(b) and Rule 10b-5, a
plaintiff must allege “(1) a material misrepresentation or
omission; (2) scienter; (3) a connection between the
misrepresentation or omission and the purchase or sale of a
security; (4) reliance; (5) economic loss; and (6) loss
causation.” Or. Pub. Emps. Ret. Fund v. Apollo Grp. Inc.,
774 F.3d 598, 603 (9th Cir. 2014).

    This case centers on the critical element of scienter,
which in this context is “a mental state embracing intent to
deceive, manipulate, or defraud.” Tellabs, 551 U.S. at 319
(quoting Ernst & Ernst v. Hochfelder, 425 U.S. 185, 194
n.12 (1976)). To allege the required scienter, a complaint
must “allege that the defendants made false or misleading
statements either intentionally or with deliberate
recklessness.” Zucco Partners, 552 F.3d at 991 (quotations
omitted). “[D]eliberate recklessness” is more than “mere
recklessness or a motive to commit fraud.” Schueneman v.
Arena Pharm., Inc., 840 F.3d 698, 705 (9th Cir. 2016)
(emphasis in original) (quoting Zucco Partners, 552 F.3d at
991). It is instead “an extreme departure from the standards
of ordinary care,” which “presents a danger of misleading
buyers or sellers that is either known to the defendant or is
so obvious that the actor must have been aware of it.” Id.
(emphasis in original) (quoting Zucco Partners, 552 F.3d
at 991).

    Securities fraud complaints are subject to heightened
pleading requirements. One source of these higher standards
is Federal Rule of Civil Procedure 9(b), which requires a
plaintiff to “state with particularity the circumstances
constituting fraud.” See also Schueneman, 840 F.3d at 705;
Zucco Partners, 552 F.3d at 990. Another source is the
                   NGUYEN V ENDOLOGIX                      17

PSLRA, which was enacted in 1995 as part of Congress’s
desire to “curb perceived abuses of the § 10(b) private
action—‘nuisance filings, targeting of deep-pocket
defendants, vexatious discovery requests and manipulation
by class action lawyers.’” Tellabs, 551 U.S. at 320 (quoting
Merrill Lynch, Pierce, Fenner & Smith Inc. v. Dabit,
547 U.S. 71, 81 (2006)).

    Under the PSLRA, “the complaint shall specify each
statement alleged to have been misleading, the reason or
reasons why the statement is misleading, and, if an allegation
regarding the statement or omission is made on information
and belief, the complaint shall state with particularity all
facts on which that belief is formed.” 15 U.S.C. § 78u-
4(b)(1). Importantly for purposes here, the complaint must
also “state with particularity facts giving rise to a strong
inference that the defendant acted with the required state of
mind.” Id. § 78u-4(b)(2)(A).

    The PSLRA’s “strong inference” requirement has teeth.
It is an “exacting” pleading obligation, Zucco Partners,
552 F.3d at 990, that “present[s] no small hurdle for the
securities fraud plaintiff.” Schueneman, 840 F.3d at 705
(quotations omitted). As the Supreme Court has explained,
“[t]he strong inference standard unequivocally raised the bar
for pleading scienter.” Tellabs, 551 U.S. at 321 (quotations
omitted) (alteration adopted). Given the substantial costs
that securities fraud litigation can impose, the “strong
inference” standard reflects Congress’s attempt to halt early
on securities litigation that lacks merit or is even abusive,
while allowing plaintiffs with potentially winning claims to
proceed to discovery. See id. at 323–24.

    Acknowledging these interests, the Supreme Court has
held that under the PSLRA’s “strong inference” standard, a
complaint will survive a motion to dismiss “only if a
18                 NGUYEN V ENDOLOGIX

reasonable person would deem the inference of scienter
cogent and at least as compelling as any opposing inference
one could draw from the facts alleged.” Id. at 324. It is to
this analysis that we now turn.

                              B

     Plaintiff’s core theory is that defendants made false and
misleading statements about whether the FDA was likely to
approve Nellix because defendants knew, based on their
experience in Europe, that Nellix would encounter migration
issues. The central theory of the complaint is thus that
defendants knew the FDA would not approve Nellix, or at
least that it would not do so on the timeline defendants were
telling the market. That is the theory of falsity on which the
complaint attacks defendants’ various statements about the
prospect of FDA approval: based on Nellix’s performance in
Europe, defendants “knew that there was absolutely no hope
of receiving FDA PMA approval by the end of 2016 or the
first part of 2017” and knew “the FDA would not approve
[Nellix] for use in the U.S. because of the unacceptable
safety risks device migration posed.”

    These allegations encounter an immediate first-level
problem: why would defendants promise the market that the
FDA would approve Nellix if defendants knew the FDA
would eventually figure out that Nellix could not be
approved due to “intractable” and “unresolvable” device
migration problems? The theory does not make a whole lot
of sense. It depends on the supposition that defendants
would rather keep the stock price high for a time and then
face the inevitable fallout once Nellix’s “unsolvable”
migration problem was revealed. If defendants had sought
to profit from this scheme in the interim, such as by selling
off their stock or selling the company at a premium, the
theory might have more legs. See, e.g., In re Rigel Pharm.,
                   NGUYEN V ENDOLOGIX                      19

Inc. Sec. Litig., 697 F.3d 869, 884–85 (9th Cir. 2012). There
are no factual allegations like that here. Instead, we are
asked to accept the theory that defendants were promising
FDA approval for a medical device application they knew
was “unapprovable,” misleading the market all the way up
to the point that defendants were “unable to avoid the
inevitable.”

    The allegation does not resonate in common experience.
And the PSLRA neither allows nor requires us to check our
disbelief at the door. “Plausibility” is a concept more
commonly associated with the base-level “non-fraud”
pleading standards in Rule 12(b)(6). See Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009); Bell Atl. Corp. v. Twombly,
550 U.S. 544, 556–57 (2007). But plausibility is no less
relevant in the context of the heightened pleading standards
of Rule 9(b) or the PSLRA. See In re NVIDIA Corp. Sec.
Litig, 768 F.3d 1046, 1058 (9th Cir. 2014) (rejecting a theory
of scienter because of the “implausibility of the timing in
CW1’s account of events”); Cafasso, U.S. ex rel. v. Gen.
Dynamics C4 Sys., Inc., 637 F.3d 1047, 1055 (9th Cir. 2011)
(“[C]laims of fraud or mistake . . . must, in addition to
pleading with particularity, also plead plausible
allegations.”). Treating the allegations in the complaint in
the light most favorable to the plaintiff, the notion that a
company would promise FDA approval that it knew would
not materialize does not, without more, create a strong
inference of intent to deceive or deliberate recklessness.

    The Fourth Circuit addressed a similar claim about
prospective FDA approval in Cozzarelli v. Inspire
Pharmaceuticals Inc., 549 F.3d 618 (4th Cir. 2008), and its
analysis is persuasive here. In Cozzarelli, a pharmaceutical
company sought FDA approval of a drug for the treatment
of dry eye disease. Id. at 621. To gain approval, the FDA
20                NGUYEN V ENDOLOGIX

required the company to conduct a study on the effectiveness
of the product. Id. at 622. The study ultimately failed. Id.
Plaintiffs alleged that, while the study was ongoing,
company executives made misleading statements that the
study would succeed. Id. at 624–25. The Fourth Circuit held
that these allegations did not plead a “strong inference” of
scienter under the PSLRA. Id. at 626.

     Underpinning the Fourth Circuit’s reasoning in
Cozzarelli was the point we recognize here: “[i]t is
improbable that [a company] would stake its existence on a
drug and a clinical trial that the company thought was
doomed to failure.” Id. at 627. The plaintiffs’ “inference of
fraud based on the supposed impossibility of [a successful
trial] [wa]s thus not even plausible, much less convincing.”
Id. This was so in Cozzarelli even though the defendants
there, unlike those here, sold some of their stock in the
company while the study was ongoing. Id. at 622, 627–28;
see also City of Edinburgh Council v. Pfizer, Inc., 754 F.3d
159, 170 (3d Cir. 2014) (affirming dismissal of securities
fraud complaint because, inter alia, “the initiation of Phase
3 cost millions of dollars and required FDA approval,
rendering it improbable that defendants would have
continued if they did not believe their interpretation of the
interim results or if they thought the drug a complete
failure”).

                             C

    Plaintiff does not surmount her plausibility problem, and
does not plead a strong inference of scienter, through
reliance on confidential witness “CW1.” There is, at the
outset, reason to question CW1’s foundation. He left the
company in June 2016, around the time that Endologix
reported to the FDA the favorable data from the first year of
the U.S. clinical trial, but well before the company narrowed
                   NGUYEN V ENDOLOGIX                      21

Nellix’s IFU and reported the less favorable second-year
data. Many of the statements that plaintiff alleges are false
and misleading were made after CW1 left Endologix. There
is thus ample basis to question aspects of CW1’s claimed
knowledge and his effort to impute scienter to the
defendants. See, e.g., Zucco Partners, 552 F.3d at 995–96.

    Even so, CW1 does not get plaintiff where she needs to
be under the PSLRA. The central problem with the
information attributable to CW1 is that it lacks any detail
about the supposed device migration problems that Nellix
encountered in the European channel. See id. at 995
(explaining that “we look to the level of detail provided by
the confidential sources”) (quotations omitted).

    The allegations sourced to CW1 are high on alarming
adjectives—“serious and unsolvable,” “dangerous,”
“urgent,” and so on. But they are short on the facts about
Nellix migration that would establish a strong inference that
defendants’ later statements about FDA approval were
intentionally false or made with deliberate recklessness.
Nowhere does CW1 identify, for example, the number of
European patients that experienced device migration, how
much Nellix was migrating in these patients, whether the
alleged device migration led to any further medical issues,
whether the patients had particular conditions that
exacerbated the migration, and whether the patients were
within or outside either the original or revised IFU. As we
have held, “negative characterizations of reports relied on by
insiders, without specific reference to the contents of those
reports, are insufficient to meet the heightened pleading
requirements of the PSLRA.” Lipton v. Pathogenesis Corp.,
284 F.3d 1027, 1036 (9th Cir. 2002). Strong rhetoric is not
a substitute for “particular[] facts giving rise to a strong
inference” of scienter. 15 U.S.C. § 78u-4(b)(2)(A).
22                 NGUYEN V ENDOLOGIX

    The same is true of CW1’s allegations that Endologix
was evaluating Nellix migration in Europe. While CW1
suggests general turmoil within Endologix over an
undefined migration issue, much of this is sourced to a
March 2016 conference in London, where “experts in the
field of endovascular aneurysm sealing” had a “full and
honest discussion” with Endologix scientists and directors,
who provided “responses to questions concerning
migration.” The complaint provides no explanation as to
why a company supposedly bent on concealment in the
United States would have open discussions with numerous
company outsiders in Europe on the same underlying issue.

    In short, while CW1 references a “stream of complaints
and incident reports” and a general concern that these reports
supposedly caused, the complaint does not plead any details
about these reports that would demonstrate a strong
inference of scienter in Endologix’s later statements about
FDA approval or Nellix migration. See, e.g., Police Ret. Sys.
of St. Louis v. Intuitive Surgical, Inc., 759 F.3d 1051, 1063
(9th Cir. 2014) (holding that plaintiffs failed to plead scienter
by relying on witness accounts that “[did] not detail the
actual contents of the reports the executives purportedly
referenced or had access to”); Lipton, 284 F.3d at 1036; In
re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 985 (9th
Cir. 1999) (“We would expect that a proper complaint which
purports to rely on the existence of internal reports would
contain at least some specifics from those reports.”),
abrogated on other grounds by S. Ferry LP, No. 2 v.
Killinger, 542 F.3d 776, 784 (9th Cir. 2008).

    The only concrete facts plaintiff alleges from the
European channel actually confirm the absence of a strong
inference of scienter. The complaint relies most heavily on
a 2016 University of Liverpool study that showed device
                   NGUYEN V ENDOLOGIX                        23

migration in 6 out of 35 devices studied, a 17% migration
rate exceeding the 2.3% migration rate that Endologix
observed in the first year of its U.S. clinical trial. But
plaintiff is hard-pressed to build a fraud case around the
Liverpool study when she admits in her complaint that
defendant McDermott acknowledged and discussed this
very study on an investor conference call in June 2016.
McDermott also explained that the Liverpool study defined
migration as four millimeters of movement, whereas the
Society for Vascular Surgery and the FDA clinical study
treated ten millimeters as the appropriate benchmark for
material migration. Plaintiff does not dispute the fact that,
as the Liverpool study itself makes clear, applying the ten-
millimeter metric there “would have generated a zero rate of
migration,” because all devices in the study migrated less
than ten millimeters. The Liverpool study thus does not
demonstrate that defendants’ statements about FDA
approval were made with wrongful scienter.

    The only other data point plaintiff provides is a 2016
United Kingdom case report about a single patient who was
reported to have experienced an eleven-millimeter device
migration. But once again, the complaint provides no details
on the circumstances of this patient or why this case report
should have alerted Endologix to a broader problem with
Nellix that would have complicated the prospects for FDA
approval. A case report is a report about a single person’s
medical situation. E.g., Rider v. Sandoz Pharm. Corp.,
295 F.3d 1194, 1199 (11th Cir. 2002).               There are
understandable limitations associated with building a broad-
based fraud claim around the unelaborated experiences of
just one patient, given the individualized features of any one
person’s medical profile. But at the very least, plaintiff here
has not pleaded facts showing that the United Kingdom case
report creates a strong inference of scienter. Indeed, plaintiff
24                    NGUYEN V ENDOLOGIX

effectively acknowledges that some amount of device
migration may occur, in casting the 2.3% migration rate in
the first year of the U.S. clinical trial as favorable, or at least
not problematic. 2

    Plaintiff’s reliance on Matrixx Initiatives, Inc. v.
Siracusano, 563 U.S. 27 (2011), is inapt. Matrixx rejected
the argument that “reports of adverse events associated with
a pharmaceutical company’s products cannot be material
absent a sufficient number of such reports to establish a
statistically significant risk that the product is in fact causing
the events.” Id. at 39 (footnotes omitted). No such “bright-
line” rule is being applied here. Id.

    Matrixx also differs from this case in important ways.
Matrixx did not involve allegedly false statements about the
prospects for FDA approval, but rather, inter alia, statements
denying reports of adverse events as “completely unfounded
and misleading,” which contradicted information of which
the company was aware. Id. at 47 (quotations omitted).
Here, by contrast, the plaintiff’s own allegations show that
Endologix acknowledged the reports of Nellix migration in
the Liverpool study and U.S. clinical trial.

    In Matrixx, moreover, the complaint alleged that the
defendant pharmaceutical company was made aware of
reports that over ten patients had lost their sense of smell
after using the company’s drug, and that the company had
both followed up on these reports and tried to squelch them,
only to then deny there was any issue. Id. at 32–33. The

     2
      Plaintiff alternatively alleges that the FDA was relying on reports
from the European channel or that Endologix failed to provide such
reports, contrary to FDA regulations. See 21 C.F.R. § 814.20(b)(8)(ii).
But plaintiff fails to plead sufficient facts to support either theory.
                      NGUYEN V ENDOLOGIX                              25

allegations here, which are based on the Liverpool study, one
case report, and CW1’s general description of the European
commercial experience, lack comparable detail to generate a
strong inference of scienter.

     Our decision in Schueneman, 840 F.3d 698, also
provides no assistance to plaintiff. In that case, a company
conducted a clinical trial using rats as part of the FDA
approval process. Id. at 701. Although the rat study revealed
that the drug might cause cancer, the company publicly
stated that the results of the study made it confident that the
FDA would approve the drug. Id. at 708. Because the rat
studies were “the sticking point with the FDA,” we held that
the complaint adequately alleged scienter. Id. (emphasis in
original). In this case, by contrast, there are no particularized
allegations that FDA approval of Nellix turned on studies or
case reports from Europe, as opposed to the U.S. clinical
trial. 3

    Where all of this leaves us is that to the extent plaintiff’s
allegations raise any inference of scienter, we cannot say this
inference is “at least as compelling as any opposing
inference one could draw from the facts alleged.” Tellabs,
551 U.S. at 324. The more plausible inference to be drawn
    3
       Mahboob’s May 9, 2016 statement that “Nellix continues to do a
fantastic performance outside of the U.S.” also does not create a strong
inference of scienter. In context, and based on the analyst question that
led to it, Mahboob’s statement appears to concern Nellix’s sales abroad.
Regardless, when considered individually and within the complaint as a
whole, Mahboob’s statement is too unclear to support a strong inference
of scienter. See, e.g., Police Ret. Sys. of St. Louis, 759 F.3d at 1063;
Zucco Partners, 552 F.3d at 1000. Plaintiff also does not plead sufficient
facts about the alleged departure of certain Endologix employees, see
Zucco Partners, 552 F.3d at 1002, or the SEC’s investigation, see
Cozzarelli, 549 F.3d at 628 n.2, to give rise to a strong inference of
scienter on these bases.
26                 NGUYEN V ENDOLOGIX

from the allegations in the complaint is that defendants made
promising statements about the timing of FDA approval
based on the initial results of the U.S. clinical trial, but then
modulated their optimism when the results began to raise
more questions.

    In late May 2016, at the beginning of the class period and
shortly after it first made positive statements about FDA
approval, Endologix released the results from the first year
of the U.S. clinical trial. By plaintiff’s own allegations, the
results were favorable: “100% procedural technical success
achieved;” “[a]t the year, the treatment success rate was
94%, achieving the primary effectiveness endpoint;”
“[f]reedom from device related secondary interventions was
96.6%, the highest rate ever reported for an IDE study of an
endovascular AAA device;” and “[e]ndoleaks were present
in 3.1% of patients at 1-year, the lowest rate ever reported
for an IDE study of an endovascular [abdominal aortic
aneurysm] device.”          The first-year data showed a
2.3% migration rate, which plaintiff does not characterize as
unfavorable and which defendants disclosed.

    Then, when Endologix obtained two-year data from the
clinical trial showing “an increase in migration” in “some
patients,” defendants disclosed that information and
expressed their belief that the issue could be addressed with
a narrowed IFU that excluded patients with “particular
anatomies” that were more susceptible to device migration.
Plaintiff identifies no sufficient factual basis as to why
defendants could not have believed that a revised IFU would
allow the FDA to approve the product. (And contrary to
plaintiff’s argument, McDermott did not then say that
Endologix had only “recently” learned about Nellix
migration; his comment referred to the “updated data cut”
Endologix had “recently” run from the clinical trial
                   NGUYEN V ENDOLOGIX                        27

database.) Regardless, defendants at this time extended the
timeline for estimated FDA approval to the third quarter of
2017. Then, when the FDA requested additional data,
Endologix disclosed this development, stating “[i]t was the
increase in the rate from year one to year two” that “drove
the discussion.”

     Under the PSLRA, “[a] court must compare the
malicious and innocent inferences cognizable from the facts
pled in the complaint, and only allow the complaint to
survive a motion to dismiss if the malicious inference is at
least as compelling as any opposing innocent inference.”
Zucco Partners, 552 F.3d at 991. The complaint cannot go
forward here because the more plausible inference from the
facts alleged is that defendants based their statements about
FDA approval on the status and progress of the U.S. clinical
trial, not that defendants were intentionally or with
deliberate recklessness seeking to mislead the market about
an FDA approval that they knew would never come through.
Viewing the allegations in the complaint both individually
and collectively, id. at 1006, plaintiff has therefore failed to
plead a strong inference of scienter. Because the complaint
fails to plead scienter, we have no occasion to address
defendants’ other arguments as to why the complaint may
fail to plead other necessary elements.

    We hold that the district court properly dismissed
plaintiff’s claims under Section 10(b) and Rule 10b-5.
Because plaintiff’s Section 20(a) “controlling person”
claims against McDermott and Mahboob require a violation
of Section 10(b) or Rule 10b-5, the Section 20(a) claims
necessarily fail as well. See, e.g., In re NVIDIA Corp. Sec.
Litig., 768 F.3d at 1052; Zucco Partners, 552 F.3d at 990.
28                  NGUYEN V ENDOLOGIX

                              III

    In the alternative, Nguyen argues that the district court
erred in dismissing her second amended complaint with
prejudice. Reviewing for abuse of discretion, Zucco
Partners, 552 F.3d at 989, we hold that the district court did
not err.

    “[W]here the plaintiff has previously been granted leave
to amend and has subsequently failed to add the requisite
particularity to its claims, the district court’s discretion to
deny leave to amend is particularly broad.” Id. at 1007
(quotations omitted). Here, the district court had already
given Nguyen leave to amend. There was thus no abuse of
discretion because “it was clear that the plaintiff[] had made
[her] best case and had been found wanting.” Id.

                          *    *    *

     The judgment of the district court is therefore

     AFFIRMED.
