                                                             NOT PRECEDENTIAL

                     UNITED STATES COURT OF APPEALS
                          FOR THE THIRD CIRCUIT
                               _____________

                                   No. 13-4777
                                  _____________

      In re: COLUMBIA LABORATORIES, INC., SECURITIES LITIGATION

                       PAUL SOLL; JERRY STERN IRA;
                 JERRY STERN FAMILY TRUST DATED 5/11/94,
                                                       Appellants
                             _______________

                   On Appeal from the United States District Court
                             for the District of New Jersey
                               (D.C. No. 2-12-cv-00614)
                    District Judge: Honorable Faith S. Hochberg
                                   _______________

                              Argued: December 9, 2014

             Before: FUENTES, FISHER, and KRAUSE, Circuit Judge

                               (Filed: March 10, 2015)
                                  _______________

Bruce D. Greenberg, Esquire
Jeffrey A. Shooman, Esquire
Lite, De Palma, Greenberg
Two Gateway Center
12th Floor
Newark, NJ 07102

Jeremy A. Lieberman, Esquire (Argued)
Tamar A. Weinrib, Esquire
Pomerantz, Grossman, Hufford, Dahlstrom & Gross
600 Third Avenue
20th Floor
New York, NY 10016
       Counsel for Appellants
C. Thomas Brown, Esquire
John D. Donovan, Jr., Esquire (Argued)
Ropes & Gray
800 Boylston Street
Prudential Tower
Boston, MA 02199

       Counsel for Appellees, Columbia Laboratories, Inc.; Frank C. Condella, Jr., and
       Lawrence A. Gyenes

Seth Aronson, Esquire
O’Melveny & Myers
400 South Hope Street
Room 1417
Los Angeles, CA 90071

Andrew J. Frackman, Esquire
Abby F. Rudzin, Esquire (Argued)
O’Melveny & Myers
7 Times Square Tower, 33rd Floor
New York, NY 10036

      Counsel for Appellees, Watson Pharmaceuticals, Inc., G. Frederick Wilkinson, R.
Todd Joyce, and Paul M. Bisaro
                                 _______________

                                       OPINION*
                                    _______________

KRAUSE, Circuit Judge

       This is an appeal from a final judgment of the United States District Court for the

District of New Jersey dismissing a putative class action securities complaint for failing




       *
        This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7
does not constitute binding precedent.


                                             2
to allege facts sufficient to plead scienter. For the reasons set forth below, we will

affirm.1

       The Appellants, a putative class of investors, claimed that Columbia Laboratories,

Inc. (“Columbia”), Watson Pharmaceuticals, Inc. (“Watson”), and various Columbia and

Watson executives violated sections 10(b) and 20(a) of the Securities Exchange Act of

19342 and SEC Rule 10b-53 when they knowingly or recklessly misled investors about

the results of a clinical trial study (“Study 302”). Specifically, Appellants alleged in their

complaint that Columbia and Watson’s statements that Study 302 achieved “statistical

significance” and “topline results” were misleading because these parties either knew or

recklessly disregarded that the Food and Drug Administration (“FDA”) required Study

302: (1) to achieve a p-value of 0.01; (2) to attain statistical significance for the United

States subgroup alone; and (3) not to be driven by anomalous results from the two foreign

testing sites. Study 302, according to Appellants, did not meet these criteria.

       A plaintiff claiming securities fraud must satisfy the heightened pleading rules of

the Private Securities Litigation Reform Act (“PSLRA”).4 To sufficiently plead scienter,


       1
        We have jurisdiction under 28 U.S.C § 1291. We review de novo the District
Court’s decision to grant the motion to dismiss. Ballentine v. United States, 486 F.3d
806, 808 (3d Cir. 2007). Because we write for the parties, we recite only those facts
necessary to our conclusion.
       2
           15 U.S.C. §§ 78j(b), 78t(a).
       3
           17 C.F.R. § 240.10b-5.
       4
           Rahman v. Kid Brands, Inc., 736 F.3d 237, 241 (3d Cir. 2013).


                                               3
the complaint must state with particularity the facts constituting the alleged violation and

giving rise to a “strong inference” that the defendants acted with the required state of

mind,5 i.e. that the defendants intended to deceive, manipulate, or defraud.6 To qualify as

strong, the inference “must be more than merely plausible or reasonable—it must be

cogent and at least as compelling as any opposing inference of nonfraudulent intent.”7

And to make this determination, a court must review the complaint in its entirety,

considering “not only inferences urged by the plaintiff . . . but also competing inferences

rationally drawn from the facts alleged.”8

       Here, the facts alleged by Appellants do not create a strong inference that

Columbia and Watson even knew that the alleged benchmarks would be required by the

FDA, let alone that these parties intended to deceive, manipulate, and defraud investors

by failing to disclose that Study 302 had not reached them.9 Appellants assert that

Columbia and Watson were “fully aware” that Study 302 would be required to achieve a

p-value of 0.01.10 Their only basis for that contention, however, is that the FDA


       5
           15 U.S.C. § 78u-4(b)(2)(A).
       6
       Rahman, 736 F.3d at 241-42 (citing Tellabs, Inc. v Makor Issues & Rights, Ltd.,
551 U.S. 308, 313 (2007)).
       7
           Tellabs, Inc., 551 U.S. at 314.
       8
           Id.
       9
           See id. at 313.
       10
            J.A. 138.


                                             4
guidelines generally require that single-trial studies achieve “[s]tatistically very

persuasive finding[s],”11 and, two years earlier, the FDA recommended that a different

Prochieve single-trial study achieve a 0.01 p-value to meet that standard.12 Appellants do

not allege that the FDA ever recommended that Study 302 itself achieve a 0.01 p-value or

instructed Columbia and Watson to rely on the p-value suggested for the earlier study.

Moreover, the FDA guidelines for single-trial studies—incorporated by reference in the

complaint—do not require a 0.01 p-value for a new drug to be approved and do not

identify any particular p-value for “statistical significance.” On the contrary, as an

example of “statistical significance,” the FDA actually describes a single-trial study that

achieved only a 0.05 p-value.13

       As for the subgroup data, Appellants do not allege that the FDA ever informed

Columbia or Watson that statistical significance, or any specific p-value, would be

required for the United States subgroup, and it is clear from the materials incorporated by

reference in the complaint that the FDA imposed no such requirement.14 Nothing in the

FDA guidelines requires that clinical trials meet statistical significance for subgroups

based on geographic location. Rather, the FDA guidelines recommend that a single-trial

study be “consisten[t] across key patient subsets” because large studies may involve

       11
            J.A. 695.
       12
            J.A. 66.
       13
            J.A. 692-96.
       14
            J.A. 261; 545-46.


                                              5
many participants that may be diverse with regard to “important covariates” unrelated to

geographic location, “such as concomitant or prior therapy, disease stage, age, gender or

race.”15

       Appellants’ arguments regarding subgroup data from the foreign test sites is

similarly unavailing. Appellants point out that Study 302 did not achieve statistical

significance when the results from South Africa and Belarus were excluded, but nothing

in either the FDA guidelines or the approved Statistical Analysis Plan indicated that

statistical significance would be required when those sites were excluded.16 Nor do

Appellants allege that the FDA ever informed Columbia or Watson that Study 302 would

be required to meet statistical significance for any subgroups.

       The FDA guidelines do recommend that a single study site should not be “largely

responsible” for a clinical trial study’s “favorable effect.”17 However, there are no

allegations that the study sites in either South Africa or Belarus were, on their own,

largely responsible for Study 302’s favorable effect, and the documents referenced in the

complaint indicate that Study 302 achieved a favorable effect even when the allegedly

“suspect” results from the test sites in South Africa and Belarus were excluded.18

Moreover, the FDA’s concerns with the foreign test sites arose after Study 302 had been

       15
            J.A. 693.
       16
            J.A. 195-96; 692-96.
       17
            J.A. 693.
       18
            J.A. 381.


                                             6
conducted.19 Appellants’ allegations about a requirement of achieving statistical

significance for the United States subgroup, or excluding the test sites in South Africa

and Belarus, thus do not support an inference of scienter.20

       Finally, Appellants frame the issue in terms of FDA “requirements.” As the FDA

representative at the Advisory Panel explained, however, “[W]e don’t necessarily dictate.

We tell them our advice. It’s guidance. It’s not rules or regulations. It’s just

guidance.”21 Likewise, while Appellants point out the FDA guidelines identify

“statistical significance” among the five “characteristics” that may inform single-trial

studies, the guidelines then caution that none of the five characteristics is “necessarily

determinative.” Instead, “the presence of one or more in a study” can contribute to a

conclusion that a single-trial study would be sufficient to support an effectiveness

claim.22 Thus, these alleged benchmarks were, at the very most, FDA recommendations

and were not, as Appellants argue, either required or dispositive of Study 302’s success.

       In sum, Appellants’ allegations do not raise a strong inference of scienter. Rather,

given the competing inferences rationally drawn from the complaint—including the

publication of Study 302 in a professional journal, the FDA’s decision to convene an

Advisory Panel to analyze Study 302, four members of the Advisory Panel voting to


       19
            See, e.g., J.A. 135-36; 294; 491-92.
       20
            Rahman, 736 F.3d at 241-42.
       21
            J.A. 408.
       22
            J.A. 693.

                                               7
approve Prochieve based on Study 302, and Columbia and Watson’s continued

investment in Study 302 and Prochieve—the District Court properly held that the more

compelling inference is that Columbia and Watson did not act with an intent to deceive,

manipulate, or defraud investors. Accordingly, we will affirm the judgment of the

District Court.




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