Skiadas v. Acer Therapeutics Inc.

Background

Acer Therapeutics Inc. sought approval from the Food and Drug Administration (FDA) for celiprolol, marketed as EDSIVO, to treat vascular Ehlers-Danlos Syndrome. Before submitting its application, Acer raised money through public offerings and made disclosures to the Securities and Exchange Commission (SEC). Those disclosures stated that, at a September 2015 meeting, the FDA had agreed that additional clinical development or an additional clinical trial was not needed or was “not likely needed,” and that Acer could submit an application for approval.

The FDA later rejected Acer’s application in a complete response letter, stating that an adequate and well-controlled trial was necessary to determine whether celiprolol reduced clinical events in patients with the disorder. Acer’s stock price fell 79 percent per share on the day the rejection was announced.

Nicholas Skiadas, whom the court appointed as Lead Plaintiff, brought claims under Section 10(b) of the Securities Exchange Act and Rule 10b-5, alleging securities fraud. He also brought a claim against the individual defendants for control-person liability under Section 20(a). The defendants moved to dismiss the second amended complaint under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not plausibly state a claim.

Statements About FDA Agreement

The court held that Skiadas plausibly alleged that the statements about what the FDA had “agreed to” were false or misleading. The statements were ambiguous because they could be understood either as addressing only whether Acer could submit its application or as addressing whether additional clinical development was needed for FDA approval. At the motion-to-dismiss stage, the court construed that ambiguity in Skiadas’s favor.

Read as statements about approval, the allegations plausibly showed falsity because the FDA later required a well-designed clinical trial before it would consider approving EDSIVO. The court also held that Skiadas adequately alleged scienter—the required intent to deceive or reckless disregard for the truth. The court relied on the importance of FDA approval to Acer’s business, the company’s need to raise funds to remain viable, the change from saying additional development was “not needed” to saying an additional trial was “not likely needed,” and the alleged access to information about the FDA’s position.

Statements About FDA Guidance

The court reached a different conclusion about statements that the FDA had provided guidance on how Acer should present its existing clinical data. No reasonable investor, the court held, would interpret those statements as saying that the data were sufficient to guarantee FDA approval. Skiadas also did not allege facts showing that the FDA had failed to provide the guidance. The FDA’s later rejection of the application did not make the earlier statements false or misleading.

Disposition

The court concluded that Skiadas plausibly alleged a Section 10(b) and Rule 10b-5 claim based on the statements about what the FDA had agreed to. It therefore denied defendants’ motion to dismiss in part. It granted the motion in part as to the other challenged statements because Skiadas had not plausibly alleged that they were false or misleading. Because defendants challenged the Section 20(a) control-person claim only on the ground that the underlying securities-fraud claim failed, that claim also survived. Judge Gregory H. Woods directed the Clerk of Court to terminate the motion at Docket Number 49.