1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 IN RE ACADIA PHARMACEUTICALS Case No.: 18-cv-01647-AJB-BGS

INC. SECURITIES LITIGATION

12 ORDER GRANTING DEFENDANTS’

MOTION TO DISMISS THE THIRD

13

AMENDED COMPLAINT WITHOUT

14 LEAVE TO AMEND

15 (Doc. No. 107) 16 17 18 Before the Court is Defendants’ motion to dismiss Plaintiff’s Third Amended 19 Complaint (“TAC”) in this securities-fraud action. (Doc. No. 107.) Plaintiff filed an 20 opposition, to which Defendants replied. (Doc. Nos. 108, 109.) For the reasons set forth 21 below, the Court GRANTS Defendants’ motion to dismiss. 22 I. BACKGROUND 23 A. Factual Background 24 This case is a putative class action, involving a class of individuals who acquired 25 ACADIA securities between April 29, 2016, and July 9, 2018, and are suing Defendants— 26 Acadia Pharmaceuticals Inc. (“Acadia”), and individuals Stephen R. Davis (“Davis”), 27 Todd S. Young (“Young”), Srdjan Stankovic (“Stankovic”), Terrance Moore (“Moore”), 28 and Michael Yang (“Yang”) (collectively, “Individual Defendants”)—for violations of the 1 Securities Exchange Act of 1934 (“Exchange Act”). (Doc. No. 102, TAC at ¶ 1.) Acadia 2 is a biopharmaceutical company that develops and commercializes medicines for central 3 nervous disorders. (Id. at ¶ 2.) Acadia’s first drug is NUPLAZID (pimavanserin), which 4 treats hallucinations and delusions associated with Parkinson’s disease psychosis (“PDP”). 5 (Id.) 6 1. “Breakthrough Therapy Designation” and FDA Approval 7 The clinical research program for NUPLAZID consisted of four randomized, 8 controlled trials for safety and efficacy, three of which failed to show a statistically 9 significant improvement in psychosis symptoms. (Id. at ¶ 40.) Acadia thereafter met with 10 the Federal Drug and Food Administration (“FDA”) in April 2010 to discuss their clinical 11 program and modifications to the design for a subsequent fourth trial. (Id.) The resulting 12 fourth trial (“020”) was statistically positive. (Id.) In August 2014, Acadia received a 13 “Breakthrough Therapy Designation,” which would speed up the FDA’s drug approval 14 process because it targets an “unmet medical need.” (Doc. No. 102 at ¶ 42.) 15 On September 1, 2015, Acadia submitted a new drug application to the FDA. (Id. at 16 ¶ 44.) On March 29, 2016, an Advisory Committee convened to evaluate NUPLAZID and 17 make a recommendation to the FDA regarding approval. (Id. at ¶ 47.) Despite Dr. 18 Andreason’s (the primary reviewer) recommendation that the drug should not be approved 19 “due to an unacceptably increased, drug related, safety risk of mortality and serious 20 morbidity,” (id. at ¶ 45), the Advisory Committee voted 12-2 in favor of approval primarily 21 because of the drug’s ability to treat an “unmet medical need” and the “lack of approved 22 products to treat PDP” (id. at ¶ 48). 23 On April 29, 2016, Acadia received FDA approval for NUPLAZID, the only drug 24 approved specifically for the treatment of PDP. (Doc. No. 102 at ¶ 2.) NUPLAZID contains 25 a black box warning indicating that there is an increased risk of death in elderly patients 26 with dementia-related psychosis treated with antipsychotic drugs. (Id. at ¶ 50.) 27 28 1 2. Commercialization Efforts 2 Upon receiving FDA approval for its drug, Acadia issued a press release entitled 3 “FDA Approves Acadia Pharmaceuticals’ NUPLAZID™ (pimavanserin) – The First Drug 4 Approved for the Treatment of Hallucinations and Delusions Associated with Parkinson’s 5 Disease Psychosis.” (Id. at ¶ 75.) The press release stated, among other things, that 020 6 was the largest research and development program in PDP to date; that NUPLAZID 7 significantly reduced the “frequency and severity of psychotic symptoms compared to 8 placebo”; that the “benefit was achieved without impairing motor function”; and that the 9 most common adverse reactions were peripheral edema and confusional state. (Id.) The 10 press release also announced Acadia’s plans to make NUPLAZID commercially available, 11 including a comprehensive program to provide financial assistance to patients, their 12 caregivers, and physicians. (Id.). 13 A few days later, on a May 2, 2016 analyst conference call to discuss the FDA’s 14 approval of NUPLAZID, Defendants Davis and Stankovic remarked on NUPLAZID’s 15 unique pharmacology compared to other antipsychotics, and explained that due to the 16 drug’s novel mechanism of action, it reduces hallucinations and delusions in patients with 17 PDP and does so without impairing motor function. (Doc. No. 102 at ¶ 77.) Defendant 18 Stankovic also commented on the drug’s safety information, describing the box warning 19 and most common adverse events. (Id.) Defendant Moore then described Acadia’s 20 “well-designed plan” to commercialize NUPLAZID and convince physicians to prescribe 21 the drug to their patients, as well as certain obstacles to successful commercialization. (Id. 22 at ¶ 78.) The plan he described included market education, increasing awareness of 23 NUPLAZID among 11,000 physicians identified as PDP treating physicians, onboarding 24 132 neuroscience sales specialists, and “direct educational efforts with a variety of 25 multi-channel education activities.” (Id.) Lastly, Defendant Davis described that the key 26 components of Acadia’s gross to net adjustments will include fees paid to specialty 27 pharmacies and distributors. (Id. at ¶ 80.) 28 1 The next day, on May 3, 2016, Acadia filed a Form 8-K with the SEC announcing 2 that two members of its Board of Directors were not running for reelection and another 3 resigned. (Id. at ¶ 81.) A couple of days later, Acadia hosted another analyst call, during 4 which Defendant Davis repeated his prior remarks about NUPLAZID’s favorable safety 5 profile and that the company’s commercialization strategy included educating healthcare 6 providers on the advantages of NUPLAZID. (Id. at ¶¶ 82–83.) On May 31, 2016, Acadia 7 commercially launched NUPLAZID and issued a press release, which included statements 8 that again highlighted the drug’s safety profile and unique pharmacology, as well as the 9 020 study results showing significant reductions in severity and frequency of hallucinations 10 and delusions in PDP patients without impairing motor function. (Id. at ¶¶ 51, 84.) 11 On August 4, 2016,1 Acadia issued another press release, which reported on the 12 company’s commercialization efforts and detailed that Acadia is “expanding awareness of 13 NUPLAZID among healthcare professionals through a number of initiatives including 14 speaker programs, media and digital campaigns, and symposia at major medical meetings 15 and . . . working with payors to make NUPLAZID available to eligible patients.” (Id. at ¶ 16 86.) Acadia also filed a Form 10-Q quarterly report with the SEC signed by Defendant 17 Davis. (Id. at ¶ 88.) The report included statements that Acadia’s commercial strategy 18 includes employing internal specialty sales force to market NUPLAZID and distributing 19 the drug solely through a limited network of third-party specialty distributors and 20 pharmacies. (Id.) In an analyst call that same day, Defendant Davis detailed the expenses 21 that Acadia incurred and discussed that the company is executing its marketing initiatives, 22 which include speaker programs, a strong presence at major medical events, hosting a 23 NUPLAZID webinar featuring PDP experts. (Id. at ¶ 89.) Defendants Davis and Moore 24 also emphasized the company’s focus on broadening awareness of NUPLAZID among 25 physicians to ensure patient access. (Id.) 26 27 1 The TAC provides a different date for this press release, but Defendants assert that the correct date for 28 1 On November 7, 2016, Acadia issued a press release wherein Defendant Davis 2 touted solid month-to-month prescription growth for NUPLAZID and reiterated the 3 company’s continued efforts to expand awareness of NUPLAZID among movement 4 disorder specialists, neurologists, and psychiatrists. (Id. at ¶ 92.) On an analyst call that 5 same day, Defendant Davis detailed that the company’s sales specialists have made 6 excellent inroads in deepening awareness of NUPLAZID among physicians; that the 7 company has received strong positive feedback from prescribing physicians; and that the 8 drug’s safety and tolerability was consistent with that observed in the clinical studies. (Id. 9 at ¶ 95.) Defendant Moore also commented on the steady adoption of NUPLAZID by 10 physicians, and Defendant Young restated the company’s previously noted gross to net 11 adjustments. (Id. at ¶¶ 95, 97.) 12 During an analyst call on February 28, 2017, Defendant Davis detailed that Acadia 13 observed a growing number of patients starting therapy and a growing number of 14 prescribers. (Id. at ¶ 101.) He also stated that the company has received favorable feedback 15 from physicians regarding NUPLAZID’s clinical profile, including its efficacy and safety 16 profile. (Id.) Defendant Young discussed the company’s expenses, and Defendant Moore 17 remarked on NUPLAZID’s strong introduction into the marketplace and the regular 18 adoption of the drug among movement disorder specialists, which was expected given the 19 high number of PDP patients they treat. (Id.) Defendant Moore also specified that educating 20 key prescribers on the benefits of NUPLAZID is crucial to Acadia’s commercialization 21 strategy. (Id.) 22 On May 9, 2017, Acadia issued a press release wherein Defendant Davis described 23 that use of NUPLAZID continues to expand as brand awareness among healthcare 24 providers grows. (Id. at ¶ 103.) On a conference call that same day, he stated that 25 NUPLAZID has performed almost exactly the same in terms of efficacy, side effect, and 26 tolerability in the marketplace as expected based upon the drug’s clinical profile. (Id. at 27 ¶ 106.) Defendant Davis stated that a majority of physicians are satisfied by the drug’s 28 safety and efficacy, and Defendant Moore detailed that 88% of physicians surveyed who 1 are aware of NUPLAZID intend to increase their use of the drug for treatment of PDP. (Id. 2 at ¶ 107.) 3 On an August 8, 2017 conference call, Defendant Young described Acadia’s 4 expenses, and Defendant Davis described the drug’s progress stating, “So overall, patients 5 are having a positive experience with NUPLAZID. They like the way the drug works. They 6 are tolerating the medication very well.” (Id. at ¶ 110.) Defendant Yang then discussed the 7 company’s efforts to generate additional NUPLAZID prescriptions, detailing that Acadia 8 continues to focus on working with physicians to identify appropriate new patients. (Id. at 9 ¶ 112.) 10 On November 7, 2017, Acadia issued a press release and held a conference call 11 positively reporting on NUPLAZID’s commercialization and growth. (Id. at ¶¶ 113, 115.) 12 On February 27, 2018, Acadia hosted a conference call, in which Defendant Young 13 described Acadia’s expenses and Defendant Davis touted NUPLAZID’s successful 14 commercialization, attributing it to continued “growth in the number of physicians 15 prescribing NUPLAZID” and “market research results that consistently continue to 16 demonstrate very high levels of physician and patient satisfaction with NUPLAZID.” (Id. 17 at ¶ 118.) Defendant Stankovic also indicated that NUPLAZID has a more favorable 18 tolerability profile compared to other antipsychotic drugs. (Id. at ¶ 120.) 19 3. Post-Commercialization Safety Issues 20 On April 9, 2018, CNN reported that physicians, medical researchers, and other 21 experts were worried that NUPLAZID “had been approved too quickly, based on too little 22 evidence that it was safe or effective.” (Id. at ¶ 121.) These individuals stated that because 23 NUPLAZID’s adverse event data reflects “mounting reports of deaths,” more needs to be 24 done to assess the drug’s true risks. (Id.) According to Plaintiff, the CNN article provided 25 the first revelation of NUPLAZID’s post-commercialization safety issues because the 26 average investor cannot easily decipher the raw data regarding adverse events and deaths 27 submitted to the FDA. (Id. at ¶ 122.) On this news, Acadia’s stock price fell $5.03 per share 28 to close at $16.50 per share. (Id.) The next day, Acadia issued a press release, stating that 1 it continually “analyze[s] new data to ensure the safety of NUPLAZID and the ongoing 2 evaluation has revealed no change in the benefit/risk profile described in the NUPLAZID 3 Prescribing Information.” (Id. at ¶ 123.) 4 Then, on April 25, 2018, CNN reported that the FDA was reexamining the safety of 5 NUPLAZID. (Id. at ¶ 125.) The article also stated that the FDA was not suggesting 6 physicians to stop prescribing NUPLAZID or take patients off the drug during its safety 7 evaluation, and that the death reports citing NUPLAZID “have typically involved elderly 8 patients with advanced-stage Parkinson’s disease who suffered from numerous medical 9 conditions and often take other medications that can increase the risk of death.” (Id.) 10 Plaintiff claims that due to Acadia’s earlier press release providing assurances regarding 11 NUPLAZID’s safety profile, investors were shocked by the news of the FDA’s 12 reexamination of NUPLAZID’s safety. (Id. at ¶ 126.) Acadia’s stock price fell $4.27 per 13 share to close at $15.20 per share. (Id.) 14 Two days later, Acadia published a statement explaining that “as a manufacturer of 15 a newly launched drug, [it is] routinely in contact with the FDA regarding requests for 16 additional information on NUPLAZID, including post marketing safety surveillance 17 information as part of the FDA’s ongoing safety monitoring.” (Id. at ¶ 127.) The company 18 also stated that it collects and analyzes these post marketing events as part of its ongoing 19 commitment to monitor NUPLAZID’s safety profile, and that these events are submitted 20 to the FDA and incorporated into the FDA’s Adverse Event Reporting System (“FAERS”). 21 (Id.) Acadia further explained that because NUPLAZID is distributed through a specialty 22 distribution channel, the company has frequent contact with patients and caregivers, which 23 naturally results in dramatically higher adverse event collection and reporting compared to 24 products without such distribution method. (Id.) 25 On May 4, 2018, Acadia issued a press release, wherein Defendant Davis attributed 26 the company’s positive financial results to the fact that healthcare providers and patients 27 continue to experience NUPLAZID’s benefits. (Id. at ¶ 129.) On a conference call that 28 same day, Defendants Davis and Young discussed Acadia’s expenses, and Defendant 1 Stankovic reiterated previous statements concerning NUPLAZID’s safety. (Id.) Defendant 2 Stankovic also explained that since the drug’s approval and launch in 2016, Acadia has 3 monitored its safety, and based on ongoing evaluations and the totality of available 4 information, NUPLAZID’s benefit-risk profile remains unchanged and is appropriately 5 described in the product labeling. (Id. at ¶ 131.) Later, in September 2018, the FDA 6 indicated that it found no new or unexpected safety risks associated with NUPLAZID. (Id. 7 at ¶ 137.) 8 4. Alleged Improper Payments to Physicians 9 On July 9, 2018, Southern Investigative Reporting Foundation (“SIRF”) published 10 a report stating that “evidence is mounting that something is horribly wrong with Acadia’s 11 sole drug, NUPLAZID” and that “Acadia has accomplished its growth in ways that have 12 attracted intense regulatory scrutiny for other drug companies” including “dispensing wads 13 of cash to doctors to incentive prescription writing and downplaying mounting reports of 14 patient deaths.” (Id. at ¶ 133.) On this news, the stock price fell $1.21 per share to close at 15 $16.63 per share. (Id. at ¶ 135.) 16 According to the SIRF report, “[o]ver the six months that NUPLAZID was 17 commercially available in 2016, Acadia spent $609,556 on consulting, speaking and travel 18 and lodging payments to 1,578 doctors.” (Id. at ¶ 134.) It then detailed that in 2017, “Acadia 19 paid more than $8.6 million to 7,051 physicians, with 62 doctors receiving more than 20 $50,000 apiece, and 26 receiving at least $100,000 each.” (Id.) Reviewing the Centers for 21 Medicare and Medicaid Services Open Payments data for 2016 and 2017 and Medicare 22 Part D data to observe prescriber behavior, the SIRF report surmised there to be “a good 23 deal of overlap between those who received Acadia consulting fee payments in 2016 and 24 2017 and the individuals who prescribed Nuplazid with some frequency in 2016.” (Id.) The 25 report also noted that one physician was a leading prescriber of NUPLAZID “but did not 26 receive any consulting fees from Acadia in 2016 and 2017.” (Id.) 27 Plaintiff alleges that Confidential Witness 1 (“CW1”), a sales specialist for Acadia 28 from April 2016 to April 2020 indicated that Acadia’s speaker program was important in 1 its commercialization efforts. (Id. at ¶ 74.) CW1 explained that “physicians who 2 participated in the speaker program received compensation per program plus an 3 honorarium and travel reimbursement, with the average speaking engagement payment 4 over $3,000.” (Id.) CW1 also concluded that “the speaker engagements influenced the 5 physicians’ prescribing practices.” (Id.) 6 On November 28, 2018, Acadia filed a prospectus supplement with the SEC, which 7 informed that two months prior, the company received a civil investigative demand from 8 the U.S. Department of Justice (“DOJ”) requesting certain documents and information 9 related to Acadia’s sales and marketing of NUPLAZID. (Id. at ¶ 136.) The investigation 10 ended in October 2020. (Id. at ¶ 138.) DOJ informed the company that it would not be 11 taking any further action related to the civil investigative demand at this time. (Id.) 12 B. Procedural History 13 Relevant here, on March 29, 2021, the Court granted Defendants’ motion to dismiss 14 Plaintiff’s Second Amended Complaint but afforded Plaintiff a third opportunity to amend 15 his complaint. (Doc. No. 101.) On April 16, 2021, Plaintiff filed his TAC. (Doc. No. 102.) 16 The TAC alleges two causes of action: (1) a violation of Section 10(b) of the Exchange 17 Act and Rule 10b-5 promulgated thereunder; and (2) a violation of Section 20(a) of the 18 Exchange Act. (Id.) Defendants have filed a motion to dismiss the TAC for failure to state 19 a claim for securities fraud, and the parties have submitted briefs in support of their 20 respective positions. (Doc. Nos. 107, 108, 109.) This Order follows. 21 II. LEGAL STANDARD 22 A. Federal Rule of Civil Procedure 12(b)(6) Standard of Review 23 A Rule 12(b)(6) motion tests the legal sufficiency of the claims made in the 24 complaint.2 Dismissal under Rule 12(b)(6) is proper where the complaint fails to set forth 25 a “cognizable legal theory,” or where there is “an absence of sufficient facts alleged to 26 support a cognizable legal theory.” Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). 27

28 1 Although a complaint need only contain “a short and plain statement of the claim showing 2 that the pleader is entitled to relief” under Rule 8(a)(2), “a plaintiff’s obligation to provide 3 the grounds of his entitlement to relief requires more than labels and conclusions, and a 4 formulaic recitation of the elements of a cause of action will not do. Factual allegations 5 must be enough to raise a right to relief above the speculative level.” Bell Atl. Corp. v. 6 Twombly, 550 U.S. 544, 544, 555 (2007) (internal quotations, alterations, and citations 7 omitted); accord Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). In reviewing a Rule 12(b)(6) 8 motion, “[a]ll allegations of material fact are taken as true and construed in the light most 9 favorable to the nonmoving party.” Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337–38 10 (9th Cir. 1996). 11 B. Heightened Pleading Standard 12 Pertinent here, a complaint alleging fraud must comply with Rule 9(b). Pursuant to 13 Rule 9(b), a party must “state with particularity the circumstances constituting fraud or 14 mistake.” Fed. R. Civ. P. 9(b). “In other words, the complaint must set forth what is false 15 or misleading about a statement, and why it is false.” Rubke v. Capitol Bancorp Ltd., 551 16 F.3d 1156, 1161 (9th Cir. 2009) (internal quotation marks omitted). Additionally, claims 17 brought under the Exchange Act are subject to the requirements of the Private Securities 18 Litigation Reform Act (“PSLRA”). The PSLRA “requires that a complaint alleging 19 misleading statements or omissions ‘specify each statement alleged to have been 20 misleading, the reason or reasons why the statement is misleading, and, if an allegation 21 regarding the statement or omission is made on information and belief, . . . all facts on 22 which that belief is formed.’” Reese v. BP Exploration (Alaska) Inc., 643 F.3d 681, 690 23 (9th Cir. 2011) (quoting 15 U.S.C. § 78u-4(b)(1)). Although Rule 9(b) allows for “[m]alice, 24 intent, knowledge, and other conditions of a person’s mind” to be alleged generally, fraud 25 claims made pursuant to the Exchange Act must “plead with particularity both falsity and 26 scienter.” Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 981, 990 (9th Cir. 2009), as 27 amended (Feb. 10, 2009). “Thus, the misrepresentation claims pled must satisfy the 28 ‘particularity’ requirement of Rule 9(b) of the Federal Rules of Civil Procedure, the 1 ‘plausibility’ requirement of Iqbal, and the scienter requirement of the PSLRA.” Reese, 2 643 F.3d at 690–91. 3 III. DISCUSSION 4 Defendants again move to dismiss both of Plaintiff’s causes of actions in the TAC. 5 As for the Section 10(b) cause of action, Defendants argue that Plaintiff fails to adequately 6 plead a materially false or misleading statement, scienter, and loss causation. As for the 7 Section 20(a) claim, Defendants argue that because this claim is contingent on a primary 8 violation of Section 10(b), which Plaintiff fails to plead, the Section 20(a) claim necessarily 9 fails. 10 A. Request for Judicial Notice and Incorporation-by-Reference 11 To begin, Defendants filed with their motion to dismiss a request for judicial notice 12 and consideration of documents incorporated by reference. (Doc. No. 107-2.) “Generally, 13 district courts may not consider material outside the pleadings when assessing the 14 sufficiency of a complaint under Rule 12(b)(6).” Khoja v. Orexigen Therapeutics, Inc., 899 15 F.3d 988, 998 (9th Cir. 2018). There are, however, “two exceptions to this rule: the 16 incorporation-by-reference doctrine, and judicial notice under Federal Rule of Evidence 17 201.” (Id.) Judicial notice “permits a court to notice an adjudicative fact if it is ‘not subject 18 to reasonable dispute.’” Id. at 999 (quoting Fed. R. Evid. 201(b)). “A fact is ‘not subject to 19 reasonable dispute’ if it is ‘generally known’ or ‘can be accurately and readily determined 20 from sources whose accuracy cannot reasonably be questioned.’” Id. (quoting Fed. R. Evid. 21 201(b)(1)–(2)). In contrast, “incorporation-by-reference is a judicially created doctrine that 22 treats certain documents as though they are part of the complaint itself.” Id. at 1002. 23 Through this doctrine, “[a] defendant may seek to incorporate a document into the 24 complaint ‘if the plaintiff refers extensively to the document or the document forms the 25 basis of the plaintiff’s claim.’” Id. (quoting United States v. Ritchie, 342 F.3d 903, 908 (9th 26 Cir. 2003). 27 Here, Defendants attached 48 exhibits to their motion and contend that all are 28 appropriate for the Court’s consideration because they are subject to either judicial notice 1 or the incorporation-by-reference doctrine. (Doc. No. 107-2.) In support, Defendants 2 presented arguments, as well as a chart that identifies what each exhibit is, whether it is 3 subject to judicial notice or incorporation-by-reference, and if the latter, which paragraph 4 in the TAC references it. (Id. at 3–6.) Plaintiff does not dispute Defendants’ 5 characterizations of the documents or otherwise oppose their request. Accordingly, and as 6 more fully analyzed below, the Court GRANTS Defendants’ request as to those documents 7 specifically mentioned in this Order.3 8 B. Securities Fraud 9 Section 10(b) of the Exchange Act forbids: (1) the use or employment of any 10 deceptive device, (2) in connection with the purchase or sale of any security, and (3) in 11 contravention of Securities and Exchange Commission rules and regulations. 15 U.S.C. 12 § 78j(b); see Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336, 341 (2005). 13 Additionally, Rule 10b-5, promulgated by the SEC under Section 10(b), forbids the making 14 of any “untrue statement of a material fact” or the omission of any material fact “necessary 15 in order to make the statements made not misleading.” 17 C.F.R § 240.10b-5; see Dura, 16 544 U.S. at 341. The basic elements of a Section 10(b) claim are: (1) a material 17 misrepresentation or omission; (2) made with scienter; (3) in connection with the purchase 18 or sale of a security; (4) reliance by plaintiffs; (5) economic loss; and (6) a causal nexus 19 between the misrepresentation or omission and the loss. Dura, 544 U.S. at 341–42. 20 In this case, Defendants argue that Plaintiff has failed to adequately plead a material 21 misrepresentation or omission (also referred to as falsity), scienter, and loss causation. 22 (Doc. No. 107-1 at 14.) 23 1. Material Misrepresentation or Omission 24 To allege an actionable false or misleading statement, a plaintiff must show that 25 Defendants made statements that were “misleading as to a material fact.” Basic 26 Incorporated, et al. v. Levinson, 485 U.S. 224, 238 (1988). A material statement is one 27 3 As for the documents not specifically cited in this Order and on which the Court does not rely to reach 28 1 where there is a “substantial likelihood that the disclosure of the omitted fact would have 2 been viewed by the reasonable investor as having significantly altered the ‘total mix’ of 3 information made available.” Id. at 231–32. Moreover, according to the Ninth Circuit: 4 [n]o matter how detailed and accurate disclosure statements are, there are likely to be additional details that could have been disclosed but were not. To 5 be actionable under the securities laws, an omission must be misleading; in 6 other words[,] it must affirmatively create an impression of a state of affairs that differs in a material way from the one that actually exists. 7

8 Brody v. Transitional Hospitals Corp., 280 F.3d 997, 1006 (9th. Cir. 2002). 9 Here, Plaintiff’s allegations regarding falsity fall into two categories: (i) a failure to 10 disclose adverse event reports related to NUPLAZID and (ii) a failure to disclose that 11 Acadia’s commercialization strategy included kickbacks. (Doc. No. 108 at 18, 19.) The 12 Court discusses each in turn. 13 ii. Adverse Event Reports 14 Plaintiff alleges throughout his TAC that Defendants failed to disclose “mounting 15 reports of adverse events, serious adverse events, and deaths in patients using NUPLAZID 16 post-commercialization.” (Doc. No. 102 at ¶ 14.) In the prior Order dismissing Plaintiff’s 17 SAC, the Court found that Defendants’ nondisclosure of FAERS data was not misleading 18 because the data was publicly available and the existence of adverse events, standing alone, 19 does not necessarily mean that the drug caused that event. (Doc. No. 101 at 15–17.) 20 Plaintiff’s new allegation that the average investor cannot easily decipher the reports of 21 adverse events and deaths submitted to the FAERS database does not change the Court’s 22 earlier conclusion. (Doc. No. 102 at ¶ 15.) The additional allegation is inconsequential 23 because an investor’s inability to decipher publicly available data with ease does not 24 necessarily establish that Defendants’ nondisclosure of adverse event reports was 25 misleading. Plaintiff cites no case law to persuade the Court to find otherwise. Cf. Rubke 26 v. Capitol Bancorp Ltd, 551 F.3d 1156, 1163 (9th Cir. 2009) (“[I]t is pointless and costly 27 to compel firms to reprint information already in the public domain.”). 28 1 As previously noted, to satisfy the heightened pleading standards of the PSLRA, 2 Plaintiff “must specify the reason or reasons why the statements made by [Defendants] 3 were misleading or untrue.” Brody, 280 F.3d at 1006. According to Plaintiff, Defendants’ 4 nondisclosure of reports concerning adverse events and deaths in patients taking 5 NUPLAZID were misleading in light of Acadia’s representations in press releases, SEC 6 filings, and conference calls that NUPLAZID has a favorable safety profile. However, apart 7 from implying that the adverse event reports necessarily reveal that NUPLAZID does not 8 have a favorable safety profile, Plaintiff provides no explanation as to why the 9 nondisclosure is misleading. Notably, the Supreme Court has stated that there is no 10 requirement “that pharmaceutical manufacturers must disclose all reports of adverse 11 events” and “[t]he fact that a user of a drug has suffered an adverse event, standing alone, 12 does not mean that the drug caused that event.” Matrixx Initiatives, Inc. v. Siracusano, 563 13 U.S. 27, 43, 44 (2011). As such, to show that the nondisclosure was misleading in this case, 14 Plaintiff must plead more than “the mere existence of reports of adverse events—which 15 says nothing in and of itself about whether the drug is causing the adverse events.” Id. 16 Plaintiff has not done so. 17 The TAC does not contain facts showing that the nondisclosure of all adverse events 18 rendered Acadia’s statements about NUPLAZID’s safety profile misleading. See Brody, 19 280 F.3d at 1006 (“Often, a statement will not mislead even if it is incomplete or does not 20 include all relevant facts.”). Again, for an omission to be misleading “it must affirmatively 21 create an impression of a state of affairs that differs in a material way from the one that 22 actually exists.” Id. Plaintiff, however, has not shown that the nondisclosure of adverse 23 events created an impression that NUPLAZID has a favorable safety profile, when in fact, 24 it does not. There is also no indication that the number and type of adverse events reported 25 were of unanticipated severity or frequency. Indeed, the TAC provides a couple of obvious 26 alternate explanations for the high number of adverse event reports, which have no bearing 27 on NUPLAZID’s safety. Eclectic Properties E., LLC v. Marcus & Millichap Co., 751 F.3d 28 990, 996 (9th Cir. 2014) (“When considering plausibility, courts must also consider an 1 ‘obvious alternative explanation’ for defendant’s behavior.” (quoting Iqbal, 556 U.S. at 2 682)). 3 First, the TAC includes allegations explaining that “NUPLAZID is distributed 4 through a specialty distribution channel” which entails “frequent (in most cases monthly) 5 contact with patients and caregivers,” and that “this increased interaction naturally results 6 in dramatically higher adverse event collection and reporting compared to products without 7 such a distribution method.” (Doc. No. 102 at ¶127.) Second, the TAC also acknowledges 8 that “[t]he FDA has noted that the death reports citing Nuplazid have typically involved 9 elderly patients with advanced-stage Parkinson’s disease who suffered from numerous 10 medical conditions and often take other medications that can increase the risk of death.” 11 (Id. at ¶ 125.) Further undercutting a finding that Defendants’ nondisclosure of adverse 12 event reports misled investors about NUPLAZID’s safety profile, the TAC acknowledges 13 that the FDA’s reevaluation of the drug’s safety “found no new or unexpected safety risks 14 associated with NUPLAID (pimavanserin).” (Id. at ¶ 137.) The Court noted these same 15 reasons in its prior Order, but Plaintiff still failed to offer facts to show how the 16 nondisclosure of adverse event reports rendered Defendants’ statements about 17 NUPLAZID’s safety misleading. Without more, the Court declines to find that Plaintiff 18 has shown that nondisclosure of the adverse event reports “created an impression of a state 19 of affairs that differs in a material way from the one that actually exists.” Brody, 280 F.3d 20 at 1006. 21 For the foregoing reasons, the Court finds that Plaintiff has failed to plead facts 22 establishing the Defendants’ nondisclosure of publicly available adverse event reports were 23 misleading. As such, there was no duty to disclose these events. Accordingly, the 24 nondisclosure of adverse events does not amount to an actionable omission in this case. 25 Lastly, although Plaintiff alleges that Defendants failed to warn investors about the 26 risk of regulatory scrutiny related to the adverse events, Acadia’s quarterly SEC filings— 27 of which the Court takes judicial notice—show that they did. (See, e.g., Doc. Nos. 107-6 28 at 14–15; 107-8 at 75–78.) See also Metzler Inv. GMBH v. Corinthian Colleges, Inc., 540 1 F.3d 1049, 1064 n.7 (9th Cir. 2008) (finding that taking judicial notice of SEC filings was 2 proper); Dreiling v. Am. Exp. Co., 458 F.3d 942, 946 n.2 (9th Cir. 2006) (same). 3 Specifically, the Court takes judicial notice of Acadia’s express statements in its SEC 4 filings that although the FDA has granted approval of NUPLAZID, the drug “is still subject 5 to substantial, ongoing regulatory requirements.” (Doc. Nos. 107-6 at 14; 107-8 at 75.) The 6 Court also takes judicial notice of Acadia’s statements that the “adverse event reporting . . 7 . for NUPLAZID will also continue to be subject to extensive and ongoing regulatory 8 requirements” and that “[d]iscovery of any issues post-approval, including any safety 9 concerns, such as . . . adverse events of unanticipated severity or frequency” may result in 10 a variety of agency action, including restrictions on NUPLAZID and withdrawal of the 11 drug from the market. (Doc. Nos. 107-6 at 14; 107-8 at 76.) In light of these statements, 12 the Court finds Plaintiff’s allegation that Defendants failed to warn of the risk of regulatory 13 scrutiny related to adverse event reports unavailing. 14 iii. Alleged Kickbacks 15 Next, Plaintiff alleges that Defendants failed to disclose that their commercialization 16 plan included paying doctors to prescribe NUPLAZID, which would raise the risk of 17 regulatory and industry scrutiny, and that they failed to list the payouts to physicians in the 18 company’s gross-to-net revenue adjustments. (E.g., Doc. No. 102 at ¶¶ 79, 80, 97, 132.) In 19 the previous Order dismissing Plaintiff’s SAC, the Court found—based on the record 20 before it—that Plaintiff adequately pled “facts suggesting Defendants paid doctors to 21 induce prescription writing of NUPLAZID, which constitutes a material fact that would 22 have made it substantially likely that a reasonable investor would have viewed this 23 information as having significantly altered the total mix of information made available.” 24 (Doc. No. 101 at 18.) In reaching this conclusion, the Court explained that “[t]he strongest 25 fact evidencing kickbacks in this case is the DOJ investigation into the matter.” (Id. at 17.) 26 Critically, however, the fact of an ongoing DOJ investigation is no longer pled. The 27 TAC establishes that the investigation is no longer active, and DOJ informed Acadia that 28 it “would not be taking any further action” at this time. (Doc. No. 102 at ¶ 138.) Plaintiff 1 insists that the cessation of the investigation is inconsequential because DOJ never 2 expressly concluded that Defendants did not pay kickbacks. (Doc. No. 108 at 16.) The 3 argument is unavailing because the Court cannot ignore common sense. See Iqbal, 556 4 U.S. at 664 (Motions to dismiss requires “the reviewing court to draw on its experience 5 and common sense.”) Based on its judicial experience and common sense, the Court finds 6 that the reasonable inference drawn from the investigation’s termination is that DOJ did 7 not uncover evidence of kickbacks to proceed with charges against Defendants. 8 Consequently, DOJ’s termination of its investigation significantly undermines Plaintiff’s 9 kickback allegations. 10 To the extent Plaintiff argues that the “law of the case” precludes the Court from 11 reconsidering its prior ruling that Plaintiff adequately pled falsity concerning kickbacks, 12 he is mistaken. “Under the law of the case doctrine, a court is generally precluded from 13 reconsidering an issue that has already been decided by the same court, or a higher court 14 in the identical case.” United States v. Alexander, 106 F.3d 874, 876 (9th Cir. 1997) 15 (internal quotations and citation omitted). However, a court has “discretion to depart from 16 the law of the case” where substantially different evidence or other changed circumstances 17 exists. Id. See, e.g., Hampton v. Steen, No. 2:12-CV-00470-AA, 2017 WL 11573592, at *2 18 (D. Or. Nov. 13, 2017) (“If plaintiffs were granted leave to amend and were successful in 19 raising new factual allegations or sufficiently changed circumstances, I would be bound by 20 neither my prior dismissal of claims nor the Ninth Circuit’s affirmance of that dismissal.”). 21 Here, the Court is not bound by its prior decision because that decision was tied to 22 the existence of an ongoing DOJ investigation, and that allegation is no longer in the 23 operative complaint. As the Court emphasized, the active DOJ investigation was the 24 “strongest fact evidencing kickbacks.” (Doc. No. 101 at 17.) As this fact no longer exists, 25 there is substantially different evidence and changed circumstances before the Court, 26 warranting a new adjudication. See Alexander, 106 F.3d at 876. Accordingly, the law of 27 the case doctrine does not apply. 28 1 Turning again to the sufficiency of Plaintiff’s kickback allegations, the Court 2 reiterates that the fact it found to be the strongest evidence of kickbacks no longer exists. 3 DOJ terminated its investigation without further action or prosecution. This fact and the 4 reasonable inferences drawn therefrom do not support Plaintiff’s claim that Defendants’ 5 marketing strategy included a kickback scheme. The Court acknowledges that in the prior 6 Order, it noted that CW1’s statements regarding the influence of speaker engagements on 7 physicians and the exit of three directors from the company after the drug’s approval 8 provided additional support for its finding. Standing by themselves, however, these 9 allegations are inadequate to substantiate Plaintiff’s contention that Defendants paid 10 kickbacks to increase NUPLAZID sales. 11 According to the TAC, “CW1 confirmed that the speaker engagements influenced 12 the physicians’ prescribing practices.” (Doc. No. 102 at ¶ 74.) The TAC, however, does 13 not contain facts sufficient to establish CW1’s personal knowledge or reliability with 14 respect to the conclusion CW1 reached. Plaintiff does allege that CW1 was an Acadia sales 15 representative tasked with recruiting physicians “to participate in a speaker program to 16 promote NUPLAZID.” (Id.) However, it is not evident from CW1’s position how CW1 17 would have personal knowledge of the physicians’ prescribing practices or any kickback 18 scheme. See generally Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 981, 996 (9th 19 Cir. 2009) (noting with approval a case “validating a confidential statement when they ‘are 20 not conclusory allegations of fraud, but specific descriptions of the precise means through 21 which it occurred, provided by persons said to have personal knowledge of them’”) 22 (quoting In re Cabletron Sys., Inc., 311 F.3d 11, 30 (1st Cir. 2002)). Considering the lack 23 of personal knowledge and reliability for CW1’s statement, the Court finds it akin to a 24 conclusory assertion, and therefore declines to accord it the presumption of truth. See Iqbal, 25 556 U.S. at 678 (“conclusory statements[] do not suffice”). Additionally, the Court notes 26 that the TAC alleges that one of the leading prescribers of NUPLAZID received no 27 consulting fees from Acadia, thereby undermining Plaintiff’s claim that Defendants bribed 28 physicians to prescribe NUPLAZID. (Doc. No. 102 at ¶ 134.) 1 As to the three company directors’ resignations, Plaintiff does not allege any facts 2 explaining the reasons for their departures or connecting them to the purported kickback 3 scheme. The Court declines to assume, based merely on the timing of the resignations, that 4 their departures were due to their awareness and disapproval of the alleged kickbacks 5 strategy. Defendants maintain that the directors’ resignations were part of Acadia’s 6 decision to downsize its board of directors. As Plaintiff’s allegations are equally consistent 7 with this alternative explanation, “[s]omething more is needed, such as facts tending to 8 exclude the possibility that the alternative explanation is true.” Eclectic, 751 F.3d at 996– 9 97. Plaintiff presented no such facts. Consequently, Plaintiff has failed to raise his claim 10 that the directors’ resignations were related to kickbacks from possible to plausible. See id. 11 Furthermore, the Court finds Plaintiff’s allegation that Defendants failed to disclose 12 that the payments to physicians may subject Acadia to regulatory scrutiny unavailing. 13 Acadia’s SEC filings, of which the Court takes judicial notice, state that its marketing plan 14 included educating healthcare providers about NUPLAZID, and that it paid external 15 providers to support Acadia’s commercial activities. (See, e.g., Doc. No. 107-6 at 11–12.) 16 The SEC filings go on warn that government authorities may conclude that its commercial 17 practices do not comply with certain laws and regulations and could adversely affect 18 Acadia’s growth and reputation. (See, e.g., id. at 17–18.) 19 Similarly, Plaintiff’s contention that Defendants misleadingly did not include 20 payments to physicians in Acadia’s list of gross to net adjustments is unpersuasive. (Doc. 21 No. 102 at ¶¶ 80, 97.) As the SEC filings show, Acadia accounted for payments to doctors 22 in its “Selling, General and Administrative Expenses,” explaining that those expenses 23 included “fees paid to external service providers to support [its] commercial activities 24 associated with NUPLAZID.” (See, e.g., Doc. No. 107-6 at 12.) As alleged in the TAC, 25 Acadia was “expanding awareness of NUPLAZID among healthcare professionals through 26 a number of initiatives including speaker programs, media and digital campaigns, and 27 symposia at major medical meetings.” (Doc. No. 102 ¶ 86). Plaintiff does not plead facts 28 1 tending to exclude the possibility that the fees were legitimate payments for services. See 2 Eclectic, 751 F.3d at 996–97. 3 There being no particular facts in the TAC sufficient to substantiate Plaintiff’s claims 4 that Defendants engaged in a kickback scheme, the Court finds that Plaintiff has failed to 5 plead an actionable omission relating to kickbacks. See Brody, 280 F.3d at 1006 (An 6 omission “must affirmatively create an impression of a state of affairs that differs in a 7 material way from the one that actually exists.”). For the foregoing reasons, the Court finds 8 that Plaintiff failed to adequately plead falsity. Accordingly, the Court GRANTS 9 Defendants’ motion to dismiss Plaintiff’s cause of action pursuant to Section 10(b) of the 10 Exchange Act and Rule 10b-5 promulgated thereunder. 11 2. Scienter and Loss Causation 12 Because the Court found that Plaintiff failed to plead falsity, the Court need not reach 13 Defendants’ additional challenges concerning the elements of scienter and loss causation. 14 C. Control-Person Liability Section 20(a) Claim 15 Turning to Plaintiff’s control-person liability claim against all Individual 16 Defendants, “under Section 20(a), plaintiff must prove: (1) a primary violation of federal 17 securities laws[]; and (2) that the defendant exercised actual power or control over the 18 primary violator.” Howard v. Everex Systems, Inc., 228 F.3d 1057, 1065 (9th Cir. 2000). 19 Considering the Court’s above finding that Plaintiff has failed to adequately state a claim 20 for a violation of Section 10(b) and Rule 10b-5 of the Exchange Act, Plaintiff has not 21 satisfied the first prong of a Section 20(a) claim. Accordingly, the Court GRANTS 22 Defendants’ motion to dismiss Plaintiff’s cause of action pursuant to Section 20(a) of the 23 Exchange Act. 24 // 25 // 26 // 27 // 28 // l IV. CONCLUSION 2 For the reason stated herein, the Court GRANTS Defendants’ motion to dismiss. 3 ||(Doc. No. 107.) Moreover, because Plaintiff's complaint remains deficient despite ample 4 and opportunity to amend, the Court DISMISSES the TAC WITHOUT LEAVE TO 5 || AMEND. See Ascon Properties, Inc. v. Mobil Oil Co., 866 F.2d 1149, 1160 (9th Cir. 1989) 6 || (“The district court's discretion to deny leave to amend 1s particularly broad where plaintiff 7 || has previously amended the complaint.”). The Clerk of Court is directed to close this case. 8 IT IS SO ORDERED. 9 || Dated: January 3, 2022 © 10 Hon, Anthony J.Battaglia 11 United States District Judge 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28