Skiadas v. Acer Therapeutics Inc., 2020 WL 3268495 (S.D.N.Y. June 16, 2020)

On June 16, 2020, Judge Gregory Woods of the Southern District of New York granted in part and denied in part a motion to dismiss an action against Acer Therapeutics Inc. and certain of its executives regarding disclosures made in offering documents prior to the Company’s submission of a New Drug Application (“NDA”) for EDSIVO, a drug that treats Vascular Ehlers-Danlos Syndrome (“vEDS”).  Plaintiff allege that when the FDA declined to approve the drug, Acer’s stock dropped.

Rather than conducting its own clinical trial into the effectiveness of EDSIVO as a treatment for vEDS, Acer licensed clinical trial data from a 2004 study called the “Ong Trial.”  The Ong Trial assessed the effect of a beta-blocker, celiprolol, in patients with VEDS.  Ultimately, the FDA denied the NDA and called for an “adequate and well-controlled trial to determine whether celiprolol reduces the risk of clinical events in patients with vEDS.”

Plaintiff’s complaint targeted Acer’s alleged statements regarding the likelihood that the FDA would require an additional clinical trial before approving the NDA for EDSIVO.  Plaintiff alleged that Acer represented in its offering documents for its secondary offering of common stock that the FDA agreed that a separate clinical trial was “unnecessary” or “not likely needed.”  According to plaintiff, the Ong Trial had obvious deficiencies and it was “near certain” that the FDA would have discussed concerns with the Ong Trial with Acer.

Defendants argued that a reasonable investor would have understood statements such as “the FDA agreed . . . that an additional clinical trial is not likely needed” to mean only that Acer could submit the NDA without conducting an additional clinical trial.  But the Court held there were ambiguities that could lead a reasonable investor to construe the statements as relating to likely FDA approval.

In partially denying defendants’ motion to dismiss, the Court held plaintiff had sufficiently pleaded scienter (i.e., fraudulent intent) given defendants’ addition in subsequent disclosures of qualifying language to describe interactions with the FDA.  According to the Court, this qualifying language supported an inference of defendants’ awareness of the inaccuracy of previous disclosure statements.

The Court, however, granted defendants’ motion with respect to Acer’s statement that the FDA provided “additional guidance” on the expected presentation of clinical data to support the NDA filing.  Plaintiff alleged this statement was false and misleading because it led investors to conclude the Ong Trial data was sufficient to support FDA approval.  The Court did not find this argument persuasive, reasoning that the FDA could have ultimately rejected the EDSIVO NDA while also providing guidance to Acer on how to present the trial data.

This decision is a reminder that companies must exercise the utmost caution when publicly predicting the outcome of an NDA and when describing discussions with the FDA, particularly when those discussions concern an upcoming or pending application.