DNJ analyzes "puffery" in WILLIAM T. HOEY v. INSMED INCORPORATED

On the subject of "puffery," note a recent decision in the District of New Jersey in the case
WILLIAM T. HOEY v. INSMED INCORPORATED, 2018 U.S. Dist. LEXIS 24907, which included text:


Lead Plaintiff Bucks County Employees Retirement Fund ("Plaintiff") brings this putative class action, on behalf of itself and all other similarly situated individuals and entities, against Insmed Incorporated ("Insmed"), a biopharmaceutical company, as well as Insmed's Chief Executive and Financial Officers, William H. Lewis ("Mr. Lewis") and Andrew T. Drechsler ("Mr. Drechsler"), respectively, alleging violations under various provisions of the applicable federal securities laws.1 Plaintiff's action is based on Defendants' alleged misrepresentations and omissions in connection with Insmed's target drug, Arikayce, and the results of its Phase 2 Trial, which, ultimately, failed to support regulatory approval. In the instant matter, Defendants moves for dismissal of the Amended Complaint, arguing, inter alia, that the challenged representations are not actionable because a duty to disclose was absent, the material statements constitute permissible opinions or corporate puffery, and Plaintiff has failed to adequately plead scienter. For the reasons set forth below, Defendant's Motion to Dismiss is GRANTED.




There is relevance to Bridgewater, New Jersey: Insmed, a publically traded biopharmaceutical company, principally located in Bridgewater, New Jersey, specializes in the development and commercialization of inhaled therapies for patients with serious lung diseases.

Further, as to puffery:


In addition, like forward-looking statements, opinions, and beliefs, a defendant may not be held liable for an alleged misrepresentation that consists of nothing more than vague and nonspecific expressions of corporate optimism. In re Advanta, 180 F.3d at 538. Such statements "constitute no more than 'puffery' and are understood by reasonable investors as such." Id. (quoting Burlington, 114 F.3d at 1428 n. 14). Thus, if a false or misleading statement is "too vague to ascertain anything on which a reasonable investor might rely," it is inactionable as corporate [*25] puffery. In re Aetna, 617 F.3d at 284.

(...)

As articulated by the Third Circuit, material representations contrasted with statements of subjective analysis or extrapolations, such as opinions, motives and intentions, or general statements of optimism, "constitute no more than 'puffery' and are understood by reasonable investors as such." In re Aetna, 617 F.3d at 283 (internal quotations and citation omitted). In the same vein, "[a] representation is immaterial if the statement at issue is too vague to be actionable," and, in turn, cannot form the basis of a claim for securities fraud. Id. (internal quotations and citations omitted).

(...)

Likewise, Plaintiff fails to state a claim under the second subset of statements, wherein Insmed merely described the EMA as, inter alia, "collaborative and supportive," as well as "enthusiastic" about the results of the trial. Based on Plaintiff's pleadings, it appears that "support" and "enthusiasm" were expressed by the EMA during the applicable time period. In fact, Insmed, following discussions with the EMA, was confident in submitting an MAA based solely on the Phase 2 Trial, which was not initially intended to support regulatory approval. That decision, which was made after Insmed's discussions with the EMA, is suggestive of Insmed's positive interactions with that agency. These representations, therefore, cannot serve as a basis for Plaintiff's securities claims. Gillis, 197 F. Supp. 3d at 589 (holding that the challenged statements [*52] were statements of opinion, because they did not "address[] existing objective facts," but rather "express[ed] [the defendants'] views, either as to the FDA's actions and communications, or as to [its drug's] prospects."); Kleinman, 706 F.3d at 153 ("We have also held that words like 'encouraging' are the type of 'expressions of puffery and corporate optimism' that do not generally 'give rise to securities violations.'") (quoting Rombach v. Chang, 355 F.3d 164, 174 (2d Cir. 2004))).

Lastly, the third group of statements, with respect to Arikayce's approvability, are both forward looking and inactionable as corporate puffery. For instance, the statement, given by Mr. Lewis during Insmed's first investor conference in March of 2015, reads, in pertinent part: "I think one of the nice things about this company two and a half years ago when I had the privilege to talk to the board and to look at the opportunity was, I saw an approvable drug, bottom line." Pl.'s Opp'n, at 14; AC ¶ 50. This statement suffers from the same flaw in Plaintiff's previous arguments; in demonstrating falsity, Plaintiff references concerns which were raised after the fact. And, more to the point, a reasonable investor would not rely on this statement. Indeed, it clearly embodies the opinion [*53] of Mr. Lewis, and amounts to nothing more than a "gut feeling" stemming from a vaguely described interaction with Insmed's corporate board, at a time before conducting a Phase 2 Trial. Statements of this kind are a paradigm of corporate puffery, and, therefore, they cannot serve as the basis for § 10(b) liability. Vallabhaneni v. Endocyte, Inc., No. 14-1048, 2016 U.S. Dist. LEXIS 673, at *47 (S.D. Ind. Jan. 4, 2016) ("Courts frequently consider loosely optimistic statements that are so vague, so lacking in specificity, or so clearly constituting the opinions of the speaker that no reasonable investor could find them important to the 'total mix of information available' to be immaterial as a matter of law." (internal citation omitted)); Lopez v. CTPartners Exec. Search, Inc., 173 F. Supp. 3d 12, 28 (S.D.N.Y. 2016) (holding that statements which are "so broad and nebulous as to not provide any specific or concrete guarantee" are not relied on by reasonable investors); Medimmune, 873 F. Supp. at 964 ("Mere expressions of hope or expectation regarding future approval, not worded as guarantees, are not actionable.")