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Ninth Circuit Affirms Dismissal Of Putative Class Action Against Pharmaceutical Company For Failure To Adequately Allege Falsity And Scienter
08/26/2025On August 20, 2025, the United States Court of Appeals for the Ninth Circuit affirmed the dismissal of a putative class action asserting claims under the Securities Exchange Act of 1934 against a pharmaceutical company and certain of its executives. Sneed v. Talphera, Inc., —F.4th—, 2025 WL 2406424 (9th Cir. 2025). Plaintiffs alleged the company’s marketing slogan for a medication was misleading because the slogan supposedly failed to disclose all the steps for administering the medication. The Ninth Circuit affirmed the dismissal of the action, holding that plaintiffs failed to adequately allege falsity and scienter.
Plaintiffs’ allegations centered on statements made by the company emphasizing that the medication could be administered orally, as opposed to intravenously—in particular, the slogan “tongue and done.” Id. at *2. The company’s marketing materials with this slogan also included warnings that cautioned the drug could only be administered pursuant to an FDA-approved Risk Evaluation and Mitigation Strategy (“REMS”), which required that the medication be administered in a specialized medical setting by trained staff. Id. Similar statements by the company’s CEO also noted that the drug could not be administered in ordinary pharmacies and was distributed and administered pursuant to a REMS program. Id. at *2–3.Nevertheless, the FDA sent the company a letter contending that the company’s marketing slogan was misleading, and the company stopped using it. Id. at *3. Plaintiffs’ allegations relied primarily on the FDA’s letter to the company.
The Ninth Circuit held that plaintiffs had not established the company made a materially false statement in connection with its marketing slogan. Id. at *4. The Ninth Circuit first explained that the slogan would not mislead investors about the process that would need to be followed to administer the drug pursuant to a REMS program. Id. The Court specifically held that a “reasonable investor would not blindly accept a marketing slogan by itself when she has access to other contextual information,” including the company’s warnings that the drug could only be administered in a medical setting by trained personnel. Id. at *5. While plaintiffs also complained that the CEO’s description of how the drug was administered was too cursory, the Ninth Circuit pointed to the CEO’s statement emphasizing that the medication could only be administered pursuant to a REMS program. Id. The Ninth Circuit noted that “a reasonable investor would not expect minute details of the REMS plan in [the CEO’s] TED-like talk and would know that she could find such information elsewhere.” Id.
The Ninth Circuit also held that the fact the company had received the FDA warning letter concerning its use of its marketing slogan did not establish the company made actionable misrepresentations. Id. at *6. The Court distinguished between the audience the FDA is concerned about (patients and medical professionals) and the audience the securities laws are concerned about (reasonable investors). Id. Accordingly, while the FDA may be focused on “disclosure of specific instructions to healthcare providers,” the Court explained that the FDA’s conclusions on that subject “do[] not make the omission of [such] information relevant for investors.” Id. The Court also noted that, in evaluating whether a challenged statement is misleading in connection with an Exchange Act claim, reasonable investors are expected to read entire documents for “caveats and disclaimers,” whereas FDA regulations governing advertisements do not allow disclaimers to cure an otherwise misleading statement. Id.
Finally, the Ninth Circuit held that plaintiffs also failed to adequately allege scienter, concluding that the individual defendants “most likely made a good-faith determination that the ‘Tongue and Done’ slogan would truthfully highlight [the drug’s] major selling point.” Id. While plaintiffs put forward scienter-related allegations attributed to confidential witnesses, the Court observed that few of those witnesses interacted with the named executives, and while one witness claimed to have told certain executives that the slogan “oversimplified” the medication’s use, the Court determined that this amounted to nothing more than “a good-faith difference of opinion.” Id. at *7. And while plaintiffs contended that a finding of scienter was supported because the drug was so important to the company’s operations, the Ninth Circuit held that plaintiffs pleaded no facts that would have caused defendants to know the slogan conveyed obviously false information. Id. The Court found it was more probable that the company did not intend to defraud investors, given that its use of the slogan was accompanied by references to the REMS program and restrictions on the drug’s use. Id.
