Amylin Pharmaceuticals, Inc. Securities Litigation

United States District Court, S.D. CaliforniaMay 1, 2003
CASE NO. 01cv1455 BTM(NLS) (S.D. Cal. May. 1, 2003)

CASE NO. 01cv1455 BTM(NLS)

May 1, 2003


ORDER DENYING DEFENDANTS' MOTION TO RECONSIDER AND VACATING IN PART AND AMENDING THE COURT'S ORDER DENYING DEFENDANTS' MOTION TO DISMISS


BARRY MOSKOWITZ, District Judge

Defendant Amylin Pharmaceuticals, Inc. and the individual defendants (collectively "Amylin" or "Defendants") filed a motion for reconsideration of the Court's order denying Defendants' motion to dismiss. For the reasons set forth below, Defendants' motion for reconsideration is DENIED and the Court's order denying Defendants' motion to dismiss is VACATED IN PART and AMENDED as set forth below.

I. BACKGROUND

Plaintiffs represent a purported class of persons purchasing shares of Amylin between November 8, 1999 and July 25, 2001 ("class period"). Plaintiffs have filed a Consolidated Complaint ("CC") against Amylin and individual defendants Joseph Cook, who was CEO during the class period, and Howard Greene, who is a director and co-founder of Amylin. Plaintiffs allege that defendants made false and misleading statements that artificially inflated Amylin's stock price causing them damage when they purchased shares during the class period. The following comes from allegations in the Complaint.

Amylin is a pharmaceuticals company engaged in the development of potential drug candidates for the. treatment of metabolic disorders. In 1987, Garth Cooper, a Ph.D. student at Oxford University, discovered amylin, a naturally occurring hormone that is secreted, along with insulin, in the pancreas, (CC ¶ 29.) Later that year, Cooper and defendant Greene founded Amylin Pharmaceuticals. (Id.). Amylin developed pramlintide acetate, a synthetic version of amylin, for the treatment of diabetes. Pramlintide was later named Symlin for marketing purposes.

The CC alleges that prior to the start of the class period, Amylin had suffered significant setbacks in connection with the development and clinical testing of Symlin. In August, 1997, Amylin's first set of Phase III trials achieved somewhat disappointing results when some dose groups did not achieve statistical significance after twelve months. (CC ¶ 36.) Following these results, Amylin modified its test protocols by (1) using a constant, instead of varying, dose of insulin, and (2) became more particular in its selection of study participants by requiring them to have a higher HbA1c value. (Id.)

HbA1c is an indicator for average blood glucose concentrations.

On October 28, 1997, Amylin met with the FDA regarding the development of Symlin. The minutes from the FDA meeting state: "Since keeping a constant dose is not how diabetics are treated, the Agency stated that it will have difficulty in evaluating data from study designs that are inconsistent with clinical practice. . . . The Agency stated that the current study data is not considered pivotal data for an NDA." (CC ¶ 45.)

In March, 1998, Johnson Johnson gave its six-month notice of intent to terminate its collaboration with Amylin on Symlin. Without Johnson Johnson's backing, Amylin had to restructure operations and cut staff. (CC ¶ 37.)

In October, 1998, Amylin's second set of Phase III trials achieved disappointing results because they did not reach statistical significance for the group who received the highest Symlin dosage. (CC ¶ 38.)

In early 1999, Amylin's stock was delisted from the NASDAQ. (CC ¶ 39.)

Plaintiffs allege that Amylin made false and misleading statements regarding the clinical studies on Symlin in order to cause its stock to be relisted on the NASDAQ and to raise over $129 million from two private placement offerings during the Class Period without excessively diluting Defendants' holdings. (CC ¶ 27, 43.)

One day after the close of the class period, on July 26, 2001, the FDA's Advisory Committee voted not to recommend approval of Symlin. (CC ¶ 66.) On July 27, 2001, Amylin shares fell to as low as $5.75 on a record volume of over 17 million shares. (CC ¶ 66.) During the class period, Amylin's stock traded as high as $18 per share, (id)

On April 29, 2002, Defendants filed a motion to dismiss the Consolidated Complaint. In an order filed on October 10, 2002, the Court denied Defendants' motion to dismiss. Defendants seek reconsideration of this order.

II. DISCUSSION

A. Deceptive Statements

In its order of October 10, 2002, the Court found that the following statements made by Defendants were false and misleading in light of the 1997 meeting with the FDA:

• "We now have comprehensive data from which to prepare our regulatory submissions. . . ." (Nov. 8, 1999 Press Release, CC ¶ 44)
• "We have completed clinical testing of SYMLIN that we believe is sufficient to support [FDA] approval to market SYMLIN." (1999 10-K Form, 1999 Annual Report, 2000 10-K Form, May 17, 2001 S-3 Form, CC ¶¶ 48, 49, 56, 57)
• "This comprehensive plan integrates not only all the data and reports required by FDA. . . ." (May 15, 2000 Press Release, CC ¶ 51)

The Court also found that the following statements regarding the side effects and safety of Symlin were deceptive based on (1) data that showed that Symlin was associated with severe hypoglycemia; (2) data that showed a correlation between Symlin and an increased incidence of adverse events including major trauma, motor vehicle accidents and deaths; and (3) Amylin's alleged manipulation of the safety database:

• "Adverse events were consistent with those in previous SYMLIN studies [where there were no adverse events]." (Nov. 8, 1999 Press Release, CC H 44)
• "These improvements in glucose control were achieved without an increase in the incidence of hypoglycemic events or clinically important safety issues." (1999 10-K Form, 1999 Annual Report, 2000 10-K Form, CC ¶¶ 48, 49, 56)
• "In Study IA, participants receiving 30/60 micrograms of SYMLIN four times a day achieved a sustained, statistically significant decrease in HbA1c from SYMLIN: —0.1% insulin only) without an increase in the frequency of patient-reported severe hypoglycemic events. . . ." (1999 10-K Form, 1999 Annual Report, 2000 10-K Form, CC ¶ 48, 49, 56)
• "In the type 1 diabetes studies, those participants who experienced an early glycemic response and received the well-tolerated dosages of 30 micrograms four times daily or 60 micrograms three times daily had no increase in severe hypoglycemia. . . ." (1999 10-K Form, 1999 Annual Report, 2000 10-K Form, CC ¶¶ 148, 49, 56)
• "The results from all six studies show a consistent lowering of blood glucose without an increase in hypoglycemia." (1999 Annual Report, Letter to Shareholders, CC ¶ 49.)
• "Phase 3 SYMLIN studies demonstrated statistically significant improvements in blood glucose control without weight gain in people with type 1 or 2 diabetes using insulin. These reductions in blood glucose were achieved with no increase in severe hypoglycemic event rates compared to the control group. No maior safety concerns were noted in the suggested therapeutic range during the development program, in which over 4,400 patients were exposed to SYMLIN." (December 7, 2000 Press Release, CC ¶ 53)

(Emphasis added.)

B. Gompper Decision

A motion for reconsideration "should not be granted, absent highly unusual circumstances, unless the district court is presented with newly discovered evidence, committed clear error, or if there is an intervening change in the controlling law." Kona Enter., Inc. v. Estate of Bishop. 229 F.3d 877, 890 (9th Cir. 2000) (citations omitted). Defendants argue that the Court should reconsider its order of October 10, 2002, based on the Ninth Circuit case, Gompper v. VISX. Inc., 298 F.3d 893 (9th Cir. 2002). Although Gompper was decided in time for Defendants to discuss the case during oral arguments, Defendants argue that they were not afforded a meaningful opportunity to discuss the impact of the case.

The Court does not consider Gompper an "intervening change in the controlling law." First, as pointed out by Plaintiffs,Gompper was issued on August 5, 2002, more than a month prior to the hearing on the motion to dismiss which was held on September 17, 2002. At the hearing, counsel for Defendants discussedGompper at length, arguing, as Defendants are here, that the Court should draw the reasonable inference that Defendants believed that the Phase III trials were adequate to obtain FDA approval of Symlin. (Excerpts of Hearing Transcript, Exh. B to Lin Decl.) Counsel for Defendants had full opportunity to argue the applicability ofGompper and did not ask the Court for leave to file a supplemental brief discussing Gompper or for additional time to explicate the impact of Gompper.

Second, Gompper did not change the controlling law. InGompper. plaintiffs sued VISX for securities fraud, alleging, among other things, that VISX intentionally deceived them by making optimistic statements about VISX's future earnings and growth because VISX knew its patents were invalid. In support of their allegations, plaintiffs detailed how VISX had initiated a number of lawsuits in defense of its patents. Plaintiffs argued that one reasonable and warranted inference one could draw from VISX's litigious behavior is that VISX knew its patents were invalid and, consequently, engaged in an aggressive strategy of intimidation through litigation. However, as pointed out by the Ninth Circuit, an equally, if not more, plausible explanation for VISX's actions is that VISX believed that its patents were valid and fought to protect its patents.

The court in Gompper explained that "when determining whether plaintiffs have shown a strong inference of scienter, the court must consider all reasonable inferences to be drawn from the allegations, including inferences unfavorable to the plaintiffs." Id. at 897. The court further explained, "District courts should consider all the allegations in their entirety, together with any reasonable inferences that can be drawn therefrom, in concluding whether, on balance, the plaintiffs' complaint gives rise to the requisite inference of scienter." Id. Gompper did not purport to be making any changes in the law. Rather, the court explained, "This approach is consistent with that currently being utilized in the Ninth Circuit." Id.

Defendants argue that Gompper constitutes a significant change in the law because previously, the Ninth Circuit had held that "[o]n a motion to dismiss, the reviewing court must accept plaintiff's allegations as true and construe them in the light most favorable to the plaintiff." In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 983 (9th Cir. 1999). However, there is a difference between construing factual allegations underlying a plaintiff's claim of scienter in the light most favorable to the plaintiff and accepting as true the plaintiffs claim that defendant acted with the requisite motive. These concepts are not contradictory. In a recent securities fraud case, the Ninth Circuit cited both propositions. No. 84 Employer-Teamster Joint Council Pension Trust Fund v. America West Holding Corp., 320 F.3d 920, 925 n. 2, 938 (9th Cir. 2002) ("America West ") ("As required by the Federal Rule of Civil Procedure 12(b)(6), the facts are presented in the light most favorable to Plaintiffs."; "[W]e must consider `all reasonable inferences to be drawn from the allegations, including inferences unfavorable to the plaintiffs.'")

At any rate, even assuming Gompper qualifies as "an intervening change in controlling law," the Court disagrees with Defendants' contention that the Court's decision, as it relates Defendants' statements about the sufficiency of its Phase III trials (the first three statements identified above), was inconsistent withGompper. Defendants argue that the following facts support the "only one reasonable and plausible inference" to be drawn — that Defendants reasonably believed that Symlin's Phase III trials were sufficient: (1) Amylin spent millions of dollars on its phase III clinical trials; (2) it is the FDA's job to work with the applicant to help devise Phase III clinical trials that are safe and will reveal the efficacy of a drug candidate; (3) there was continuous dialogue between Amylin and the FDA during the drug approval process; (4) the FDA approved the design and nature of Amylin's Phase III clinical trials; and (5) Amylin actually submitted its NDA for Symlin to the FDA; and (6) the lack of stock sales by the insiders.

There is no evidence regarding the alleged lack of stock sales by the insiders before the Court. (Defendants just point out that Plaintiffs did not allege that such sales took place.) The Court considered the other "facts" and any reasonable inferences to be drawn therefrom in reaching the conclusion that, on balance, Plaintiffs' Consolidated Complaint gave rise to the requisite inference of scienter. (See Order Denying Defendants' Motion to Dismiss, pp. 7-8.)

Amylin clearly hoped that its Phase III trials were sufficient to obtain FDA approval and undoubtedly spent significant amounts of money pursuing the trials to that end. However, Amylin's decision to forge ahead with the Phase III trials does not negate the reasonable inference that Amylin knew that the FDA had serious concerns about its study designs which could prevent the approval of Symlin.

Based on the facts alleged by Plaintiffs, the most plausible inference to be drawn is that Amylin knew that there may be a problem with the methodology used in conjunction with the Phase III trials but took the calculated risk of continuing the trials and application process as originally planned, There is nothing unlawful about taking a calculated risk. However, if, as Plaintiffs allege, Defendants misled Plaintiffs about such risk by making assurances regarding the completeness of the data and the likelihood of FDA approval, Defendants may be held liable.

C. Safe Harbor Warnings and Forward-Looking Statements

Defendants argue that the Court erred in finding that its "safe harbor" warnings were insufficient. Defendants have also requested that the Court certify this issue for interlocutory appeal pursuant to 28 U.S.C. § 1292(b) in the event that the Court does not change its ruling on the issue.

In its order of October 10, 2002, the Court held that the challenged statements are forward-looking and proceeded to analyze the cautionary language in Defendant's press releases and SEC filings. However, upon reexamination, the Court finds that with one exception noted below, the challenged statements are not forward-looking. Therefore, the Court need not reach the issue of whether there was sufficient cautionary language to bring these statements within the PSLRA's safe harbor. Accordingly, the portion of the Court's order discussing the safe harbor and "bespeaks caution" doctrine (pp. 13:1-15:22) is VACATED and the order is AMENDED as follows:

A defendant shall not be liable with respect to any forward-looking statement if and to the extent that the forward-looking statement is "identified as a forward-looking statement, and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statement." 15 U.S.C. § 78u-5(c)(1)(A). The term "forward-looking" statement is defined in 15 U.S.C. § 78u-5(i)(1), which provides:

The term "forward-looking statement" means —

(A) a statement containing a projection of revenues, income (including income loss), earnings (including earnings loss) per share, capital expenditures, dividends, capital structure, or other financial items;
(B) a statement of the plans and objectives of management for future operations, including plans or objectives relating to the products or services of the issuer;
(C) a statement of future economic performance, including any such statement contained in a discussion and analysis of financial condition by the management or in the results of operations included pursuant to the rules and regulations of the Commission;
(D) any statement of the assumptions underlying or relating to any statement described in subparagraph (A), (B), or (C);
(E) any report issued by an outside reviewer retained by an issuer, to the extent that the report assesses a forward-looking statement made by the issuer; or
(F) a statement containing a projection or estimate of such other items as may be specified by rule or regulation of the Commission.

(Emphasis added.)

The "bespeaks caution" doctrine was created by the courts prior to the enactment of the PSLRA. Like the safe harbor provision of the PSLRA, the "bespeaks caution" doctrine provides a mechanism by which a court can rule as a matter of law . . . that defendants1 forward-looking representations contained enough cautionary language or risk disclosure to protect the defendant against claims of securities fraud." Provenz v. Miller. 102 F.3d 1478, 1493 (9th Cir. 1996). The Court has not found any authority indicating that the definition of a forward-looking statement is broader under the "bespeaks caution" doctrine than it is under the PSLRA. Therefore, the Court's analysis regarding forward-looking statements under the PSLRA applies equally to Defendants' "bespeaks caution" arguments.

The Court previously indicated that the statements at issue fall within 15 U.S.C. § 78u-). However, the Court was mistaken. Assertions of present or historical fact are not "assumptions." See, e.g., Harris v. Ivax Corp., 182 F.3d 799, 806 (11th Cir. 1999) (explaining that observed facts such as "prices have continued to decline" and "customer reorders remain depressed" do not fall with the definition of "assumptions" and are not forward-looking statements); In re Boeing Sec. Litig., 40 F. Supp.2d 1160, 1169 (W.D. Wash, 1998) (explaining that statements concerning present production problems are not assumptions). With the exception of the statement "We have completed clinical testing of SYMLIN that we believe is sufficient to support [FDA] approval to market SYMLIN," all of the challenged statements in this case are observed facts about the trial results and data as opposed to predictions or assumptions about future events. See In re Viropharma, Inc., 2003 WL 1824914 (E.D. Pa. Apr. 7, 2003) (holding that statements regarding the results of clinical trials and the status of the NDA for Pleconaril were not forward-looking statements).

Perhaps realizing that the statements themselves are not forward-looking, Defendants originally argued that the statements are part of press releases and SEC filings which contain other forward-looking statements and which are therefore considered forward-looking in their entirety. (Defendants' Memorandum of Points and Authorities in Support of Motion to Dismiss, 21:8-23:2.) Defendants relied on Harris v. Ivax. 182 F.3d 799, 806 (11th Cir 1999) in making this argument. However, Defendants misinterpreted the holding of Harris.

In Harris, the Fifth Circuit analyzed statements made in two press releases to determine whether they were entitled to safe harbor protection. One of the press releases, which predicted third quarter results of the company, contained a "laundry list" of factors relating to the company's generic drug business that were expected to influence the company's third quarter results. Some of the sentences contained in the list were forward-looking while others were not, raising the question of whether the safe harbor would apply to the entire list or only parts of the list. The Fifth Circuit concluded that the entire list qualified for safe harbor protection. The court explained, "[W]hen the factors underlying a projection or economic forecast include both assumptions and statements of known fact, and a plaintiff alleges that a material factor is missing, the entire list of factors is treated as a forward-looking statement." Harris, 182 F.3d at 807.

The holding of Harris is limited to omissions from lists of factors underlying a projection or economic forecast. Harris did not hold that entire communications should be treated as forward-looking if they contain some forward-looking statements. TheHarris court explicitly rejected this argument, which was urged by the defendants in that case, explaining that the legislative history of the PSLRA Implies piecemeal examination of the statements found in a company communication." Id. at 804. See also In re Musicmaker.com Sec. Litig., 2001 WL 34062431 (C.D. Cal. June 4, 2001) (rejecting defendants' reliance on Harris for the proposition that a statement of present fact falls within the safe harbor of the PSLRA if it was made within the same paragraph as a forward-looking statement — "In short, the PSLRA's safe harbor does not immunize an allegedly fraudulent statement of present or historical fact, otherwise adequately pleaded, whenever a forward-looking statement is made along with it,")

Harris is inapplicable to this case. Plaintiffs do not contend that they were misled by omissions from lists of factors. Moreover, the challenged statements are not lists of factors or portions thereof. Therefore, the statements are not considered forward-looking just because there are other forward-looking statements made in their proximity.

The only statement that qualifies as forward-looking is the statement that "We have completed clinical testing of SYMLIN that we believe is sufficient to support [FDA] approval to market SYMLIN." This statement is an "assumption" underlying the following statement of the plans and objectives of management for future operations: "We are currently preparing a New Drug Application for planned submission to the FDA in mid-2000." (1999 10-K Form, 2000 10-K Form, May 17, 2001 S-3 Form.)

To receive safe harbor protection, this forward-looking statement must have been accompanied by meaningful language identifying important factors that could cause actual results to differ materially from those in the forward-looking statement. 15 U.S.C. § 78u-5(c)(1)(A). Upon review of the cautionary language contained in Defendants1 SEC filings, the Court finds that the warnings were not meaningful.

Vague or boilerplate disclaimers are insufficient to invoke safe harbor protection, in re Donald J. Trump Casino Sec. Litig., 7 F.3d 357, 371-72 (3d Cir. 1993). Rather, cautionary statements must be "substantive and tailored to the specific future projections, estimates or opinions . . . which the plaintiffs challenge." Id. For example, in Helwig v. Vencor, Inc., 251 F.3d 540 (6th Cir. 2001), the plaintiffs alleged that Vencor, knowing about the likely adverse impact of the Balanced Budget Act which was making its way through Congress, made false and misleading earnings statements. The court held that Veneer's cautionary language to the effect that it could not predict the form, effect, or likelihood of any proposed legislation, offered investors no guidance about the consequences of health care reform upon the company's business, and did not bring Vencor's statements within the PSLRA's safe harbor. See also In re Nike, Inc. Sec. Litig., 181 F. Supp.2d 1160, 1172 (D. Or. 2002) (holding that Nike's cautionary statement regarding the potential impact of the "mix of futures and `at once1 orders" on revenue did not convey a risk of similar significance to the revenue losses caused by the manufacturing, scheduling, and ordering problems caused by Nike's new demand/supply planning system).

The cautionary language in the SEC filings consisted of general statements such as, "Results from our clinical trials may not be sufficient to obtain regulatory clearance to market Symlin," "The FDA may also require additional testing for safety and efficacy," and "[The] data collected from our clinical trials may not be sufficient to support approval of SYMLIN . . . by the FDA." " (1999 10-K Form, 2000 10-K Form, May 17, 2001 S-3 Form.) These cautionary statements were included in approximately ten pages of "risk factors." The warnings were not tailored to Defendants' statement regarding the sufficiency of the trial results and did not provide meaningful information to the plaintiffs regarding the FDA's concern that the trial designs were inconsistent with clinical practice and that data from such trials would not be considered pivotal data for NDA approval.

Relying on In re MedImmune, Inc. Sec. Litig., 873 F. Supp. 953 (D. Md. 1995), Defendants argue that they were not required to spell out the exact reservations raised by the FDA regarding the Phase III trials. However, MedImmune is distinguishable from this case. In MedImmune. the court held, "Mere questioning by the FDA imposed no duty upon Defendants either to trim back their opinions as to the efficacy of the drug or to report to the public the FDA staffers' questions as they rose." (Emphasis added.) The fact that the FDA had some questions regarding the efficacy of the drug due to study designs, did not mean that the drug was in fact inefficacious. Therefore, the plaintiffs had not established that the defendants' statements regarding the efficacy of the drug were false or misleading.

The statement at issue here was not limited to Defendants' opinion regarding the efficacy of the drug. Instead, Defendants represented that, in their opinion, the trial results met the requirements for FDA approval. Viewing the facts in the light most favorable to Plaintiffs, the concerns raised by the FDA in the 1997 meeting were much more significant than a "bump on the road" and shed serious doubt on the sufficiency of the trials. Accordingly, Defendants were obligated to disclose the FDA's concerns to render their statement not misleading.

MedImmune also held, "Mere expressions of hope or expectation regarding future approval, not worded as guarantees, are not actionable." Id. at 964. The Court is not bound by MedImmune and disagrees with this holding. If a defendant states that it believes or expects that the FDA will approve its drug but has information tending to seriously undermine the accuracy of its statement, the statement is actionable. See In re Apple Computer Sec. Litig., 886 F.2d 1109, 1113 (9th Cir. 1989).

A company seeking FDA approval of a new drug clearly is not under any obligation to disclose every single issue raised by the FDA throughout the process. However, if the FDA expresses significant concerns regarding the sufficiency of the trials, the company cannot make affirmative representations regarding the completeness or sufficiency of the trials without full disclosure.

In conclusion, most of the statements at issue are not "assumptions" and do not otherwise fall within the statutory definition of "forward-looking statement." The only statement that is forward-looking is not accompanied by meaningful cautionary language and therefore does not qualify for safe harbor protection. D. Falsity of Statements

Defendants argue that in light of Gompper. the Court should reconsider its prior decision as it relates to the falsity of the challenged statements. However, Gompper does not have any bearing on the Court's analysis regarding the falsity of the statements. As discussed above, Gompper held that when deciding whether plaintiffs have shown a strong inference of scienter, the court must consider all reasonable inferences to be drawn from the allegations, including inferences unfavorable to the plaintiffs. The determination of whether the facts alleged establish falsity is independent of the analysis regarding scienter.

At any rate, Defendants have not shown that the Court's previous decision regarding the falsity of the statements was erroneous. Defendants argue that the statements regarding the sufficiency of the Phase III trials were statements of opinions and are not actionable. However, statements of opinion are actionable under the federal securities laws under certain circumstances. In re Apple Computer Sec. Litig., 886 F.2d 1109, 1113 (9th Cir. 1989). In determining whether statements of opinions are actionable courts examine the following factors: (1) if the statement is not genuinely believed; (2) if there is no reasonable basis for the belief; and (3) if the speaker is aware of undisclosed facts tending to seriously undermine the accuracy of the statement. In re Apple Computer Sec. Litig., 886 F.2d at 1113. See also In re 2TheMart.com. Inc. Sec. Litig., 114 F. Supp.2d 955, 961 (C.D. Cal. 2000): In re Oxford Health Plans. Inc. Sec. Litig., 187 F.R.D, 133, 141 (S.D.N.Y. 1999).

As discussed in the Court's previous decision, Plaintiffs have alleged that Defendants were privy to information — i.e., the statements made in the 1997 meeting with the FDA — which they did not disclose and which seriously undermines any belief Defendants may have had regarding the sufficiency of the trials. Accordingly, even if the statements regarding the sufficiency of the trials can be characterized as statements of opinion, the statements are actionable.

The Court accordingly denies Defendants' request to shorten the class period.

Defendants also argue that the Court erred in finding that the statements relating to severe hypoglycemia were misleading. In making this argument, Defendants rely on an October 20, 1998 press release (Request for Judicial Notice, Exh. Q) and a Sell Recommendation report issued on January 22, 2001 by the Avalon Research Group, Inc. (Request for Judicial Notice, Exh. P). These documents are not properly before the Court.

Under the incorporation by reference doctrine, a court deciding a motion to dismiss may consider documents "whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the [plaintiffs] pleading." In re Silicon Graphics. Inc. Sec. Litig., 183 F.3d 970, 986 (9th Cir. 1999) (quoting Branch v. Tunnel!, 14 F.3d 449, 454 (9th Cir. 1994)). Exhibits P and Q to Defendants' Request for Judicial Notice were not attached to the Consolidated Complaint or referenced therein. Therefore, the Court denies Defendants' request to take judicial notice of these documents. For the reasons set forth in the Court's prior order, the Court finds that Plaintiffs have sufficiently alleged the falsity of the statements regarding the side effects and safety of Symlin.

The other documents attached to Defendants' Request for Judicial Notice were judicially noticed by the Court in connection with the motion to dismiss.

Finally, Defendants dispute the Court's prior decision as it relates to Defendants' safety data base. First, Defendants contend that there is no evidence that there were "clinically significant" or "major" safety issues. However, Plaintiffs have alleged that Defendants' statements that there were no "clinically important safety issues" and "no major safety concerns" were false based on trial results which showed that Symlin was associated with severe hypoglycemia and serious adverse events. (CC ¶ 50, 54, and 58.) Whether the safety issues actually rose to the level of "major" or "clinically important" in the context of the studies is an issue of fact.

Defendants also argue that there is no evidence that Defendants knew about the errors in the safety data base. This argument actually pertains to scienter. At any rate, Plaintiffs' allegation that the safety database "was manipulated by Defendants" implies that Defendants had knowledge about the errors. (CC ¶ 45. 50, 52, 54, 58.) This allegation, in isolation, may fall short of establishing scienter However, viewing this allegation with all of the other allegations in the Consolidated Complaint, Plaintiffs have made a sufficient showing of scienter to survive dismissal under Rule 12(b)(6). See America West. 302 F.3d at 945 ("[A]lthough recognizing that some of Plaintiffs' allegations are individually lacking, we hold that the allegations in their totality are sufficient to meet the stringent pleading standard set forth in the PSLRA.").

E. Interlocutory Appeal

Defendants have requested that the Court certify for interlocutory appeal the issue of whether the cautionary statements included in their press releases and SEC filings were adequate for purposes of safe harbor protection. The Court denies Defendants' request.

An interlocutory appeal from an order is appropriate where the order "involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation." 28 U.S.C. § 1292(b). Here, an immediate appeal from the Court's ruling on Defendants' cautionary language would not materially advance the ultimate termination of the litigation because, as discussed above, only one of the statements in dispute is forward-looking, The other statements are not eligible for safe harbor protection.

III. CONCLUSION

For the reasons set forth above, Defendants' motion for reconsideration [38-1] is DENIED. The portion of the Court's Order Denying Defendants' Motion to Dismiss discussing the safe harbor and "bespeaks caution" doctrine (pp. 13:1-15:22) is VACATED and the order is AMENDED as set forth above in Section II.C.

IT IS SO ORDERED.