Local No. 8 IBEW Retirement Plan & Trust v. Vertex Pharm., Inc., No. 15-2250 (1st Cir. 2016)Annotate this Case
Following an announcement that overstated the positive interim results from clinical trials for an experimental drug combination intended to treat a fatal lung disease, Vertex Pharmaceuticals, Inc.’s stock price rose from $37.41 per share to $64.85 three weeks later. After Vertex corrected the initial release’s overstatement, the stock price dropped to $57.80. Local No. 8 IBEW Retirement Plan & Trust filed a class action complaint against Vertex and six past and current Vertex employees on behalf of those who acquired Vertex stock during the period in which the overstatement stood uncorrected, charging Defendants with securities fraud under the Securities Exchange Act of 1934. Defendants moved to dismiss for failure to state a claim. The district court dismissed the complaint, concluding that it failed to create a strong inference that Defendants acted with the mental state required to render them liable under the Act. The First Circuit affirmed, holding that the allegations in the complaint that Defendants acted with scienter fell short of what Congress demands in the securities fraud context.