Aramic LLC v. Revance Therapeutics, Inc.

• Court: District Court, N.D. California
• Decided: March 30, 2024
• Docket: 3:21-cv-09585
• Status: Unknown

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 ARAMIC LLC, et al., Case No. 21-cv-09585-AMO

8 Plaintiffs, ORDER GRANTING DEFENDANTS’ 9 v. MOTION TO DISMISS

10 REVANCE THERAPEUTICS, INC., et al., Re: Dkt. No. 65 Defendants. 11

12 13 This is a securities fraud case about the U.S. Food and Drug Administration’s review of a 14 drug developed by Revance Therapeutics, Inc. (“Revance”). Defendants’ motion to dismiss was 15 heard before this Court on August 10, 2023. Having read the papers filed by the parties and 16 carefully considered their arguments therein and those made at the hearing, as well as the relevant 17 legal authority, the Court hereby GRANTS the motion to dismiss, for the following reasons. 18 I. BACKGROUND1 19 Plaintiffs Aramic LLC (“Aramic”) and Tang Family Investor Group are stockholders of 20 Defendant Revance Therapeutics, Inc. (“Revance”), who seek to represent purchasers of Revance 21 stock between November 25, 2019, and October 11, 2021 (the “class period”). FAC ¶ 1. Revance 22 is a biotechnology company that develops and sells skin treatment drugs. FAC ¶ 2. During the 23 class period, Defendants made statements regarding the company’s attempt to secure U.S. Food 24 and Drug Administration (“FDA”) approval for their drug candidate DAXI. FAC ¶¶ 2-3, 7-8. 25 DAXI is a drug used to treat frown lines. FAC ¶ 2. 26 1 The Court accepts Plaintiffs’ allegations in the complaint as true and construes the pleadings in 27 the light most favorable to Plaintiffs. See Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1 To obtain FDA approval, drug developers must submit to the FDA a Biologics License 2 Application (“BLA”), which provides testing results, product development information, and 3 descriptions of manufacturing processes. FAC ¶¶ 4, 53. As part of the BLA review process, the 4 FDA typically conducts an inspection to evaluate company compliance with Current Good 5 Manufacturing Practices (“cGMP”) regulations, assess readiness for commercial manufacturing, 6 ensure conformance to the submitted application, and ensure the integrity of data submitted with 7 the BLA. FAC ¶¶ 4, 49, 53. After the inspection, the FDA may issue a Form 483 with 8 observations of potential non-compliance with cGMP regulations. FAC ¶¶ 49, 52, 75-76. The 9 company then has fifteen days to respond. FAC ¶ 109. If the FDA does not approve a BLA, it 10 issues a Complete Response Letter (“CRL”) explaining why the FDA did not approve the drug. 11 FAC ¶¶ 21, 146. 12 On November 25, 2019, Revance announced its submission of a BLA for DAXI, which it 13 had been manufacturing since 2010, stating that it anticipated potential FDA product approval at 14 the end of 2020. FAC ¶ 6. Due to COVID-19, the FDA delayed its pre-approval inspection of the 15 manufacturing facility until July of 2021. FAC ¶ 15. 16 After completing the inspection on July 2, 2021, the FDA provided Revance with a Form 17 483, containing five “inspectional observations.” FAC ¶¶ 74, 77. The first two observations 18 focused on the deterioration of Revance’s working cell banks (“WCBs”), which are cell tissues 19 extracted from a repository to produce drug substance and product, and Revance’s new WCB not 20 being fully qualified and being a different manufacturing process than proposed in the BLA. FAC 21 ¶¶ 12, 78-81, 87-90. The third observation noted that Revance did not have a “quality agreement” 22 in place with a third-party facility. FAC ¶ 92. The fourth and fifth observations involved how 23 Revance calculated percentage yield and record-keeping details. FAC ¶¶ 97-104. 24 Revance provided a written response to the Form 483 in July 2021. FAC ¶ 110. It 25 explained that it had enough drug substance from a qualified WCB to support commercial 26 production of DAXI. FAC, Ex. C (ECF 58-3) (Form 483 Response) at 10. Revance also 27 explained that it planned to qualify the new WCB, and believed that qualification was a “post 1 aged and our new WCB will not be fully qualified at the licensure. However, we have a fully 2 functional [redacted] that can last for more than [redacted] as well as [drug substance] inventory to 3 support [drug product] production through [redacted]. Given that supply shortage is not a 4 concern, Revance proposes to submit a post approval application for the WCB qualification 5 package per approved protocol once available. . . [.]” Id. at 10-11. Revance also disagreed with 6 the FDA observation that it was using a different manufacturing process than that proposed for 7 licensure. Id. at 7. 8 To address the remaining observations, Revance executed a quality agreement with third- 9 party facility on July 16, 2021, adjusted the way it calculated percentage yield, and amended its 10 record-keeping details and photo clarity. Ex. C at 12-14, 17-18. On August 5, 2021, Revance 11 issued a press release stating that the FDA initiated its pre-approval inspection in June and that 12 Revance anticipated approval of DAXI in 2021. FAC ¶ 150. On October 15, 2021, the FDA 13 issued a Complete Response Letter (“CRL”) denying Revance’s BLA for DAXI. FAC ¶ 168. On 14 March 8, 2022, Revance resubmitted its BLA. FAC ¶ 175. In September 2022 after issuance of 15 another Form 483 in March 2022, the FDA approved DAXI. FAC ¶¶ 178-79. 16 On December 10, 2021, Plaintiffs filed the instant securities class action. ECF 1. On 17 November 7, 2022, Plaintiff filed the operative complaint, the First Amended Complaint (“FAC”) 18 against Defendants Mark Foley, Tobin Schilke, and Abhay Joshi (“Individual Defendants”) and 19 Revance (collectively, “Defendants”) alleging that Defendants made 29 false or misleading 20 statements about the timing and likelihood of FDA approval of DAXI in violation of Sections 21 10(b) and 20(a) of the Exchange Act in the following general categories:

22 (1) Defendants failed to disclose significant quality control and manufacturing 23 deficiencies that made FDA approval unlikely;

24 (2) Defendants’ statements about readiness for FDA inspection and confidence in FDA approval were false and misleading given the deficiencies that existed; and 25 (3) Defendants continued statements expressing confidence in FDA approval after 26 the Form 483 was issued were false and misleading. 27 1 complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which 2 relief can be granted. Motion (ECF 65). 3 II. LEGAL STANDARD 4 Federal Rule of Civil Procedure 8(a) requires that a complaint contain “a short and plain 5 statement of the claim showing that the pleader is entitled to relief.” A defendant may move to 6 dismiss a complaint for failing to state a claim upon which relief can be granted under Federal 7 Rule of Civil Procedure 12(b)(6). “Dismissal under Rule 12(b)(6) is appropriate only where the 8 complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory.” 9 Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008). To survive a Rule 10 12(b)(6) motion, a plaintiff must plead “enough facts to state a claim to relief that is plausible on 11 its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is facially plausible 12 when a plaintiff pleads “factual content that allows the court to draw the reasonable inference that 13 the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). 14 In reviewing the plausibility of a complaint, courts “accept factual allegations in the 15 complaint as true and construe the pleadings in the light most favorable to the nonmoving party.” 16 Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). Nonetheless, 17 Courts do not “accept as true allegations that are merely conclusory, unwarranted deductions of 18 fact, or unreasonable inferences.” In re Gilead Scis. Secs. Litig., 536 F.3d 1049, 1055 (9th Cir. 19 2008). 20 Securities fraud cases have heightened pleading requirements as the complaint must satisfy 21 both the pleading requirements of Federal Rule of Civil Procedure 9(b) and the PSLRA. In re 22 VeriFone Holdings, Inc. Sec. Litig., 704 F.3d 694, 701 (9th Cir. 2012). Pursuant to Rule 9(b), 23 claims alleging fraud must “state with particularity the circumstances constituting fraud…” Fed. 24 R. Civ. P. 9(b). The PSLRA mandates that “the complaint shall specify each statement alleged to 25 have been misleading, [and] the reason or reasons why the statement is misleading. . . [.]” 15 26 U.S.C. § 78u–4(b)(1)(B). The PSLRA further requires that the complaint “state with particularity 27 facts giving rise to a strong inference that the defendant acted with the required state of 1 15 U.S.C. § 78u–4(b)(2)(A)). This means a plaintiff must allege that “the defendant[] made false 2 or misleading statements either intentionally or with deliberate recklessness.” In re VeriFone 3 Holdings, 704 F.3d at 701 (quoting Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 981, 991 4 (9th Cir. 2009)). 5 Section 10(b) of the Securities Exchange Act makes it unlawful for any person to “use or 6 employ, in connection with the purchase or sale of any security . . . any manipulative or deceptive 7 device or contrivance in contravention of such rules and regulations as the Commission may 8 prescribe as necessary or appropriate in the public interest or for the protection of 9 investors.” 15 U.S.C. § 78j(b). SEC Rule 10b-5 implements this provision, making it unlawful to, 10 among other things, “make any untrue statement of a material fact or to omit to state a material 11 fact necessary in order to make the statements made, in the light of the circumstances under which 12 they were made, not misleading[.]” 17 CFR § 240.10b–5(b). 13 III. DISCUSSION 14 A. Request for Judicial Notice 15 While the scope of review on a motion to dismiss is generally limited to the contents of the 16 complaint, courts may take judicial notice of facts that are “not subject to reasonable dispute.” 17 Fed. R. Evid. 201(b). Courts may consider documents incorporated into the complaint by 18 reference, Tellabs, 551 U.S. at 322, and take judicial notice of documents on which complaints 19 necessarily rely, Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001), publicly available 20 financial documents such as SEC filings, Metzler Inv. GMBH v. Corinthian Colls., Inc., 540 F.3d 21 1049, 1064 n.7 (9th Cir. 2008), and publicly available articles or other news releases of which the 22 market was aware, Heliotrope Gen., Inc. v. Ford Motor Co., 189 F.3d 971, 981 n.18 (9th Cir. 23 1999). The Court may not assume the truth of an incorporated document “if such assumptions 24 only serve to dispute facts in a well-pleaded complaint.” Khoja v. Orexigen Therapeutics, Inc., 25 899 F.3d 988, 1003 (9th Cir. 2018). 26 Defendants seek judicial notice of 27 exhibits. They argue that 23 exhibits including press 27 releases, SEC filings, conference call and investor presentation transcripts, and documents issued 1 Complaint or otherwise form the basis of Plaintiff’s claims.” RJN (ECF 66) at 7. Plaintiffs agree 2 that Exhibits 2-17, 20, and 22-26 (press releases, earnings call and presentation transcripts, and 3 SEC) are incorporated by reference, but may not be considered for their truth. ECF 69 at 15. 4 Accordingly, the Court takes judicial notice of the incorporated documents but does not assume 5 the truth of disputed facts. See Khoja, 899 F.3d at 1003.2 6 Exhibit 19, a publicly available FDA guidance document, is also the proper subject of 7 judicial notice. “[C]ourts routinely take judicial notice of [ ] FDA guidance documents, many of 8 which also appear on the FDA’s public website.” Immanuel Lake v. Zogenix, Inc., No. 19-CV- 9 01975-RS, 2020 WL 3820424, at *5 (N.D. Cal. Jan. 27, 2020) (“Zogenix”) (citation omitted). 10 Because the document is accessible on the FDA’s website (specifically, at 11 https://www.fda.gov/media/109615/download) as of the date of this order, its “accuracy cannot 12 reasonably be questioned,” making it subject to judicial notice. Fed. R. Evid. 201(b). 13 Plaintiffs object to the Court taking judicial notice of Exhibits 1 (Review of Post- 14 Inspection Responses), 18 (Revance’s Form 8-K filed with the SEC on May 26, 2021), and 27 15 (September 8, 2022 press release). ECF 69 at 17-19. Exhibits 1 and 18 are each referred to once 16 in the FAC, in passing reference, and do not form the basis of Plaintiffs’ claims. See FAC ¶¶ 69, 17 109. Plaintiffs cite Exhibit 27 once in their FAC to discuss that the FDA approved Revance’s 18 BLA for DAXI in September 2022, FAC ¶ 179, but argue that the eventual approval is not 19 relevant to their claims. Because these exhibits do not form the basis of Plaintiffs’ claims, the 20 Court does not take judicial notice of Exhibits 1, 18, or 27. 21 Defendants argue that Revance’s unredacted Form 483 Response, Ex. 21, is incorporated 22 by reference, as Plaintiffs attach the redacted version of the same document to the FAC (see ECF 23 58-3), and the document forms the basis of Plaintiffs’ complaint. ECF 66 at 9. Plaintiffs do not 24 2 For example, the Court takes judicial notice of the fact that the documents, such as the press 25 releases, contained purportedly cautionary language about forward-looking statements. See Diversified Capital Invs., Inc. v. Sprint Commc’ns, Inc., 2016 WL 2988864, at *4 (N.D. Cal. May 26 24, 2016) (taking “judicial notice of the existence and facial content of the press release,” but not for its truth); In re Twitter, Inc. Sec. Litig., 2020 WL 4187915, at *3 (N.D. Cal. Apr. 17, 2020) 27 (“the court will take judicial notice of the analyst reports, news articles, and SEC filings cited by 1 dispute the accuracy or authenticity of the unredacted Form 483 Response but argue that it is not 2 incorporated by reference as it is not referred to extensively and does not form the basis of 3 Plaintiffs’ claims. The Court agrees. Plaintiffs refer to the Form 483 Response on three occasions 4 in the FAC. See FAC ¶ 15 (explaining that Revance was able to address “minor deficiencies the 5 FDA identified” but could not address the ineffectiveness of the WCB and “incorrectly claim[ed] 6 that it was using ‘the exact same process as proposed’”); ¶ 84 (Revance initiated a quality 7 investigation in September 2020 that determined in December 2020 that the root cause of the issue 8 was the effectiveness of the previously qualified WCB); see also FAC ¶ 110. However, 9 Revance’s Form 483 Response does not form the basis of Plaintiffs’ claims as the document 10 “creates a defense to the” FAC’s allegations and Plaintiffs did not have access to the unredacted 11 document. See Khoja, 899 F.3d at 1001-02. Accordingly, the Court finds that Ex. 21 is not 12 incorporated by reference. 13 B. Motion to Dismiss 14 Defendants move to dismiss the FAC, arguing that the challenged statements are not 15 actionable because they are forward-looking statements protected by the PSLRA safe harbor or are 16 corporate puffery or opinion statements. Defendants further assert that any remaining statements 17 are not false or misleading or were made without scienter. The Court considers each argument in 18 turn. 19 1. Forward-Looking Statements 20 Under the PSLRA’s “safe harbor” rule, a person is not liable for a false or misleading 21 “forward-looking statement” if 1) it is “accompanied by meaningful cautionary statements 22 identifying important factors that could cause actual results to differ materially” or 2) the forward- 23 looking statement is “immaterial” or 3) the plaintiff fails to prove it is made by a natural person 24 with “actual knowledge . . . that the statement was false or misleading.” 15 U.S.C. § 78u-5(c); see 25 Weston Fam. P’ship LLLP v. Twitter, Inc., 29 F. 4th 611, 620 (9th Cir. 2022). A forward-looking 26 statement is “any statement regarding (1) financial projections, (2) plans and objectives of 27 management for future operations, (3) future economic performance, or (4) the assumptions 1 Fund v. Am. W. Holding Corp., 320 F.3d 920, 936 (9th Cir. 2003) (citing 15 U.S.C. § 78u-5(i)). 2 Defendants argue that these statements expressing anticipation of future FDA approval are 3 forward-looking statements protected by the PSLRA safe harbor:

4 • “Revance anticipates potential product approval in the second half of 2020.” FAC ¶ 115 5 (Nov. 25, 2019 Press Release).

6 • “Revance anticipates acceptance of the submission in the first quarter and projects potential approval in the fourth quarter of 2020.” FAC ¶¶ 116 (January 9, 2020 Press 7 Release), 118 (Feb. 6, 2020 Press Release).

8 • “We continue to anticipate approval this year and, as we have noted before, the FDA did 9 not indicate that there were any other review issues beyond the pending inspection.” FAC ¶ 143 (May 10, 2021 Press Release). 10 • “Revance continues to anticipate receiving approval for [DAXI] in 2021 and is actively 11 building inventory and preparing for commercial launch.” FAC ¶ 150 (Aug. 5, 2021 Press 12 Release), ¶ 155 (Aug. 5 2021 Earnings Call).

13 • “[T]he company continues to anticipate FDA approval of [DAXI] . . . in 2021.” FAC ¶ 165 (Oct. 12, 2021 Press Release). 14 15 Plaintiffs do not dispute that these statements about the likelihood of FDA approval are forward- 16 looking. Opposition (ECF 68) at 24-24; see Kovtun v. VIVUS, Inc., No. C 10-4957 PJH, 2012 WL 17 4477647, at *12 (N.D. Cal. Sept. 27, 2012) (“VIVUS”), aff’d sub nom. Ingram v. VIVUS, Inc., 591 18 F. App’x 592 (9th Cir. 2015) (“Projections about the likelihood of FDA approval are forward- 19 looking statements. They are assumptions related to the company’s plan for its product, and as 20 such fall under the PSLRA’s safe harbor rule.”). Instead, Plaintiffs argue that the statements were 21 not accompanied by meaningfully cautionary language or were made with actual knowledge of 22 their falsity. Opposition at 24-25. 23 Statements that Defendants made prior to the July 2021 FDA inspection were accompanied 24 by cautionary language. Defendants repeatedly warned investors that forward-looking statements 25 are “subject to risks and uncertainties that could cause actual results to differ materially from our 26 expectations,” Ex. 3 (ECF 65-4) (Jan. 9, 2020 Press Release) at 3, Ex. 4 (ECF 65-5) (Feb. 6, 2020 27 Press Release) at 2, such as the “ability to obtain and maintain regulatory approval of our drug 1 “results, timing . . . and development activities and regulatory approvals, including the continuing 2 delay in the FDA’s approval of the BLA for [DAXI], including as a result of delays in the site 3 inspection conducted of our manufacturing facility . . . [and] observations made by the FDA 4 during the site inspection . . . due to COVID-19 . . . observations made by the FDA during the site 5 inspection and other reasons. . . [.]” Ex. 16 (ECF 65-17) (May 10 2021 Press Release) at 4, Ex. 22 6 (ECF 65-22) (Aug. 5, 2021 Press Release) at 4 (same). 7 Plaintiffs acknowledge that they “are not [] alleging that [Defendants] filed a BLA they 8 knew could never be approved.” Opposition at 10. Instead, they argue that the cautionary 9 statements were “boilerplate” as they fail to mention the actual risks facing BLA approval, such as 10 the ineffective WCB, the possibility of a CRL, and the issuance of the Form 483. Id. at 24-25. 11 However, Plaintiffs have not shown that prior to the issuance of the Form 483, and prior to 12 Revance determining the root cause of the rejected lots, Defendants believed or had reason to 13 believe that their projections of the timeline for BLA approval were inaccurate. Indeed, courts 14 have found less detailed cautionary statements to sufficiently caution investors. See, e.g., Police 15 Ret. Sys. of St. Louis v. Intuitive Surgical, Inc., 759 F.3d 1051, 1059-60 (9th Cir. 2014) (“Intuitive 16 Surgical”) (“Actual results may differ materially from those expressed or implied, as a result of 17 certain risks and uncertainties. These risks and uncertainties are described in detail in the 18 company’s [SEC] filings. Prospective investors are cautioned not to place undue reliance on such 19 forward-looking statements.”); In re Cutera Sec. Litig., 610 F.3d 1103, 1112 (9th Cir. 2010) 20 (“[T]hese prepared remarks contain forward-looking statements concerning future financial 21 performance and guidance . . . management may make additional forward-looking statements in 22 response to questions, and . . . factors like Cutera’s ability to continue increasing sales 23 performance worldwide could cause variance in the results.”). Thus, the pre-inspection statements 24 anticipating approval within a projected timeline are immunized. See FAC ¶¶ 115, 116, 143. 25 Plaintiffs also challenge the cautionary language as insufficient once Defendants received 26 the Form 483. For example, on August 5, 2021, Revance issued a press release stating that it 27 anticipated FDA approval in 2021. FAC ¶ 150. The press release included a warning that 1 the BLA for [DAXI] . . . , including as a result of observations made by the FDA during the site 2 inspection . . . [.]” Ex. 22 at 4. Although the press release warns of the risk of delay due to FDA 3 observations, Plaintiffs argue that it does not caution investors of the risks that were already 4 realized – the rejected drug substance lots, that WCB qualification was not projected to be 5 complete until December 31, 2021, and the FDA had informed the company that its manufacturing 6 changes were inconsistent with the submitted BLA. FAC ¶¶ 86-87 (citing Ex. B at 22), 193. 7 Determining whether this language is meaningfully cautionary is a closer call. Cf. In re Solarcity 8 Corp. Sec. Litig., 274 F. Supp. 3d 972, 993 (N.D. Cal. 2017) (warning language was meaningful 9 where it “specifically refers to a potential lack of demand and the potential that signed contracts 10 would be cancelled, the two risk factors that Plaintiffs allege that Defendants failed to disclose”). 11 Nonetheless, even if the language was not meaningfully cautionary, the statements are 12 protected under the safe harbor as Plaintiffs have failed to allege “with particularity facts giving 13 rise to a strong inference that the defendant acted with the required state of mind,” that is, “actual 14 knowledge . . . that the statement was false or misleading.” 15 U.S.C. § 78u–4(b)(2); 15 U.S.C. § 15 78u–5(c)(1)(B)(i); see In re Cutera, 610 F.3d at 1113. Plaintiffs argue that Defendants knew that 16 the ineffective WCB and Form 483 decreased the likelihood of BLA approval. Opposition at 25. 17 Although in hindsight, the projections may have been overly optimistic, Plaintiffs have not alleged 18 that Defendants knew that the projected timeline for BLA approval was not possible. See, e.g., In 19 re Connetics Corp. Sec. Litig., 542 F. Supp. 2d 996, 1008 (N.D. Cal. 2008) (statements predicting 20 that the “FDA would approve [the drug] were not made in the face of actual knowledge that [the 21 drug] could never be approved; rather, they may have been made in the optimistic belief that the 22 transgenic testing problem was a surmountable barrier to FDA approval”). Defendants may have 23 reasonably believed that they could fix any deficiencies by the timeline they predicted. See In re 24 Syntex Corp. Sec. Litig., 95 F.3d 922, 930 (9th Cir. 1996) (“Syntex was forecasting a future event. 25 Any alleged deficiencies in the testing procedures do not indicate that Syntex’s prediction of an 26 FDA approval date was false when made. Instead, the company could have known of problems in 27 the testing procedures, planned to remedy those deficiencies, and still thought it would achieve 1 informed the FDA that they considered (Plaintiffs argue wrongfully so) WCB qualification to be a 2 post-approval activity. Ex. C at 10-11. Thus, Plaintiffs have not shown actual falsity, and the 3 statements about the anticipated timeline for DAXI approval are protected under the PSLRA safe 4 harbor. Accordingly, the Court DISMISSES the Section 10(b) claim with respect to the 5 statements about the anticipated timeline for DAXI approval. 6 2. Corporate Optimism and Opinion Statements 7 Defendants also argue that Plaintiffs challenge vague statements of optimism and opinion 8 statements that are not actionable. In the Ninth Circuit, “vague, generalized assertions of 9 corporate optimism or statements of ‘mere puffing’ are not actionable material misrepresentations 10 under federal securities laws” because no reasonable investor would rely on such statements. City 11 of Royal Oak Ret. Sys. v. Juniper Networks, Inc., 880 F. Supp. 2d 1045, 1063 (N.D. Cal. 2012) 12 (quoting In re Impac Mortg. Holdings, Inc. Sec. litig., 554 F. Supp. 2d 1083, 1096) (citing Glen 13 Holly Entm’t, Inc. v. Tektronix, Inc., 352 F.3d 367, 379 (9th Cir. 2003)); see In re Cutera, 610 14 F.3d at 1111 (“professional investors, and most amateur investors as well, know how to devalue 15 the optimism of corporate executives”) (citation omitted). This is because “[w]hen valuing 16 corporations, . . . investors do not rely on vague statements of optimism like ‘good,’ ‘well- 17 regarded,’ or other feel good monikers.” In re Cutera, 610 F.3d at 1111. However, even “general 18 statements of optimism, when taken in context,” may be misleading “when those statements 19 address specific aspects of a company’s operation that the speaker knows to be performing 20 poorly.” In re Quality Sys., Inc. Sec. Litig., 865 F.3d 1130, 1143 (9th Cir. 2017) (citation 21 omitted). 22 Expressions of opinions – as opposed to statements of fact – are only actionable if they are 23 both subjectively and objectively false or misleading. Rubke v. Capitol Bancorp Ltd, 551 F.3d 24 1156, 1162 (9th Cir. 2009) (citing Va. Bankshares, Inc. v. Sandberg, 501 U.S. 1083, 1094-96 25 (1991)). “To be misleading, a statement must be “capable of objective verification.’ ” Retail 26 Wholesale & Dep’t Store Union Loc. 338 Ret. Fund v. Hewlett-Packard Co., 845 F.3d 1268, 1275 27 (9th Cir. 2017) (quoting Or. Pub. Emps. Ret. Fund v. Apollo Grp. Inc., 774 F.3d 598, 606 (9th Cir. 1 The parties agree that Plaintiffs challenge various opinion statements:

2 • “the BLA filing represents a monumental achievement . . . Revance enters a catalyst-rich 3 calendar year of significant clinical trial readouts and meaningful Company milestones.” FAC ¶ 115 (Nov. 25, 2019 Press Release). 4 • “This progress has set us up for a transformational 2020, a year which we believe will be 5 characterized by excitement and execution.” FAC ¶ 121 (Q4 2019 Earnings Call)

6 • “This is a very exciting and pivotal year for Revance . . .” FAC ¶ 116 (Jan. 9, 2020 Press 7 Release).

8 • “The FDA’s acceptance of our BLA for our next-generation neuromodulator product, DAXI, is a significant achievement for Revance and a crucial step forward. . .” FAC ¶ 118 9 (Feb. 6, 2020 Press Release) 10 • “. . . Revance has constructed an exceptional start to what we believe will be 11 transformational year for the company.” FAC ¶ 119 (Feb. 24, 2020 Press Release).

12 • “[S]hould the anticipated approval of DaxibotulinumtoxinA for Injection in glabellar lines be delayed, we believe that Revance is in a strong position, both commercially and 13 financially, to weather any near-term change in timing. Just as importantly, we remain 14 confident in the overall strength of our BLA submission for [DAXI].” FAC ¶¶ 130 (Nov. 9, 2020 Press Release) 132 (Nov. 9, 2020 Q3 Earnings Call); see also FAC ¶ 136 (Jan. 7, 15 2021 Press Release).

16 • “ . . . we continue to feel very good about the quality of the submission . . .” FAC ¶ 133 17 (Nov. 9, 2020 Q3 Earnings Call)

18 • “We feel very good in terms of our preparedness . . . and continue to build product in preparation for launch.” FAC ¶ 146 (June 8, 2021 Goldman Sachs Conference). 19 20 • “In closing, we’re very proud of our performance in the first half of the year and anticipate a strong finish in the second half with the potential approval of [DAXI] . . . we feel very 21 good about our prep and where we were in that process and we continue all of our preparations in the hopeful approval of the product.” FAC ¶¶ 155, 157 (Aug. 5, 2021 Q2 22 2021 Earnings Call).

23 • “But we feel really good about where we are in that process [for approval of the 24 neuromodulator].” FAC ¶ 159 (Sept. 9, 2021 Wells Fargo Conference).

25 Here, the Court finds that statements in FAC ¶¶ 115, 116, 118, 119, and 121 are statements 26 of corporate optimism. See FAC ¶ 115 (filing the BLA was a “monumental achievement”); 27 FAC ¶ 121 (the year will be full of “excitement and execution”); FAC ¶¶ 116, 119 (it is an 1 “exciting,” “pivotal,” and “transformational” year for Revance). These statements are “feel good 2 monikers” that are not actionable. See In re Cutera, 610 F.3d at 1111; see also In re Solarcity, 3 274 F. Supp. 3d at 994-95 (finding that the following statements were corporate puffery: “we’re 4 highly optimistic . . . about our growth,” “[d]emand remained as strong as ever,” “Q2 was an 5 amazing quarter,” and “I’m very happy with our continued ability to scale and [unbelievably] 6 strong sales”). Plaintiffs argue that these statements are objectively verifiable because Revance 7 was experiencing deficiencies that implicated readiness for BLA approval. Opposition at 23-24. 8 However, they cite no binding or persuasive caselaw in support of their contention that these 9 vague statements of optimism are actionable. For example, Plaintiffs do not explain how the 10 statement that the acceptance of the DAXI BLA is a “significant achievement” and a “crucial step 11 forward” is misleading to investors. See FAC ¶ 118. Such “mildly optimistic, subjective 12 assessment[s] . . . [do not] amount to a securities violation.” See In re Cutera, 610 F.3d at 1111; 13 see, e.g., Bodri v. GoPro, Inc., 252 F. Supp. 3d 912, 924 (N.D. Cal. 2017) (statement that the 14 company was “enjoying terrific momentum” which was a “testament to the strength of the GoPro 15 brand” was corporate optimism even though plaintiffs alleged that sales were weak and within 16 days GoPro had cancelled orders). Accordingly, the statements in FAC ¶¶ 115, 116, 118, 119, and 17 121 are not actionable. 18 Next, Plaintiffs argue that pre-inspection statements about Revance’s “confidence” in the 19 BLA submission and the “good” feelings about preparedness for inspection were misleading as 20 Defendants knew they had not entered into a Quality Agreement (QA) or failed to disclose that the 21 opinions were formed “without a reasonable inquiry into the BLA’s completeness.” Opposition at 22 23. However, as discussed below, the failure to enter into the QA was not material as Defendants 23 were able to remedy it within days of the FDA’s observations. Ex. C at 12. Accordingly, 24 Plaintiffs have not shown that the pre-inspection statements that Revance felt “good” or 25 “confident” about the BLA submission and inspection (FAC ¶¶ 130, 132, 133, 136, 146) were 26 false when made. 27 Finally, Plaintiffs argue that statements made while aware of the rejected lots, the 1 assuming that Revance was not objectively ready for the FDA inspection because of the 2 ineffective WCB, Plaintiffs have not specifically pleaded that prior to the inspection Defendants 3 believed that their confidence in the BLA approval process or readiness for inspection was false. 4 Accordingly, statements in FAC ¶¶ 130, 132, and 133 that Defendants feel “good” and “confident” 5 about the approval process are not actionable. See In re Siebel Sys., Inc. Sec. Litig., No. C 04- 6 0983 CRB, 2005 WL 3555718, at *4 (N.D. Cal. Dec. 28, 2005) (“That a new program has kinks 7 does not make a positive statement about the program false. If that were the case, the federal 8 securities laws would prevent software companies from making any positive statements about new 9 software”). 10 However, during the inspection, the FDA inspector explained that Revance’s assumption 11 that the manufacturing changes it made were “consistent with the BLA” was “incorrect.” 12 FAC ¶ 193. The Court agrees that at this point, statements that Revance felt good about its 13 preparedness for approval (FAC ¶¶ 155, 157, 159) were misleading given the FDA inspector’s 14 explanation. Indeed, after July 2, 2021, even if Defendants “genuinely believed” they were ready 15 for approval, Revance was “aware of undisclosed facts tending seriously to undermine the 16 statement’s accuracy.” See City of Dearborn Heights Act 345 Police & Fire Ret. Sys. v. Align 17 Tech., Inc., 856 F.3d 605, 616 (9th Cir. 2017) (citations omitted). At this stage, the Court cannot 18 “conclude that the statement[s] [are] ‘so obviously unimportant to a reasonable investor that 19 reasonable minds could not differ on the question of their unimportance.’ ” In re Energy Recovery 20 Inc. Sec. Litig., No. 15-CV-00265-EMC, 2016 WL 324150, at *20 (N.D. Cal. Jan. 27, 2016) 21 (citation omitted). Thus, statements in FAC ¶¶ 155, 157, and 159 may be actionable if Plaintiffs 22 have alleged scenter. 23 3. Materially False or Misleading 24 For a statement to be actionable under the PSLRA it must be false or misleading as well as 25 material. “Under Rule 10b-5, . . . a fraudulent omission is a failure to ‘state a material fact 26 necessary in order to make the statements made, in the light of the circumstances under which they 27 were made, not misleading.’ ” Wochos v. Tesla, Inc., 985 F.3d 1180, 1188 (9th Cir. 1 reasonable investor the ‘impression of a state of affairs that differs in a material way from the one 2 that actually exists.’ ” Berson v. Applied Signal Tech., Inc., 527 F.3d 982, 985 (9th Cir. 3 2008) (quoting Brody v. Transitional Hosps. Corp., 280 F.3d 997, 1006 (9th Cir. 2002)). 4 An omitted fact is material if there is a “substantial likelihood that the disclosure of the 5 omitted fact would have been viewed by the reasonable investor as having significantly altered the 6 ‘total mix’ of information made available.” TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449 7 (1976). “The inquiry into materiality is ‘fact-specific.’ ” In re Alphabet, Inc. Sec. Litig., 1 F. 4th 8 687, 700 (9th Cir. 2021) (quoting Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27, 43 (2011)). 9 As such, “resolving materiality as a matter of law is generally appropriate ‘only if the adequacy of 10 the disclosure or the materiality of the statement is so obvious that reasonable minds could not 11 differ.’ ” Id. (citation omitted). 12 Plaintiffs challenge 29 statements as false and misleading prior to and after the FDA 13 inspection. Defendants argue that Plaintiffs have not adequately alleged the falsity of any specific 14 statement or shown that any statement is misleading and have not alleged that two Defendants 15 made any statements. Defendants distinguish between statements made before the drug substance 16 lots were rejected (August and September 2020), before the FDA inspection and issuance of the 17 Form 483 (July 2021), and after the inspection. The Court considers the arguments below. 18 a. Pre-Inspection Statements (November 2019 Through August 2020) 19 Defendants made pre-inspection statements that Revance was “ready” for the FDA 20 inspection and “feel[s] very good about the quality of the submission,” FAC ¶ 133, and the FDA 21 “did not indicate there are any other review issues at this time, beyond the on-site inspection,” 22 FAC ¶ 135. Plaintiffs argue that these statements are false or misleading given the quality control 23 deficiencies3 – mainly, the lack of a Quality Agreement (“QA”) with a third-party facility, 24 FAC ¶¶ 117, 120, 122, 125, 127, 129. Defendants argue that Plaintiffs have not alleged that any 25 quality control deficiencies, if they did exist, were material, or that they needed to be disclosed. 26

27 3 Plaintiffs admit that the Form 483 Observations 4 and 5 (yield calculations and written 1 Motion at 20-22. 2 As part of the BLA approval process, Revance was required to enter into a QA with a 3 third-party testing facility. FAC ¶ 94. However, Plaintiffs do not allege that a QA was needed in 4 2019 or 2020, when these statements were made. Allegations that Revance had leased a testing 5 facility since 2015, FAC ¶ 194, are insufficient to show that a QA was required at the time 6 Revance made statements about readiness for inspection. Further, Plaintiffs only point to the July 7 2021 Form 483 to demonstrate that a QA was necessary for the BLA. There is a “general 8 principle” that “to be actionable, a statement or omission must have been misleading at the time it 9 was made; liability cannot be imposed on the basis of subsequent events.” Reese v. BP 10 Exploration (Alaska) Inc., 643 F.3d 681, 693 (9th Cir. 2011) (internal quotations omitted). Thus, 11 Plaintiffs have not specifically alleged that the 2019 and 2020 readiness statements or projected 12 timelines for approval were false. 13 Even if a QA was necessary in 2019 or 2020, Plaintiffs have not alleged that the lack of a 14 QA materially decreased the likelihood that the BLA would be approved on Defendants’ projected 15 timeline. Materiality requires a “substantial likelihood that the disclosure of the omitted fact 16 would have been viewed by the reasonable investor as having significantly altered the ‘total mix’ 17 of the information available.” Matrixx Initiatives, 563 U.S. at 38 (citation omitted). Plaintiffs do 18 not dispute that Revance entered a new QA before responding to the Form 483, or that the FDA 19 inspected the third-party facility and identified no issues. Ex. C at 12; FAC ¶ 15. Thus, Plaintiffs 20 have not shown that failure to disclose the lack of a QA made statements about being “ready” or 21 anticipating approval by the end of the year materially misleading. 22 b. Pre-Inspection Statements (November 2020 Through June 2021) 23 Plaintiffs challenge the following statements as false or misleading due to the rejected drug 24 substance lots and the ineffective WCB:

25 • “Though the company’s BLA is still under review, the FDA did not indicate any further outstanding review issues beyond the pending on-site inspection. The company remains 26 confident in its BLA submission and continues to work proactively with the FDA on a 27 preapproval inspection as soon as possible in 2021.” FAC ¶ 136 (Jan. 27, 2021 Press Release); see also FAC ¶¶ 133 (Nov. 9, 2020 Earnings Call), 135 (Nov. 25, 2020 Press 1 • “We have the ability to manufacture our own botulinum toxin bulk drug substance to 2 support our clinical trial programs and eventually, our commercial production.” FAC ¶ 138 (Feb. 25, 2021 10-K). 3 • “We remain ready to support an on-site inspection as soon as the agency is able to visit our 4 facility. And we continue to build drug product inventory in anticipation of approval and are eager to introduce this unique product into the aesthetics market.” FAC ¶ 144 (May 5 10, 2021 Earnings Call); see also FAC ¶ 143. 6 • “[Approval decision] will be the next update. Obviously if there was something that was 7 not favorable, we would certainly release that, but really the next update would be approval.” FAC ¶ 146 (June 8, 2021 Goldman Sachs Conference). 8

9 Defendants argue that these statements were not misleading as Plaintiffs have not alleged 10 that the WCB needed to be qualified before obtaining FDA approval and the statements did not 11 trigger a need to disclose that the rejected drug substance lots. Motion at 22-24; see Ex. C at 10- 12 11. 13 While there is no “freestanding completeness requirement,” a statement is misleading by 14 omission if it “affirmatively create[s] an impression of a state of affairs that differs in a material 15 way from the one that actually exists.” Brody, 280 F.3d at 1006. As recognized by the Supreme 16 Court, “whether an omission makes an expression of opinion misleading always depends on 17 context.” Omnicare, Inc. v. Laborers Dist. Council Const. Indus. Pension Fund, 575 U.S. 175, 18 190 (2015). Here, the context was that the WCB produced two drug substance lots that were 19 rejected in August and September 2020, FAC ¶ 81, in September 2020, Revance conducted a 20 quality investigation, and in May 2021 recommended corrective action and preventative action to 21 manufacture and qualify a new WCB with a projected timeline of December 31, 2021 – six 22 months after the pre-approval inspection. FAC ¶ 191. 23 Prior to May 2021, Revance had not yet determined the WCB was ineffective or would not 24 be qualified until the end of 2021. Further, Revance’s Form 483 Response shows that the new 25 WCB “performs as expected” and “consistently met the specification,” suggesting that the 26 statement about the ability to manufacture drug substance was not misleading or false when made. 27 Ex. C at 9. See, e.g., Browning v. Amyris, Inc., No. 13-CV-02209-WHO, 2014 WL 1285175, at 1 *10 (N.D. Cal. Mar. 24, 2014) (statements that the company had created a process with 2 “industrial-scale production” were not false or misleading even if the company missed its 3 production targets, and limited or failed test runs were not inconsistent with statements that the 4 company “expects to begin” production in May). 5 Plaintiffs argue that by stating it was “ready” for inspection, Revance conveyed the 6 impression “that there was nothing material left to do for the inspection to be successful.” 7 Opposition at 16. However, Plaintiffs have not alleged that the WCB needed to be qualified prior 8 to the inspection for Revance to be “ready” for inspection. See FAC ¶ 80 (stating only that FDA 9 regulatory guidance requires that a newly prepared WCB be appropriately qualified by 10 characterization and testing); see, e.g., Zogenix, Inc., 2020 WL 3820424, at *8 (finding no falsity 11 where plaintiffs “appear to assume that defendants knew, at the time of filing the [new drug 12 application], that the failure to reference [] toxicity studies made the application facially deficient 13 and created an ‘exceedingly high risk’ of rejection, but plaintiffs pleaded no specific allegations to 14 support this critical assumption”). Indeed, Revance’s Form 483 Response indicates that it had 15 manufactured a new WCB that was undergoing qualification and that drug substance lots made 16 with the “same process” were “manufactured successfully and met the acceptance criteria . . . [.]” 17 Ex. C at 5. The Zogenix court explained that “were plaintiffs’ version of falsity the law, a 18 pharmaceutical company could be sued for securities fraud each and every time it received a [new 19 drug application] rejection from the FDA[,] . . . [as] [p]otential plaintiffs could merely parrot any 20 deficiency identified by the FDA rejection letter and then claim the company concealed from the 21 market that it failed to include this ‘necessary’ piece of information in its application.” 2020 WL 22 3820424, at *9. Similarly, Plaintiffs cannot rely on the FDA’s statements in the Form 483 and the 23 fact that the FDA ultimately denied the BLA to argue that Defendants concealed important 24 information from investors. Thus, Plaintiffs’ readiness statements in FAC ¶¶ 143-44 are not 25 actionable. However, even if these statements were actionable, Plaintiffs have failed to allege 26 scienter, which the Court addresses in Section 4 below. 27 c. Post-Inspection Statements 1 inspection statements as misleading for failure to disclose the Form 483 and the changed 2 manufacturing process:

3 • “The FDA initiated their pre-approval inspection of our manufacturing facility in June, and 4 we continue to anticipate approval of [DAXI] for Injection for the treatment of glabellar lines in 2021. We are actively preparing for the launch . . . [.]” FAC ¶ 150 (Aug. 5, 2021 5 Press Release); see also FAC ¶ 155.

6 • “[O]ur BLA may receive a Complete Response Letter or another response from the FDA identifying deficiencies that must be addressed, rather than an approval.” FAC ¶ 152 7 (Aug. 5, 2021 Form 10-Q). 8 • “So we continue to feel very good that they’re following sort of through with the expected 9 inspection plan. I think you’re sensing consistency with our tone around the expected approval before year-end. We’ve taken advantage of this time to keep up sort of our 10 readiness for the inspection and continue to advance our commercial preparation plans.” 11 FAC ¶ 156 (Aug. 5, 2021 Q2 2021 Earnings Call)

12 • “[W]e’re focused on an approval certainly before the end of 2021, and have full preparation and build schedule going on in the interim . . . [inspection] is a standard piece 13 that needs to happen before approval. So the next communication you’ll hear from us is kind of once we get the decision. But again, come back to the fact that we feel very good 14 about our prep and where we were in that process . . .” FAC ¶ 157 (Aug. 5, 2021 Q2 2021 15 Earnings Call).

16 • “[W]e feel really good about where we are in that [approval] process. The last thing that had to be completed as part of our approval was the on-site inspection, which did happen at 17 the end of [Q2].” FAC ¶ 159 (Sept. 9, 2021 Wells Fargo Conference).

18 • “A typical inspection is 1 to 2 weeks of sort of on-site inspection activities. Ours was a 19 very typical inspection.” FAC ¶ 161 (Sept. 9, 2021 Wells Fargo Conference).

20 • “[T]he company continues to anticipate FDA approval of [DAXI] in 2021. Revance notes that the issuance of a Form 483 following the conclusion of an onsite inspection is not 21 uncommon. A Form 483 lists observations made by FDA representatives during the 22 inspection of a facility. A Form 483 does not constitute a final agency determination. Revance provided its response to the Form 483 in July 2021 following a preapproval 23 inspection and is currently awaiting the FDA’s decision on its BLA for [DAXI]. The company remains confident in the quality of its BLA submission and continues to 24 anticipate FDA approval in 2021.” FAC ¶ 165 (Oct. 12, 2021 Press Release). 25 26 Defendants argue that these statements are not false or misleading because they do not 27 refer to the outcome of the FDA inspection or state that Revance had not received a Form 483. 1 “typical” was not misleading. See FAC ¶ 161. Plaintiffs argue that the inspection was not 2 “typical” in light of the “severity of certain Deficiencies identified in the Form 483 . . . [.]” 3 Opposition at 20. However, this statement was made immediately after stating that “[a] typical 4 inspection is 1 to 2 weeks,” implying that the “typical” comment referred to the length of the 5 inspection. See FAC ¶ 161. Moreover, Plaintiffs have not alleged that Form 483s are uncommon, 6 or even that they necessarily result in a Complete Response Letter. Accordingly, this statement 7 was not misleading. 8 Plaintiffs also contend that Revance’s statement that it “may receive a Complete Response 9 Letter or another response from the FDA identifying deficiencies that must be addressed, rather 10 than approval,” “put the Form 483 itself ‘in play.’ ” Opposition at 18 (citing FAC ¶ 152). The 11 Court agrees. Although Defendants were under no obligation to discuss the FDA process, once 12 they chose to discuss the process, they were required to do so in a way that was not misleading. 13 Stating that Revance “may” receive a response from the FDA identifying deficiencies was 14 misleading where Revance did not disclose that these risks “may already have come to fruition.” 15 See Berson, 527 F.3d at 987-90; see also Siracusano v. Matrixx Initiatives, Inc., 585 F.3d 1167, 16 1181 (9th Cir. 2009), aff’d, 563 U.S. 27 (2011) (misleading where the SEC Form spoke about the 17 risks of product liability claims in the abstract when the company was already being sued in a 18 product liability action). Moreover, at the inspection, the FDA assessor told Defendant Joshi 19 (Revance’s Chief Operating Officer and President of R&D and Products Operations) that the FDA 20 recommended that the BLA be withheld for lack of commercial readiness. FAC, Ex. B at 2. 21 Thus, at this point, it was misleading to tout Revance’s confidence in BLA approval, and 22 statements in FAC ¶¶ 150, 152, 155, 156, 157, 159, 165 may be actionable if Plaintiffs have 23 alleged scienter, which the Court explores in Section 4, below. 24 d. Schilke and Joshi’s Liability 25 Individuals are only liable for materially misleading or false statements that they “made.” 26 Janus Cap. Grp., Inc. v. First Derivative Traders, 564 U.S. 135, 141 (2011). A person or entity 27 who has “ultimate authority over the statement” is said to have made the statement. Id. at 142. 1 be said to have “made” the statement. See Abdo v. Fitzsimmons, No. 17-CV-00851-TSH, 2021 2 WL 616324, at *7 (N.D. Cal. Feb. 17, 2021); Special Situations Fund III QP, L.P. v. Brar, 2015 3 WL 1393539, at *3 (N.D. Cal. Mar. 26, 2015) (“Courts have consistently held that the signer of a 4 corporate filing is its ‘maker,’ because signing a filing implies ‘ultimate control’ over its 5 contents.”) (citation omitted) (citing cases). 6 Defendants argue that Defendants Schilke (Revance’s Chief Financial Officer) and Joshi 7 did not make any of the challenged statements, and thus are not liable. Motion at 19 n. 2. 8 Plaintiffs allege that Joshi effectively made several statements as he signed SEC filings that 9 contain false or misleading statements. Opposition at 21 (citing FAC ¶¶ 123-24, 138-39, 152-53). 10 Joshi may be held liable for false or misleading statements in SEC filings that he signed. See 11 Abdo, 2021 WL 616324, at *7. 12 Plaintiffs also argue that Schilke and Joshi effectively “made” statements because they 13 failed to correct false or misleading statements on conference calls that they attended. Motion at 14 21 (citing FAC ¶¶ 121-22, 126-29, 132-34, 144-45, 167). The Ninth Circuit has not determined 15 whether an officer may be liable for failing to correct false or misleading statements. Some courts 16 have held that a high-ranking officer may not “knowingly fail to correct” a false statement made 17 by another official. McGuire v. Dendreon Corp., No. C07-800MJP, 2008 WL 5130042, at *8 18 (W.D. Wash. Dec. 5, 2008) (citation omitted) (citing cases). Other courts have held that an officer 19 is not liable for failure to correct another’s statements without factual allegations demonstrating 20 that the officer had “ultimate control and authority over those statements.” See Hampton v. Aqua 21 Metals, Inc., No. 17-CV-07142-HSG, 2020 WL 6710096, at *17 (N.D. Cal. Nov. 16, 2020); City 22 of Royal Oak, 880 F. Supp. 2d at 1071 (Board Chairman not liable under Janus for statements that 23 other individual defendants made during investor calls). The Court finds persuasive the latter set 24 of cases as they comport with the Supreme Court’s requirement that “the maker of a statement is 25 the person or entity with ultimate authority over the statement . . . [.]” Janus, 564 U.S. at 142. 26 With the exception of the statements that Joshi signed, Plaintiffs have not alleged that Joshi had 27 ultimate authority over any of the statements pleaded, and Plaintiffs have not alleged that Schilke 1 statements they did not correct. Plaintiffs may amend their pleadings to show that Joshi or Schilke 2 had ultimate authority over the oral statements made on investor calls. 3 4. Scienter 4 Defendants also challenge the sufficiency of Plaintiffs’ allegations with respect to scienter. 5 Scienter is the intent to deceive, manipulate or defraud. Tellabs, 551 U.S. at 319. To establish 6 scienter, the complaint must “state with particularity facts giving rise to a strong inference that the 7 defendant acted with the required state of mind.” 15 U.S.C. § 78u– 4(b)(2)(A). The required state 8 of mind is “a mental state that not only covers ‘intent to deceive, manipulate, or defraud,’ but also 9 ‘deliberate recklessness.’ ” Schueneman v. Arena Pharms., Inc., 840 F.3d 698, 705 (9th Cir. 10 2016) (internal citations omitted). Deliberate recklessness is “‘an extreme departure from the 11 standards of ordinary care,’ which ‘presents a danger of misleading buyers or sellers that is either 12 known to the defendant or is so obvious that the actor must have been aware of it.’” In re 13 Alphabet, Inc. Sec. Litig., 1 F. 4th at 701 (emphasis in original) (quoting Nguyen v. Endologix, 14 Inc., 962 F.3d 405, 414 (9th Cir. 2020)). 15 The “strong inference” required by the PSLRA “must be more than merely ‘reasonable’ or 16 ‘permissible’—it must be cogent and compelling, thus strong in light of other explanations.” 17 Tellabs, 551 U.S. at 324. “Facts showing mere recklessness or a motive to commit fraud and 18 opportunity to do so provide some reasonable inference of intent, but are not sufficient to establish 19 a strong inference of deliberate recklessness.” In re VeriFone Holdings, 704 F.3d at 701. “A 20 court must compare the malicious and innocent inferences cognizable from the facts pled in the 21 complaint, and only allow the complaint to survive a motion to dismiss if the malicious inference 22 is at least as compelling as any opposing innocent inference.” Zucco Partners, 552 F.3d at 991 23 (9th Cir. 2009); see Nguyen, 962 F.3d at 415 (9th Cir. 2020). In evaluating whether a complaint 24 satisfies the “strong inference” requirement, courts must consider the allegations and other 25 relevant material “holistically,” not “scrutinized in isolation.” In re VeriFone Holdings, 704 F.3d 26 at 701-02 (citing Tellabs, 551 U.S. at 323, 326). Because scienter is a subjective inquiry, “the 27 ultimate question is whether the defendant knew his or her statements were false, or was 1 2010). 2 Plaintiffs rely on the following to support an inference of scienter: (1) Defendants’ 3 knowledge of and access to the deficiencies and the Form 483; (2) the core operations doctrine; 4 and (3) Defendants’ motives to artificially inflate its stock. Plaintiffs’ scienter allegations fail for 5 several reasons. 6 Plaintiffs detail Defendant Joshi’s access to information about the BLA and the FDA 7 approval process, FAC ¶¶ 183-187, and allege that Defendant Foley (Revance’s Chief Executive 8 Officer) and Defendant Schilke also had access to this information because Joshi reports to Foley, 9 FAC ¶ 187, and these three Individual Defendants had weekly meetings, some of which related to 10 FDA inspection preparations, FAC ¶ 189. However, Plaintiffs cite to no authority showing that 11 simply reporting to another employee or having meetings about the general subject are sufficient 12 to show knowledge. Indeed, “[w]here a complaint relies on allegations that management had an 13 important role in the company but does not contain additional detailed allegations about the 14 defendants’ actual exposure to information, it will usually fall short of the PSLRA standard.” S. 15 Ferry LP, No. 2 v. Killinger, 542 F.3d 776, 784 (9th Cir. 2008) (“Killinger”). That is the case 16 here. 17 Further, knowledge of manufacturing issues alone is insufficient to show intent to deceive 18 or that Defendants were deliberately reckless. See Connetics, 542 F. Supp. 2d at 1008. With 19 respect to pre-inspection statements, Plaintiffs have not made any allegations that Defendants had 20 “contemporaneous knowledge” that a statement was false or misleading when made. See VIVUS, 21 2012 WL 4477647, at *19. Plaintiffs’ theory is that Defendants knew of the existence of various 22 deficiencies, and therefore their statements about FDA approval were misleading. However, 23 Plaintiffs have not pointed to any evidence that Defendants believed that FDA approval was 24 unlikely or would be delayed because of the deficiencies. 25 Moreover, the Court must weigh plausible competing inferences. Tellabs, 551 U.S. at 323- 26 24. Plaintiffs contend that Defendants’ awareness of the deficiencies shows scienter. Opposition 27 at 26-29. However, the problem is that Plaintiffs only allege that in hindsight, after receipt of the 1 statements of confidence were overly optimistic, Plaintiffs have not alleged facts showing that 2 Defendants believed that the manufacturing issues could not be resolved quickly or that the FDA 3 would not approve the BLA.4 4 Plaintiffs argue that once Defendants knew that the WCB had deteriorated, that it would 5 not be qualified until the end of 2021, and the FDA issued the Form 483, there is a strong 6 inference of scienter. To sufficiently plead scienter for allegedly misleading omissions, however, 7 Plaintiffs must allege “a highly unreasonable omission” and facts to support the inference that 8 Defendants either knew that their omissions were misleading the investors or that the potential for 9 misleading the public was so obvious that Defendants must have been aware of it. See Zucco 10 Partners, 552 F.3d at 991. None of the facts alleged in the FAC relate to the Defendants’ state of 11 mind. Indeed, “even if a company knows that a problem exists, it could still honestly and in good 12 faith report that the company will continue to perform as expected. Management simply may have 13 been confident that they could overcome the problems or merely underestimated the severity of 14 such problems.” Connetics, 542 F. Supp. 2d at 1008 (quoting In re CBT Group PLC Sec. Litig., 15 1999 WL 1249287 *3 (N.D. Cal. July 21, 1999)). As the pleadings show, Revance was in the 16 process of qualifying a new WCB and had already successfully produced drug substance lots with 17 the new WCB. Thus, there are no indications that Defendants intended to deceive investors by 18 stating their readiness for BLA inspection or FDA approval. In. Zogenix, the court found 19 insufficient allegations of scienter as “Plaintiffs have no answer to defendants’ benign 20 explanation—namely that ‘Zogenix had every incentive to get it right the first time, and to put 21 FINTEPLA on the path to [FDA] approval,’ did not consciously engage in any ‘reckless gamble,’ 22 but rather misread what the FDA was looking for in the FINTEPLA NDA.” 2020 WL 3820424, at 23 *11. The same is true here. Although Plaintiffs argue that Defendants knew or recklessly 24 disregarded information that “materially decreased the likelihood that the BLA would be approved 25 as submitted,” Opposition at 29, the FAC does not allege an intent to deceive, manipulate, or 26 4 Plaintiffs also argue that Defendants were aware of the lack of the QA. Opposition at 27. 27 However, as discussed above in Section 3(a), the fact that the QA was quickly resolved after the 1 defraud investors. Indeed, the Form 483 is not a final determination by the FDA, and although 2 evidently Revance’s Form 483 Response did not satisfactorily address the FDA’s concerns, 3 Defendants’ misreading of what the FDA required does not show conscious intent to deceive or an 4 “extreme departure from the standards of ordinary care.” See In re Alphabet, Inc. Sec. Litig., 1 F. 5 4th at 701; Zogenix, 2020 WL 3820424, at *11. 6 Further, the statements that Plaintiffs cite – projections for the timeline for approval, 7 confidence in the BLA submission, and readiness for inspection – were not “so dramatically false” 8 that at least some corporate official must have known of their falsity upon publication. See In re 9 NVIDIA Corp. Sec. Litig., 768 F.3d 1046, 1063-64 (9th Cir. 2014) (awareness of serious defects in 10 two important products was not enough to trigger corporate scienter). The more compelling 11 inference is that Revance believed it was on the path to approval, even after the issuance of the 12 Form 483, which is supported by the fact that the FDA approved the BLA the following year. 13 FAC ¶ 23. Accordingly, Plaintiffs have not pleaded scienter based on Defendants’ purported 14 knowledge of manufacturing issues. 15 Plaintiffs’ core operation allegations are also deficient. The “core operations” doctrine 16 allows the knowledge of certain facts that are critical to a business’s “core operations” to be 17 attributed to a company’s key officers. Webb v. Solarcity Corp., 884 F.3d 844, 854 (9th Cir. 18 2018). “Allegations that rely on the core-operations inference are among the allegations that may 19 be considered in the complete PSLRA analysis.” Killinger, 542 F.3d at 784. “[C]orporate 20 management’s general awareness of the day-to-day workings of the company’s business does not 21 establish scienter—at least absent some additional allegation of specific information conveyed to 22 management and related to the fraud.” Metzler, 540 F.3d at 1068. Plaintiffs argue that it would be 23 “absurd to suggest” that Defendants were unaware of the deficiencies and the Form 483 while 24 making positive statements about the BLA and FDA inspection and approval timeline. Opposition 25 at 30. However, Plaintiffs have not made “detailed and specific allegations” supporting a strong 26 inference that Defendants Schilke or Foley were intimately involved in the minutiae of the BLA 27 process. Zucco Partners, 552 F.3d at 1000 (citation omitted). The fact that Defendants had 1 information was conveyed to Foley or Schilke. See In re NVIDIA Corp., 768 F.3d at 1064. Even 2 assuming that knowledge could be imputed on the Individual Defendants under the core 3 operations doctrine, Plaintiffs again fail to show that knowledge of manufacturing deficiencies 4 meant that Defendants believed that the BLA was not ready or would not pass inspection, and thus 5 fail to show scienter under the core operations theory. 6 Plaintiffs also argue that Defendants had “compelling motives” to mislead investors to 7 keep stock prices inflated during the class period as their compensation came in the form of stock 8 and options. Opposition at 30-31 (citing FAC ¶¶ 212-13). But “evidence of a personal profit 9 motive on the part of officers and directors . . . is insufficient to raise a strong inference of 10 scienter.” Intuitive Surgical, 759 F.3d at 1064 (significant profits from sale of company stock did 11 not raise an inference of scienter); see In re Rigel Pharms., Inc. Sec. Litig., 697 F.3d 869, 884 (9th 12 Cir. 2012) (“allegations of routine corporate objectives such as the desire to obtain good financing 13 and expand are not, without more, sufficient to allege scienter”). Moreover, Plaintiffs fail to 14 acknowledge that the Ninth Circuit has “recognized that a lack of stock sales can detract from a 15 scienter finding.” Webb, 884 F.3d at 856. None of the Individual Defendants is alleged to have 16 sold Revance stock during the class period. See In re Pixar Sec. Litig., 450 F. Supp. 2d 1096, 17 1107 (N.D. Cal. 2006) (“the absence of insider trading by a defendant is highly relevant and 18 undermines any inference of scienter”). In Nguyen, the Ninth Circuit found that the plaintiffs’ 19 theory that defendants promised FDA approval that they knew would not be approved because of 20 migration problems “does not make a whole lot of sense,” and relies on the “supposition that 21 defendants would rather keep the stock price high for a time and then face the inevitable fallout” 22 when the migration problem was revealed. 962 F.3d at 415. However, there were no factual 23 allegations that the defendants sold any stock or sold the company at a premium during this time. 24 Id. Thus, the court found the allegations of fraud implausible. Id. The same is true here. 25 Therefore, the Court finds that Defendants’ general financial motives cannot show scienter. See 26 id. (“Treating the allegations in the complaint in the light most favorable to the plaintiff, the notion 27 that a company would promise FDA approval that it knew would not materialize does not, without 1 After having determined that none of Plaintiffs’ allegations, standing alone, is sufficient to 2 || create a strong inference of scienter, the Court now considers the allegations holistically. See In re 3 VeriFone, 704 F.3d at 702-03; Zucco Partners, 552 F.3d at 992. The Court finds that taken 4 || together, the facts do not evince such fraudulent intent or deliberate recklessness as to make the 5 inference of scienter cogent. See Tellabs, 551 U.S. at 323-24. Indeed, as noted above, Plaintiffs’ 6 || factual allegations fail to sufficiently plead scienter as to any of the Defendants. Accordingly, the 7 || Court DISMISSES the FAC with leave to amend. 8 Cc. Section 20(a) Claim 9 A Section 20(a) claim requires an underlying violation of securities law. In re Rigel 10 || Pharms., 697 F.3d at 886. Because Plaintiffs failed to adequately plead a violation under Rule ll 10b-5/Section 10(b), their Section 20(a) claim also fails. See id. 12 || IV. CONCLUSION 13 For the foregoing reasons, the Court GRANTS Defendants’ motion to dismiss with leave 14 || toamend. Any amended complaint must be filed by May 1, 2024. No additional parties or claims 3 15 may be added without leave of Court or stipulation of Defendants. a 16 IT IS SO ORDERED. 18 Dated: March 30, 2024 19 Mod W/o

ARACELI MARTINEZ-OLGUIN 21 United States District Judge 22 23 24 25 26 27 28