In an opinion issued today, Judge Berman dismissed a putative securities fraud class action brought by shareholders of Ventrus Biosciences against the company and two of its officers. As Judge Berman summarized the plaintiffs’ claims:

At the core of the Complaint is the allegation that Defendants, as part of their efforts to raise capital for Ventrus, “touted” pre-2008 Phase II test results for VEN 309 conducted by the drug’s patent holder, Sam Amer, “[d]espite the fact that the small testing groups and subjective endpoints used in Amer’ s studies could not produce a reliable gauge of the efficacy of VEN 309.” Plaintiffs allege that Defendants’ misrepresentation of these Phase II test results-which were obtained during the second of three required stages of testing before a drug may obtain FDA approval-“misled investors as to VEN 309’s previous testing success and anticipated FDA approval,” and caused Plaintiffs to suffer economic loss when, on June 25, 2012, Ventrus disclosed that its Phase III clinical trial for VEN 309 “did not meet its endpoints” and that Ventrus would abandon its development of VEN 309.

Judge Berman found the complaint lacking both for failing to allege false statements made by the defendants and scienter.  Relying on case law specifically dealing with fraud based on statements about clinical drug trials, Judge Berman explained:

 “The Second Circuit has emphasized that in scrutinizing a Section 10(b) claim, a court does not judge the methodology of a drug trial, but whether a defendant’s statements about that study were false and misleading.” Abely v. Aetema Zentaris Inc., 12-cv-4711, 2013 WL 2399869, at *7 (S.D.N.Y. May 29, 2013) (citing Kleinman, 706 F.3d at 154-55). In Kleinman v. Elan Corp., plc, a case very much on point, the Court held that plaintiffs’ criticism of the methodology used in defendants’ “post-hoc analysis” of a Phase II drug trial did not support a securities fraud claim because defendants had not made misleading statements regarding that methodology. . . .

Here, as in Kleinman, Plaintiffs do not allege that Defendants’ Class Period statements misrepresented any facts regarding the German Study, including its size or any other facts about its methodology, but, instead, criticize the study’s methodology as unreliable. Under Kleinman, this is plainly insufficient to plead falsity in a securities fraud case.

On scienter, Judge Berman ruled that the plaintiffs’ allegations that Ventrus’ officers were motivated to commit fraud in order to finance the company and receive additional compensation “are no different than those generally possessed by most corporate directors and officers, and thus ‘do not suffice’ to demonstrate scienter.”