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Tj -224.4 -4.2 Td (NECA-IBEW P) Tj /F2 8.4 Tf 101.1 Tz .79 Tw (ENSION) Tj /F2 12 Tf 100 Tz 0 Ts 1.2 Tw ( F) Tj /F2 8.4 Tf 101.1 Tz .79 Tw (UND) Tj /F2 12 Tf 100 Tz 0 Ts 1.2 Tw (,) Tj 201.468 -9 Td (CV 04-0886 MHM) Tj /F3 20 Tf 100 Tz -19.848 -1.3 Td 2 Tw () Tj /F4 12 Tf 100 Tz -105.96 -2.9 Td 1.2 Tw (Claimant-Appellant,) Tj /F2 12 Tf 100 Tz 125.808 -9 Td (CV 04-1012 MHM) Tj -118.968 -9 Td (v.) Tj 141.84 -9 Td (OPINION) Tj -224.34 -9 Td (M) Tj /F2 8.4 Tf 101.1 Tz .79 Tw (ATRIXX) Tj /F2 12 Tf 100 Tz 0 Ts 1.2 Tw ( I) Tj /F2 8.4 Tf 101.1 Tz .79 Tw (NITIATIVES) Tj /F2 12 Tf 100 Tz 0 Ts 1.2 Tw (, I) Tj /F2 8.4 Tf 101.1 Tz .79 Tw (NC) Tj /F2 12 Tf 100 Tz 0 Ts 1.2 Tw (.; C) Tj /F2 8.4 Tf 101.1 Tz .79 Tw (ARL) Tj /F2 12 Tf 100 Tz 0 Ts 1.2 Tw ( J.) Tj 0 -13.2 Td (J) Tj /F2 8.4 Tf 101.1 Tz .79 Tw (OHNSON) Tj /F2 12 Tf 100 Tz 0 Ts 1.2 Tw (; W) Tj /F2 8.4 Tf 101.1 Tz .79 Tw (ILLIAM) Tj /F2 12 Tf 100 Tz 0 Ts 1.2 Tw ( J. H) Tj /F2 8.4 Tf 101.1 Tz .79 Tw (EMELT) Tj /F2 12 Tf 100 Tz 0 Ts 1.2 Tw (,) Tj /F4 12 Tf 100 Tz 65.688 -13.2 Td (Defendants-Appellees.) Tj /F3 20 Tf 100 Tz 115.932 -8.8 Td 1.6 Ts 2 Tw () Tj 0 Ts /F2 12 Tf 100 Tz -142.878 -26.2 Td 1.2 Tw (Appeal from the United States District Court) Tj 46.206 -13.2 Td (for the District of Arizona) Tj -42.606 -13.2 Td (Mary H. Murguia, District Judge, Presiding) Tj 52.128 -26.2 Td (Argued and Submitted) Tj -44.526 -13.2 Td (June 9, 2009San Francisco, California) Tj 42.594 -26.2 Td (Filed October 28, 2009) Tj -73.302 -26.2 Td (Before: Mary) Tj 0 Tw ( ) Tj 1.2 Tw (M.) Tj 0 Tw ( ) Tj 1.2 Tw (Schroeder, A.) Tj 0 Tw ( ) Tj 1.2 Tw (Wallace) Tj 0 Tw ( ) Tj 1.2 Tw (Tashima and) Tj 58.002 -13.2 Td (Carlos) Tj 0 Tw ( ) Tj 1.2 Tw (T.) Tj 0 Tw ( ) Tj 1.2 Tw (Bea, Circuit) Tj 0 Tw ( ) Tj 1.2 Tw (Judges.) Tj 6.132 -26.2 Td (Opinion by Judge Tashima) Tj ET Q q 1 0 0 1 156 664.5 cm 0 G .9 w 0 -65.95 m 183.8 -65.95 l s 1.2 w 186.6 -139.1 m 186.6 -73.8 l s 1.2 w 186.6 -221.4 m 186.6 -156.1 l s .9 w 0 -228.35 m 183.3 -228.35 l s Q q BT 0 Tr 0 g 1 0 0 1 0 792 Tm /F2 11 Tf 100 Tz 292.25 -664.5 Td 1.1 Tw 0 Tc (14507) Tj ET Q endstream endobj 5 0 obj 3073 endobj 3 0 obj << /Type /Page /MediaBox [0 0 612 792] /Parent 10 0 R /Resources << /Font << /F1 6 0 R /F2 7 0 R /F3 8 0 R /F4 9 0 R >> /ProcSet 1 0 R >> /Contents 4 0 R >> endobj %%Page: 2 2 12 0 obj << /Length 13 0 R >> stream q BT 0 Tr 0 g 1 0 0 1 156 643.5 Tm /F1 12 Tf 100 Tz 120.996 -262.2 Td 1.2 Tw 0 Tc (COUNSEL) Tj /F2 12 Tf 100 Tz -120.996 -26.2 Td 1.32 Tw (Joseph D. Daley, Coughlin Stoia Geller Rudman & Robbins) Tj 0 -13.2 Td 1.2 Tw (LLP, San Diego, California, for the plaintiff-appellant.) Tj 0 -26.2 Td 4.75 Tw (Michael G. Yoder, O'Melveny & Myers LLP, Newport) Tj 0 -13.2 Td 1.2 Tw (Beach, California, for the defendants-appellees.) Tj ET Q q 1 0 0 1 156 643.5 cm 0 G .5 w 0 -242.75 m 300 -242.75 l s Q q BT 0 Tr 0 g 1 0 0 1 0 792 Tm /F2 11 Tf 100 Tz 156 -136.5 Td 1.1 Tw 0 Tc (14510) Tj 52.6525 0 Td (S) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (IRACUSANO) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( v. NECA-IBEW P) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (ENSION) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( F) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (UND) Tj /F2 11 Tf 100 Tz 0 Ts ET Q q 1 0 0 1 0 792 cm 0 G .5 w 156 -140.25 m 456 -140.25 l s Q endstream endobj 13 0 obj 955 endobj 11 0 obj << /Type /Page /MediaBox [0 0 612 792] /Parent 10 0 R /Resources << /Font << /F1 6 0 R /F2 7 0 R >> /ProcSet 1 0 R >> /Contents 12 0 R >> endobj %%Page: 3 3 15 0 obj << /Length 16 0 R >> stream q BT 0 Tr 0 g 1 0 0 1 156 643.5 Tm /F1 12 Tf 100 Tz 123.666 -8.4 Td 1.2 Tw 0 Tc (OPINION) Tj /F2 12 Tf 100 Tz -123.666 -25.9 Td (TASHIMA, Circuit Judge:) Tj 12 -25.9 Td 3 Tw (Matrixx Initiatives, Inc. \() Tj (Matrixx) Tj (\) is a pharmaceutical) Tj -12 -13 Td 2.22 Tw (company that sells cold products through its wholly-owned) Tj 0 -13 Td 1.77 Tw (subsidiary, Zicam, LLC. One of its main products is Zicam) Tj 0 -13 Td 4.81 Tw (Cold Remedy, which comes in several different forms.) Tj 4.9 Ts /F5 6 Tf 100 Tz (1) Tj 0 Ts /F2 12 Tf 100 Tz 0 -13 Td .66 Tw (Plaintiffs-Appellants are lead plaintiff, NECA-IBEW Pension) Tj 0 -13 Td .22 Tw (Fund, and named plaintiff, James Siracusano, in a class action) Tj 0 -13 Td .24 Tw (brought against Matrixx and three Matrixx executives \(collec-) Tj 0 -13 Td 3.55 Tw (tively ) Tj (Appellees) Tj (\) under the Private Securities Litigation) Tj 0 -13 Td 3.9 Tw (Reform Act of 1995 \() Tj (PSLRA) Tj (\). Appellants alleged that) Tj 0 -13.1 Td 2.08 Tw (Appellees violated the Securities Exchange Act of 1934 by) Tj 0 -13.1 Td .51 Tw (failing to disclose material information regarding Zicam Cold) Tj 0 -13.1 Td .78 Tw (Remedy specifically, that Zicam causes a condition called) Tj 0 -13.1 Td 0 Tw (anosmia, which is a loss of the sense of smell, in its users. The) Tj 0 -13.1 Td 2.41 Tw (district court granted in part and denied in part Appellees') Tj 0 -13.1 Td .47 Tw (motion to strike portions of the complaint and granted Appel-) Tj 0 -13.1 Td .16 Tw (lees' motion to dismiss the complaint and the action. We have) Tj 0 -13.1 Td 2.7 Tw (jurisdiction pursuant to 28 U.S.C. ) Tj 0 Tw ( ) Tj 2.7 Tw (1291. We reverse and) Tj 0 -13.1 Td 1.2 Tw (remand for further proceedings.) Tj /F1 12 Tf 100 Tz 104.334 -25.9 Td (BACKGROUND) Tj /F2 12 Tf 100 Tz 4.9 Ts /F5 6 Tf 100 Tz .5 Tw (2) Tj 0 Ts /F2 10 Tf 100 Tz -94.334 -25.8 Td 4.1 Ts /F5 6 Tf 100 Tz .72 Tw (1) Tj 0 Ts /F2 10 Tf 100 Tz (On June 16, 2009, the Food and Drug Administration \() Tj (FDA) Tj (\) issued) Tj -10 -11.1 Td 0 Tw (a warning letter to Matrixx, setting forth the FDA's conclusion that several) Tj 0 -11.1 Td .38 Tw (Zicam Cold Remedy products ) Tj (may pose a serious risk to consumers who) Tj 0 -11.1 Td 12.1 Tw (use them.) Tj ( http://www.fda.gov/ICECI/EnforcementActions/Warning) Tj 0 -11.1 Td 3.21 Tw (Letters/ucm166909.htm \(visited July 19, 2009; information moved to) Tj 0 -11.1 Td 1 Tw (http://www.fda.gov/ForConsumers/ConsumerUpdates/ucm166931.htm\).) Tj 0 -11.1 Td 1.09 Tw (The FDA stated that it had received ) Tj (more than 130 reports of anosmia,) Tj 0 -11.1 Td .3 Tw (\(loss of sense of smell, which in some cases can be long-lasting or perma-) Tj 0 -11.1 Td 1 Tw (nent\), associated with use of these products.) Tj ( ) Tj /F4 10 Tf 100 Tz (Id.) Tj /F2 10 Tf 100 Tz ( ) Tj 10 -13.9 Td 4.1 Ts /F5 6 Tf 100 Tz 1.46 Tw (2) Tj 0 Ts /F2 10 Tf 100 Tz (The following allegations are taken from the Consolidated Amended) Tj -10 -11.1 Td .61 Tw (Complaint \() Tj (CAC) Tj (\). In reviewing the district court's dismissal for failure) Tj 0 -11.1 Td .85 Tw (to state a claim, we accept the plaintiffs' allegations as true and construe) Tj 0 -11.1 Td .75 Tw (them in the light most favorable to the plaintiffs. ) Tj /F4 10 Tf 100 Tz (Zucco Partners, LLC v.) Tj 0 -11.1 Td .99 Tw (Digimarc Corp.) Tj /F2 10 Tf 100 Tz (, 552 F.3d 981, 989 \(9th Cir. 2009\). As such, the allega-) Tj 0 -11.1 Td 1 Tw (tions are hereafter stated as fact. ) Tj ET Q q 1 0 0 1 156 643.5 cm 0 G .5 w 0 -319.65 m 300 -319.65 l s Q q BT 0 Tr 0 g 1 0 0 1 0 792 Tm /F2 11 Tf 100 Tz 428.5 -136.5 Td 1.1 Tw 0 Tc (14511) Tj -219.8475 0 Td (S) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (IRACUSANO) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( v. NECA-IBEW P) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (ENSION) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( F) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (UND) Tj /F2 11 Tf 100 Tz 0 Ts ET Q q 1 0 0 1 0 792 cm 0 G .5 w 156 -140.25 m 456 -140.25 l s Q endstream endobj 16 0 obj 4136 endobj 14 0 obj << /Type /Page /MediaBox [0 0 612 792] /Parent 10 0 R /Resources << /Font << /F1 6 0 R /F2 7 0 R /F4 9 0 R /F5 17 0 R >> /ProcSet 1 0 R >> /Contents 15 0 R >> endobj %%Page: 4 4 19 0 obj << /Length 20 0 R >> stream q BT 0 Tr 0 g 1 0 0 1 156 643.5 Tm /F2 12 Tf 100 Tz 12 -8.4 Td 1.44 Tw 0 Tc (On April 27, 2004, Appellants filed a class action against) Tj -12 -13 Td 3.32 Tw (Matrixx and three individual defendants Carl Johnson,) Tj 0 -13 Td 1.62 Tw (Matrixx's Chief Executive Officer, President and a director;) Tj 0 -13 Td .38 Tw (William Hemelt, Matrixx's Chief Financial Officer and Exec-) Tj 0 -13 Td 3.22 Tw (utive Vice President; and Timothy Clarot, Matrixx's Vice) Tj 0 -13 Td 1.75 Tw (President and Director of Research and Development on) Tj 0 -13.1 Td 1.57 Tw (behalf of investors who purchased Matrixx securities during) Tj 0 -13.1 Td 3.55 Tw (the class period, October 22, 2003, to February 6, 2004.) Tj 0 -13.1 Td .81 Tw (Zicam Cold Remedy accounted for approximately 70 percent) Tj 0 -13.1 Td 1.25 Tw (of Zicam's sales during the class period. Zicam Cold Reme-) Tj 0 -13.1 Td .67 Tw (dy's active ingredient is zinc gluconate and can be applied as) Tj 0 -13.1 Td .5 Tw (a nasal spray or a gel. Appellants alleged that Appellees were) Tj 0 -13.1 Td .87 Tw (aware that numerous users of Zicam had developed anosmia,) Tj 0 -13.1 Td .09 Tw (but that they failed to disclose the risk and instead issued false) Tj 0 -13.1 Td 1.2 Tw (and misleading statements regarding Zicam.) Tj /F1 12 Tf 100 Tz 0 -26 Td (I.) Tj 9 Tw ( ) Tj 1.2 Tw (Allegations of Adverse Information Regarding Zicam) Tj /F2 12 Tf 100 Tz 12 -26 Td 4.2 Tw (In December 1999, Dr. Alan Hirsch, the Neurological) Tj -12 -13.1 Td .63 Tw (Director of the Smell & Taste Treatment and Research Foun-) Tj 0 -13.1 Td 5.24 Tw (dation, Ltd., ) Tj (called Matrixx's customer service line to) Tj 0 -13.1 Td .23 Tw (inquire into the amount of zinc contained in Zicam nasal gel.) Tj () Tj 0 -13.1 Td 2.28 Tw (CAC) Tj ( ) Tj 0 Tw ( ) Tj 2.28 Tw (25. Hirsch spoke with a Mr. Landau and explained) Tj 0 -13.1 Td 1.36 Tw (that at least one of Hirsch's patients had developed anosmia) Tj 0 -13.1 Td 1.7 Tw (after using Zicam. ) Tj (Hirsch stated that other studies had indi-) Tj 0 -13.1 Td .28 Tw (cated potential problems with ) Tj (intranasal application of zinc,) Tj () Tj 0 -13.1 Td .63 Tw (and offered to conduct a clinical study on the issue. Mr. Lan-) Tj 0 -13.1 Td 1.2 Tw (dau declined his offer.) Tj 12 -26 Td .5 Tw (In September 2002, Clarot, Vice President of Research and) Tj -12 -13.1 Td 1.9 Tw (Development, called Miriam Linschoten, Ph.D., of the Uni-) Tj 0 -13.1 Td .95 Tw (versity of Colorado Health Sciences Center. Clarot contacted) Tj 0 -13.1 Td 1.33 Tw (Linschoten because a patient Linschoten had treated for loss) Tj 0 -13.1 Td 3.51 Tw (of smell following use of Zicam also had complained to) Tj 0 -13.1 Td 1.48 Tw (Matrixx.) Tj ( Linschoten expressed concern that Zicam, an over-) Tj 0 -13.1 Td .71 Tw (the-counter product, contained no warning that it could cause) Tj 0 -13.1 Td 3.77 Tw (a loss of smell. Clarot told Linschoten that Matrixx had) Tj 0 -13.1 Td 1.08 Tw (received similar complaints from other customers as early as) Tj 1 0 0 1 0 792 Tm /F2 11 Tf 100 Tz 156 -136.5 Td 1.1 Tw 0 Tc (14512) Tj 52.6525 0 Td (S) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (IRACUSANO) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( v. NECA-IBEW P) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (ENSION) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( F) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (UND) Tj /F2 11 Tf 100 Tz 0 Ts ET Q q 1 0 0 1 0 792 cm 0 G .5 w 156 -140.25 m 456 -140.25 l s Q endstream endobj 20 0 obj 3552 endobj 18 0 obj << /Type /Page /MediaBox [0 0 612 792] /Parent 10 0 R /Resources << /Font << /F1 6 0 R /F2 7 0 R >> /ProcSet 1 0 R >> /Contents 19 0 R >> endobj %%Page: 5 5 22 0 obj << /Length 23 0 R >> stream q BT 0 Tr 0 g 1 0 0 1 156 643.5 Tm /F2 12 Tf 100 Tz 0 -8.4 Td 1.32 Tw 0 Tc (1999. ) Tj (Linschoten asked whether Matrixx had performed any) Tj 0 -13.5 Td .86 Tw (studies, told Clarot about existing studies linking zinc sulfate) Tj 0 -13.5 Td 1.83 Tw (to the loss of smell, and offered to send Clarot information) Tj 0 -13.5 Td 1.95 Tw (regarding those studies. ) Tj (Clarot replied that Matrixx had not) Tj 0 -13.5 Td .81 Tw (done any studies but that ) Tj (it had hired a consultant to review) Tj 0 -13.5 Td 1.2 Tw (the product.) Tj () Tj ( CAC ) Tj 0 Tw ( ) Tj 1.2 Tw (26. ) Tj 12 -26.7 Td .33 Tw (On September 20, 2002, Linschoten sent an email to Clarot) Tj -12 -13.5 Td 1.81 Tw (including abstracts on the link between zinc sulfate and the) Tj 0 -13.5 Td 2.16 Tw (loss of smell. ) Tj (Clarot called Linschoten to ask if she would) Tj 0 -13.5 Td .88 Tw (participate in animal studies to be conducted by Matrixx, but) Tj 0 -13.5 Td 1.12 Tw (Linschoten declined because she focused on human, not ani-) Tj 0 -13.5 Td 1.2 Tw (mal, research.) Tj 12 -26.7 Td 1 Tw (Linschoten, Dr. Bruce Jafek of the University of Colorado) Tj -12 -13.5 Td .62 Tw (School of Medicine, and another colleague planned to submit) Tj 0 -13.5 Td .41 Tw (their findings regarding ten patients who had developed anos-) Tj 0 -13.5 Td 1.88 Tw (mia following Zicam use in a presentation to the American) Tj 0 -13.5 Td .03 Tw (Rhinologic Society on September 20, 2003. ) Tj (On September 12,) Tj 0 -13.5 Td 1.81 Tw (2003, ) Tj (Matrixx sent a letter to Jafek stating that he did not) Tj 0 -13.5 Td 1.93 Tw (have permission to use Matrixx's name or the names of its) Tj 0 -13.4 Td .73 Tw (products in the presentation. CAC ) Tj 0 Tw ( ) Tj .73 Tw (29. Jafek asked for per-) Tj 0 -13.4 Td .27 Tw (mission to use the Zicam name, but Matrixx refused. ) Tj (The pre-) Tj 0 -13.4 Td 3.55 Tw (sentation to the American Rhinologic Society accordingly) Tj 0 -13.4 Td .47 Tw (was made without naming Zicam.) Tj ( ) Tj (Jafek's findings regarding) Tj 0 -13.4 Td .81 Tw (Zicam were ultimately disclosed to the public on February 6,) Tj 0 -13.4 Td 1.2 Tw (2004 on ) Tj /F4 12 Tf 100 Tz (Good Morning America) Tj /F2 12 Tf 100 Tz (.) Tj ( ) Tj /F4 12 Tf 100 Tz (Id.) Tj /F2 12 Tf 100 Tz 12 -26.6 Td 2.34 Tw (As of April of 2004, Dr. Jafek had evaluated over 100) Tj -12 -13.4 Td 1.02 Tw (cases of anosmia following Zicam use.) Tj ( CAC ) Tj 0 Tw ( ) Tj 1.02 Tw (30. Linscho-) Tj 0 -13.4 Td 1.41 Tw (ten had treated approximately 65 such patients, all of whom) Tj 0 -13.4 Td 1.61 Tw (complained of ) Tj (an `immediate, severe burning' immediately) Tj 0 -13.4 Td 3.57 Tw (following use of Zicam nasal gel, followed by a loss of) Tj 0 -13.4 Td .17 Tw (smell. None of the patients had fully recovered. ) Tj /F4 12 Tf 100 Tz (Id.) Tj /F2 12 Tf 100 Tz ( Jafek and) Tj 0 -13.4 Td .85 Tw (Hirsch ) Tj (have observed that the Zicam nasal spray does reach) Tj 0 -13.4 Td 3.6 Tw (the upper area of the nasal cavity where smell reception) Tj 0 -13.4 Td 1.2 Tw (occurs.) Tj 1 0 0 1 0 792 Tm /F2 11 Tf 100 Tz 428.5 -136.5 Td 1.1 Tw 0 Tc (14513) Tj -219.8475 0 Td (S) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (IRACUSANO) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( v. NECA-IBEW P) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (ENSION) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( F) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (UND) Tj /F2 11 Tf 100 Tz 0 Ts ET Q q 1 0 0 1 0 792 cm 0 G .5 w 156 -140.25 m 456 -140.25 l s Q endstream endobj 23 0 obj 3598 endobj 21 0 obj << /Type /Page /MediaBox [0 0 612 792] /Parent 10 0 R /Resources << /Font << /F1 6 0 R /F2 7 0 R /F4 9 0 R >> /ProcSet 1 0 R >> /Contents 22 0 R >> endobj %%Page: 6 6 25 0 obj << /Length 26 0 R >> stream q BT 0 Tr 0 g 1 0 0 1 156 643.5 Tm /F1 12 Tf 100 Tz 0 -8.4 Td 1.2 Tw 0 Tc (II.) Tj 9 Tw ( ) Tj 1.2 Tw (Allegations of Misleading Statements) Tj /F2 12 Tf 100 Tz 12 -26.7 Td 4.58 Tw (On October 22, 2003, Matrixx issued a press release) Tj -12 -13.5 Td .63 Tw (announcing that its net sales for the third quarter of 2003 had) Tj 0 -13.5 Td 2.07 Tw (increased by 163% over the third quarter of 2002. Johnson) Tj 0 -13.5 Td 1.2 Tw (was quoted in the press release as follows:) Tj 22 -26.7 Td .47 Tw (The Zicam brand is poised for growth in the upcom-) Tj 0 -13.5 Td 4.04 Tw (ing cough and cold season with improved retail) Tj 0 -13.5 Td .91 Tw (exposure by virtue of three [new] unique oral deliv-) Tj 0 -13.5 Td 1.78 Tw (ery forms of our Zicam Cold Remedy product, the) Tj 0 -13.5 Td 1.92 Tw (resumption of our television advertising campaigns) Tj 0 -13.5 Td .91 Tw (in recent weeks and the momentum from last year's) Tj 0 -13.5 Td 2.74 Tw (successful season. Additionally, our retail partners) Tj 0 -13.5 Td .33 Tw (have come to rely on the Zicam brand not only as an) Tj 0 -13.5 Td 1.32 Tw (efficacious product for their customers, but also for) Tj 0 -13.5 Td 2.88 Tw (the profitability that Zicam branded products pro-) Tj 0 -13.5 Td 1.2 Tw (duce for their respective bottom-lines.) Tj -22 -26.7 Td 3.83 Tw (Matrixx 10/22/2003 press release. Appellants alleged that) Tj 0 -13.5 Td .14 Tw (these statements were materially false and misleading because) Tj 0 -13.5 Td 1.83 Tw (they failed to disclose Appellees' awareness of the material) Tj 0 -13.5 Td 1.2 Tw (health risk that Zicam posed to consumers.) Tj 12 -26.7 Td 1.67 Tw (On October 23, 2003, Appellees held an earnings confer-) Tj -12 -13.5 Td .44 Tw (ence call, at which Johnson expressed his ) Tj (enthusiasm for the) Tj 0 -13.4 Td 1.57 Tw (most recently completed quarter) Tj ( and his ) Tj (optimis[m] about) Tj 0 -13.4 Td 1.2 Tw (the future.) Tj ( 10/23/03 Tr. at 1. Johnson explained that) Tj 22 -26.7 Td 4.51 Tw (we have very strong momentum going into the) Tj 0 -13.4 Td 1.28 Tw (upcoming cough and cold season. In addition, what) Tj 0 -13.4 Td 1.88 Tw (lies behind these results is a unique product in the) Tj 0 -13.4 Td 2.21 Tw (Zicam product line, a product that offers a unique) Tj 0 -13.4 Td 1.24 Tw (benefit, the ability for consumers to actually reduce) Tj 0 -13.4 Td 2.03 Tw (the duration and severity of the common cold, not) Tj 0 -13.4 Td 3.16 Tw (just mask the symptoms, and tremendous support) Tj 0 -13.4 Td 1.2 Tw (that we are receiving from our retail customers.) Tj 1 0 0 1 0 792 Tm /F2 11 Tf 100 Tz 156 -136.5 Td 1.1 Tw 0 Tc (14514) Tj 52.6525 0 Td (S) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (IRACUSANO) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( v. NECA-IBEW P) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (ENSION) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( F) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (UND) Tj /F2 11 Tf 100 Tz 0 Ts ET Q q 1 0 0 1 0 792 cm 0 G .5 w 156 -140.25 m 456 -140.25 l s Q endstream endobj 26 0 obj 3077 endobj 24 0 obj << /Type /Page /MediaBox [0 0 612 792] /Parent 10 0 R /Resources << /Font << /F1 6 0 R /F2 7 0 R /F4 9 0 R >> /ProcSet 1 0 R >> /Contents 25 0 R >> endobj %%Page: 7 7 28 0 obj << /Length 29 0 R >> stream q BT 0 Tr 0 g 1 0 0 1 156 643.5 Tm /F4 12 Tf 100 Tz 0 -8.4 Td .07 Tw 0 Tc (Id.) Tj /F2 12 Tf 100 Tz ( at 2. Johnson further expressed the expectation for the year) Tj 0 -13.4 Td .61 Tw (that ) Tj (our revenues will be up in excess of 50% and that earn-) Tj 0 -13.4 Td 1.2 Tw (ings per share for the full year will be in the 25-30 range.) Tj () Tj /F4 12 Tf 100 Tz 0 -13.4 Td 4.27 Tw (Id.) Tj /F2 12 Tf 100 Tz ( at 5. Hemelt stated that the growth ) Tj (was driven by) Tj 0 -13.4 Td 1.47 Tw (increased sales of all 10 of our Zicam products,) Tj ( explaining) Tj 0 -13.4 Td 1 Tw (that approximately one-third of the increase in sales was due) Tj 0 -13.3 Td .57 Tw (to ) Tj (three new Zicam oral cold remedy products,) Tj ( and that the) Tj 0 -13.3 Td 1.2 Tw (remainder of the increase ) Tj (was due to increased sales of our) Tj 0 -13.3 Td 2 Tw (other seven Zicam products.) Tj ( ) Tj /F4 12 Tf 100 Tz (Id.) Tj /F2 12 Tf 100 Tz ( at 4. Johnson and Hemelt) Tj 0 -13.3 Td 1.2 Tw (then answered questions.) Tj 12 -26.5 Td 1.5 Tw (At one point, they were asked to ) Tj (make any comment on) Tj -12 -13.3 Td .1 Tw (the litigation MTXX or its officers are involved in, or whether) Tj 0 -13.3 Td 1.73 Tw (or not there is any SEC [Securities and Exchange Commis-) Tj 0 -13.3 Td .14 Tw (sion] investigation.) Tj ( ) Tj /F4 12 Tf 100 Tz (Id.) Tj /F2 12 Tf 100 Tz ( at 17. They replied that ) Tj ([t]he officers) Tj 0 -13.3 Td 1.3 Tw (of this company are not involved in any litigation,) Tj ( and that) Tj 0 -13.3 Td 1.17 Tw (they were not aware of any SEC investigation.) Tj 4.9 Ts /F5 6 Tf 100 Tz (3) Tj 0 Ts /F2 12 Tf 100 Tz ( ) Tj /F4 12 Tf 100 Tz (Id.) Tj /F2 12 Tf 100 Tz ( at 17-18.) Tj 0 -13.3 Td 1.25 Tw (Johnson concluded by reiterating ) Tj (the optimism we have for) Tj 0 -13.3 Td 1.45 Tw (the future.) Tj ( ) Tj /F4 12 Tf 100 Tz (Id.) Tj /F2 12 Tf 100 Tz ( at 32. There was no mention of the anosmia) Tj 0 -13.3 Td 1.2 Tw (issue.) Tj 12 -26.5 Td .25 Tw (On November 12, 2003, Matrixx filed its Form 10-Q report) Tj -12 -13.3 Td .52 Tw (for the third quarter of 2003 with the SEC. The section of the) Tj 0 -13.3 Td 1.16 Tw (Form 10-Q that Appellants alleged was false and misleading) Tj 0 -13.3 Td 1.2 Tw (was this paragraph from the section on Risk Factors:) Tj /F4 12 Tf 100 Tz 22 -26.4 Td 1.08 Tw (We may incur significant costs resulting from prod-) Tj 0 -13.3 Td 1.2 Tw (uct liability claims) Tj /F2 12 Tf 100 Tz 0 -26.4 Td 1.41 Tw (We are subject to significant liability should use or) Tj 0 -13.3 Td .94 Tw (consumption of our products cause injury, illness or) Tj 0 -13.3 Td .33 Tw (death. Although we carry product liability insurance,) Tj /F2 10 Tf 100 Tz -12 -26.2 Td 4.1 Ts /F5 6 Tf 100 Tz 1.03 Tw (3) Tj 0 Ts /F2 10 Tf 100 Tz (A lawsuit was filed against Matrixx and Zicam on October 14, 2003,) Tj -10 -11.3 Td 1.1 Tw (in the United States District Court for the Western District of Michigan,) Tj 0 -11.3 Td 1.06 Tw (alleging that Zicam caused anosmia. Matrixx was served on October 23,) Tj 0 -11.3 Td .65 Tw (2003, the day of the earnings conference call. ) Tj /F4 10 Tf 100 Tz (Christensen v. Matrixx Ini-) Tj 0 -11.3 Td 1 Tw (tiatives, Inc.) Tj /F2 10 Tf 100 Tz (, No. 03-cv-0146, Docket No. 3. ) Tj ET Q q 1 0 0 1 156 643.5 cm 0 G .5 w 0 -432.45 m 300 -432.45 l s Q q BT 0 Tr 0 g 1 0 0 1 0 792 Tm /F2 11 Tf 100 Tz 428.5 -136.5 Td 1.1 Tw 0 Tc (14515) Tj -219.8475 0 Td (S) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (IRACUSANO) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( v. NECA-IBEW P) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (ENSION) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( F) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (UND) Tj /F2 11 Tf 100 Tz 0 Ts ET Q q 1 0 0 1 0 792 cm 0 G .5 w 156 -140.25 m 456 -140.25 l s Q endstream endobj 29 0 obj 3901 endobj 27 0 obj << /Type /Page /MediaBox [0 0 612 792] /Parent 30 0 R /Resources << /Font << /F1 6 0 R /F2 7 0 R /F4 9 0 R /F5 17 0 R >> /ProcSet 1 0 R >> /Contents 28 0 R >> endobj %%Page: 8 8 32 0 obj << /Length 33 0 R >> stream q BT 0 Tr 0 g 1 0 0 1 156 643.5 Tm /F2 12 Tf 100 Tz 22 -8.4 Td .93 Tw 0 Tc (there can be no assurance that our insurance will be) Tj 0 -13 Td 5.66 Tw (adequate to protect us against product liability) Tj 0 -13 Td .33 Tw (claims or that insurance coverage will continue to be) Tj 0 -13 Td 3.16 Tw (available on reasonable terms. A product liability) Tj 0 -13 Td .81 Tw (claim, even one without merit or for which we have) Tj 0 -13 Td .61 Tw (substantial coverage, could result in significant legal) Tj 0 -13.1 Td 2.06 Tw (defense costs, thereby increasing our expenses and) Tj 0 -13.1 Td .83 Tw (lowering our earnings. Such a claim, whether or not) Tj 0 -13.1 Td 2.53 Tw (proven to be valid, could have a material adverse) Tj 0 -13.1 Td .95 Tw (effect on our product branding and goodwill, result-) Tj 0 -13.1 Td 2.28 Tw (ing in reduced market acceptance of our products.) Tj 0 -13.1 Td 2.9 Tw (This in turn could materially adversely affect our) Tj 0 -13.1 Td 1.2 Tw (results of operations and financial condition.) Tj -22 -26 Td 3.94 Tw (CAC ) Tj 0 Tw ( ) Tj 3.94 Tw (35. Appellants alleged that these statements were) Tj 0 -13.1 Td 1.38 Tw (materially false and misleading because Appellees ) Tj (failed to) Tj 0 -13.1 Td 2.41 Tw (disclose that a lawsuit alleging that Zicam caused anosmia) Tj 0 -13.1 Td .3 Tw (had already been filed and, given the findings of the research-) Tj 0 -13.1 Td 2.6 Tw (ers at the University of Colorado it was highly likely that) Tj 0 -13.1 Td 1.2 Tw (additional suits would be filed in the future.) Tj ( ) Tj /F4 12 Tf 100 Tz (Id.) Tj /F2 12 Tf 100 Tz 12 -26 Td .2 Tw (Matrixx issued a press release on January 7, 2004, in which) Tj -12 -13.1 Td 2.22 Tw (it ) Tj (upwardly revised its guidance for fiscal year 2003. The) Tj 0 -13.1 Td .25 Tw (Company expects total 2003 revenues to grow by greater than) Tj 0 -13.1 Td 1.74 Tw (80 percent compared to 2002 and fully diluted earnings per) Tj 0 -13.1 Td 3.68 Tw (share to be in the range of $0.33 to $0.38.) Tj ( CAC ) Tj () Tj 0 Tw ( ) Tj 3.68 Tw (37.) Tj 0 -13.1 Td .41 Tw (Matrixx reported that ) Tj ([t]he increase in the guidance for 2003) Tj 0 -13.1 Td 2.83 Tw (reflects a much greater incidence of colds than previously) Tj 0 -13.1 Td 1.2 Tw (anticipated. ) Tj /F4 12 Tf 100 Tz (Id.) Tj /F2 12 Tf 100 Tz 12 -26 Td 5.74 Tw (On January 30, 2004, an article in the Dow Jones) Tj -12 -13.1 Td 2.75 Tw (Newswires reported that the FDA was ) Tj (looking into com-) Tj 0 -13.1 Td .88 Tw (plaints that an over-the-counter common-cold medicine man-) Tj 0 -13.1 Td 1.41 Tw (ufactured by a unit of Matrixx Initiatives Inc. \(MTXX\) may) Tj 0 -13.1 Td .84 Tw (be causing some users to lose their sense of smell.) Tj ( The arti-) Tj 0 -13.1 Td .2 Tw (cle stated that ) Tj ([t]he FDA's interest follows at least three law-) Tj 0 -13.1 Td 1.33 Tw (suits filed by individuals against Matrixx and Zicam LLC, a) Tj 0 -13.1 Td 1.18 Tw (wholly-owned subsidiary, by users of Zicam Cold Remedy.) Tj () Tj 1 0 0 1 0 792 Tm /F2 11 Tf 100 Tz 156 -136.5 Td 1.1 Tw 0 Tc (14516) Tj 52.6525 0 Td (S) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (IRACUSANO) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( v. NECA-IBEW P) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (ENSION) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( F) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (UND) Tj /F2 11 Tf 100 Tz 0 Ts ET Q q 1 0 0 1 0 792 cm 0 G .5 w 156 -140.25 m 456 -140.25 l s Q endstream endobj 33 0 obj 3534 endobj 31 0 obj << /Type /Page /MediaBox [0 0 612 792] /Parent 30 0 R /Resources << /Font << /F1 6 0 R /F2 7 0 R /F4 9 0 R >> /ProcSet 1 0 R >> /Contents 32 0 R >> endobj %%Page: 9 9 35 0 obj << /Length 36 0 R >> stream q BT 0 Tr 0 g 1 0 0 1 156 643.5 Tm /F2 12 Tf 100 Tz 0 -8.4 Td 3.1 Tw 0 Tc (Appellants alleged that Matrixx's stock declined after this) Tj 0 -13 Td .7 Tw (report, ) Tj (falling from $13.55 per share on January 30, 2004 to) Tj 0 -13 Td 1.2 Tw ($11.97 per share on February 2, 2004.) Tj ( CAC ) Tj 0 Tw ( ) Tj 1.2 Tw (41.) Tj 12 -26 Td 1.48 Tw (On February 2, 2004, Matrixx issued a press release, ) Tj (re-) Tj -12 -13 Td 2.7 Tw (spond[ing] to the Dow Jones `In The Money report: FDA) Tj 0 -13.1 Td 1.45 Tw (Looks Into Complaints About Zicam,' by Carol S. Remond,) Tj 0 -13.1 Td 2.04 Tw (alleging that the FDA is investigating consumer complaints) Tj 0 -13.1 Td 2.95 Tw (regarding intranasal zinc gluconate-induced loss of smell.) Tj () Tj 0 -13.1 Td 1.2 Tw (Matrixx 2/2/2004 press release. The press release stated:) Tj 22 -26 Td 8.26 Tw (Matrixx Initiatives, Inc., the manufacturer of) Tj 0 -13.1 Td 2.71 Tw (Zicam\(R\) Cold Remedy, is not aware of an FDA) Tj 0 -13.1 Td 5.95 Tw (inquiry into the safety of our intranasal zinc-) Tj 0 -13.1 Td 1.2 Tw (gluconate products . . . . ) Tj 0 -26 Td 1.33 Tw (All Zicam products are manufactured and marketed) Tj 0 -13.1 Td .66 Tw (according to FDA guidelines for homeopathic medi-) Tj 0 -13.1 Td .37 Tw (cine. Our primary concern is the health and safety of) Tj 0 -13.1 Td 1.85 Tw (our customers and the distribution of factual infor-) Tj 0 -13.1 Td 2.26 Tw (mation about our products. Matrixx believes state-) Tj 0 -13.1 Td 1.21 Tw (ments alleging that intranasal Zicam products cause) Tj 0 -13.1 Td 2.66 Tw (anosmia \(loss of smell\) are completely unfounded) Tj 0 -13.1 Td 1.2 Tw (and misleading.) Tj 0 -26 Td 2.16 Tw (In no clinical trial of intranasal zinc gluconate gel) Tj 0 -13.1 Td 2.77 Tw (products has there been a single report of lost or) Tj 0 -13.1 Td 6.26 Tw (diminished olfactory function \(sense of smell\).) Tj 0 -13.1 Td .87 Tw (Rather, the safety and efficacy of zinc gluconate for) Tj 0 -13.1 Td 2.42 Tw (the treatment of symptoms related to the common) Tj 0 -13.1 Td .47 Tw (cold have been well established in two double-blind,) Tj 0 -13.1 Td 5.5 Tw (placebo-controlled, randomized clinical trials. In) Tj 0 -13.1 Td .6 Tw (fact, in neither study were there any reports of anos-) Tj 0 -13.1 Td .58 Tw (mia related to the use of this compound. The overall) Tj 0 -13.1 Td .24 Tw (incidence of adverse events associated with zinc glu-) Tj 0 -13.1 Td 1.42 Tw (conate was extremely low, with no statistically sig-) Tj 0 -13.1 Td 2.11 Tw (nificant difference between the adverse event rates) Tj 0 -13.1 Td 1.2 Tw (for the treated and placebo subsets.) Tj 1 0 0 1 0 792 Tm /F2 11 Tf 100 Tz 428.5 -136.5 Td 1.1 Tw 0 Tc (14517) Tj -219.8475 0 Td (S) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (IRACUSANO) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( v. NECA-IBEW P) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (ENSION) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( F) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (UND) Tj /F2 11 Tf 100 Tz 0 Ts ET Q q 1 0 0 1 0 792 cm 0 G .5 w 156 -140.25 m 456 -140.25 l s Q endstream endobj 36 0 obj 3156 endobj 34 0 obj << /Type /Page /MediaBox [0 0 612 792] /Parent 30 0 R /Resources << /Font << /F1 6 0 R /F2 7 0 R >> /ProcSet 1 0 R >> /Contents 35 0 R >> endobj %%Page: 10 10 38 0 obj << /Length 39 0 R >> stream q BT 0 Tr 0 g 1 0 0 1 156 643.5 Tm /F2 12 Tf 100 Tz 22 -8.4 Td 3.43 Tw 0 Tc (A multitude of environmental and biologic influ-) Tj 0 -13 Td 1.33 Tw (ences are known to affect the sense of smell. Chief) Tj 0 -13 Td 2.33 Tw (among them is the common cold. As a result, the) Tj 0 -13 Td 1.37 Tw (population most likely to use cold remedy products) Tj 0 -13 Td 1.9 Tw (is already at increased risk of developing anosmia.) Tj 0 -13 Td 6.06 Tw (Other common causes of olfactory dysfunction) Tj 0 -13 Td .57 Tw (include age, nasal and sinus infections, head trauma,) Tj 0 -13 Td .65 Tw (anatomical obstructions, and environmental irritants.) Tj 0 -26 Td 1.94 Tw (The circumstances surrounding the development of) Tj 0 -13.1 Td 2.45 Tw (Ms. Remond's column are extremely suspect. The) Tj 0 -13.1 Td 2.11 Tw (article appeared online in public financial message) Tj 0 -13.1 Td .98 Tw (boards almost immediately following its availability) Tj 0 -13.1 Td 10.88 Tw (through the Dow Jones `In The Money') Tj 0 -13.1 Td .67 Tw (subscription-only service. At least one of these mes-) Tj 0 -13.1 Td 1.25 Tw (sage board postings was made by a registered user-) Tj 0 -13.1 Td 7.38 Tw (name frequently used by Floyd Schneider, a) Tj 0 -13.1 Td 3.11 Tw (defendant currently being sued for defamation by) Tj 0 -13.1 Td .37 Tw (Matrixx Initiatives. From at least August 2001 to the) Tj 0 -13.1 Td 1.71 Tw (present, Schneider has posted false and defamatory) Tj 0 -13.1 Td 2.33 Tw (statements about Matrixx on various Internet mes-) Tj 0 -13.1 Td .78 Tw (sage boards using a variety of anonymous aliases. It) Tj 0 -13.1 Td 2.66 Tw (has come to our attention that Schneider has also) Tj 0 -13.1 Td 4 Tw (attempted to interfere with Matrixx' business by) Tj 0 -13.1 Td 1.2 Tw (contacting our retail customers.) Tj 0 -26 Td .47 Tw (Ms. Remond's article appears on today's Dow Jones) Tj 0 -13.1 Td .66 Tw (Newswire the very day that Matrixx Initiatives is) Tj 0 -13.1 Td 2.18 Tw (deposing Schneider. We believe that the timing of) Tj 0 -13.1 Td 2.04 Tw (this article was manipulated by Schneider to inter-) Tj 0 -13.1 Td 4.61 Tw (rupt the deposition process. We know that Ms.) Tj 0 -13.1 Td 0 Tw (Remond and Schneider were in close communication) Tj 0 -13.1 Td .28 Tw (during the development of Ms. Remond's article and) Tj 0 -13.1 Td .55 Tw (even discussed the disclosure statement detailing the) Tj 0 -13.1 Td 1.87 Tw (basis for our suit against Schneider, which has not) Tj 0 -13.1 Td 2.61 Tw (yet been made public. Therefore, it is particularly) Tj 0 -13.1 Td .65 Tw (troubling that Ms. Remond neglected to mention the) Tj 0 -13.1 Td 1.41 Tw (defamation action or that Schneider was one of her) Tj 1 0 0 1 0 792 Tm /F2 11 Tf 100 Tz 156 -136.5 Td 1.1 Tw 0 Tc (14518) Tj 52.6525 0 Td (S) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (IRACUSANO) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( v. NECA-IBEW P) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (ENSION) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( F) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (UND) Tj /F2 11 Tf 100 Tz 0 Ts ET Q q 1 0 0 1 0 792 cm 0 G .5 w 156 -140.25 m 456 -140.25 l s Q endstream endobj 39 0 obj 3206 endobj 37 0 obj << /Type /Page /MediaBox [0 0 612 792] /Parent 30 0 R /Resources << /Font << /F1 6 0 R /F2 7 0 R >> /ProcSet 1 0 R >> /Contents 38 0 R >> endobj %%Page: 11 11 41 0 obj << /Length 42 0 R >> stream q BT 0 Tr 0 g 1 0 0 1 156 643.5 Tm /F2 12 Tf 100 Tz 22 -8.4 Td .2 Tw 0 Tc (chief sources of information. We consider her failure) Tj 0 -13.5 Td .4 Tw (to mention these facts to be a significant omission in) Tj 0 -13.5 Td 1.2 Tw (fair and balanced reporting.) Tj 0 -26.7 Td .9 Tw (Matrixx Initiatives would like to underscore that we) Tj 0 -13.5 Td 7.92 Tw (intend to vigorously pursue those individuals) Tj 0 -13.5 Td 3 Tw (involved in any effort to improperly discredit the) Tj 0 -13.5 Td .76 Tw (company and its products. Furthermore, we strongly) Tj 0 -13.5 Td 3.07 Tw (urge Dow Jones to open its own investigation to) Tj 0 -13.5 Td 6.46 Tw (determine whether Dow Jones' credibility was) Tj 0 -13.5 Td .58 Tw (undermined by the use of copyrighted material in an) Tj 0 -13.5 Td 1.44 Tw (attempt to do further harm to the value and reputa-) Tj 0 -13.5 Td 1.2 Tw (tion of Matrixx Initiatives and its products.) Tj -22 -26.7 Td 5.83 Tw (Matrixx 2/2/2004 press release. Appellants alleged that) Tj 0 -13.5 Td 1.28 Tw (Matrixx's ) Tj (vigorous, but baseless, denials had their intended) Tj 0 -13.5 Td 2.34 Tw (effect: the stock price rose, closing at $13.40 per share on) Tj 0 -13.5 Td 1.2 Tw (February 3, 2004.) Tj ( CAC ) Tj 0 Tw ( ) Tj 1.2 Tw (41.) Tj 12 -26.7 Td 1.82 Tw (On February 6, 2004, the television show ) Tj /F4 12 Tf 100 Tz (Good Morning) Tj -12 -13.5 Td 2.33 Tw (America) Tj /F2 12 Tf 100 Tz ( did a report on Matrixx's zinc gluconate products) Tj 0 -13.5 Td 1.21 Tw (and anosmia. Reporter John Ferrugia reported that Jafek had) Tj 0 -13.5 Td .48 Tw (treated ) Tj () Tj 0 Tw ( ) Tj .48 Tw (`more than a dozen patients') Tj 0 Tw ( ) Tj .48 Tw ( and that four lawsuits) Tj 0 -13.4 Td 2.5 Tw (had been filed, and others were ) Tj () Tj 0 Tw ( ) Tj 2.5 Tw (`being prepared.') Tj 0 Tw ( ) Tj 2.5 Tw ( ) Tj (CAC) Tj 0 -13.4 Td 3.7 Tw () Tj 0 Tw ( ) Tj 3.7 Tw (42. Appellants alleged that, ) Tj ([i]n response to the ) Tj /F4 12 Tf 100 Tz (Good) Tj 0 -13.4 Td .27 Tw (Morning America) Tj /F2 12 Tf 100 Tz ( segment . . . , the price of Matrixx common) Tj 0 -13.4 Td 1.25 Tw (stock plummeted, falling from $13.05 per share on February) Tj 0 -13.4 Td 1.13 Tw (5, 2004, to close at $9.94 per share on February 6 a one-) Tj 0 -13.4 Td .25 Tw (day drop of 23.8% on unusually heavy trading volume.) Tj ( CAC) Tj 0 -13.4 Td 1.2 Tw () Tj 0 Tw ( ) Tj 1.2 Tw (43. ) Tj 12 -26.7 Td .53 Tw (On February 6, 2004, Matrixx issued another press release,) Tj -12 -13.4 Td 2.71 Tw (describing the reports linking anosmia with zinc gluconate) Tj 0 -13.4 Td 2.95 Tw (intranasal gels as ) Tj (completely unfounded and misleading.) Tj () Tj 0 -13.4 Td 1.62 Tw (Matrixx 2/6/2004 press release. Matrixx ) Tj (assure[d] our con-) Tj 0 -13.4 Td 2.81 Tw (sumers that Zicam Cold Remedy intranasal zinc gluconate) Tj 0 -13.4 Td 1.95 Tw (products are manufactured and marketed according to Food) Tj 1 0 0 1 0 792 Tm /F2 11 Tf 100 Tz 428.5 -136.5 Td 1.1 Tw 0 Tc (14519) Tj -219.8475 0 Td (S) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (IRACUSANO) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( v. NECA-IBEW P) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (ENSION) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( F) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (UND) Tj /F2 11 Tf 100 Tz 0 Ts ET Q q 1 0 0 1 0 792 cm 0 G .5 w 156 -140.25 m 456 -140.25 l s Q endstream endobj 42 0 obj 3463 endobj 40 0 obj << /Type /Page /MediaBox [0 0 612 792] /Parent 30 0 R /Resources << /Font << /F1 6 0 R /F2 7 0 R /F4 9 0 R >> /ProcSet 1 0 R >> /Contents 41 0 R >> endobj %%Page: 12 12 44 0 obj << /Length 45 0 R >> stream q BT 0 Tr 0 g 1 0 0 1 156 643.5 Tm /F2 12 Tf 100 Tz 0 -8.4 Td 2.33 Tw 0 Tc (and Drug Administration guidelines for homeopathic medi-) Tj 0 -13 Td 1.2 Tw (cine. ) Tj /F4 12 Tf 100 Tz (Id.) Tj /F2 12 Tf 100 Tz ( Matrixx further asserted as follows:) Tj 22 -26 Td 2.16 Tw (In no clinical trial of intranasal zinc gluconate gel) Tj 0 -13.1 Td 2.77 Tw (products has there been a single report of lost or) Tj 0 -13.1 Td 6.26 Tw (diminished olfactory function \(sense of smell\).) Tj 0 -13.1 Td .87 Tw (Rather, the safety and efficacy of zinc gluconate for) Tj 0 -13.1 Td 2.42 Tw (the treatment of symptoms related to the common) Tj 0 -13.1 Td .47 Tw (cold have been well established in two double-blind,) Tj 0 -13.1 Td 5.5 Tw (placebo-controlled, randomized clinical trials. In) Tj 0 -13.1 Td .6 Tw (fact, in neither study were there any reports of anos-) Tj 0 -13.1 Td .58 Tw (mia related to the use of this compound. The overall) Tj 0 -13.1 Td .24 Tw (incidence of adverse events associated with zinc glu-) Tj 0 -13.1 Td 1.42 Tw (conate was extremely low, with no statistically sig-) Tj 0 -13.1 Td 2.11 Tw (nificant difference between the adverse event rates) Tj 0 -13.1 Td 1.2 Tw (for the treated and placebo subsets.) Tj 0 -26 Td 3.43 Tw (A multitude of environmental and biologic influ-) Tj 0 -13.1 Td 1.33 Tw (ences are known to affect the sense of smell. Chief) Tj 0 -13.1 Td 2.33 Tw (among them is the common cold. As a result, the) Tj 0 -13.1 Td 1.37 Tw (population most likely to use cold remedy products) Tj 0 -13.1 Td 1.9 Tw (is already at increased risk of developing anosmia.) Tj 0 -13.1 Td 1.2 Tw (. . . ) Tj 0 -26 Td .33 Tw (A few researchers have attempted to link nasal prod-) Tj 0 -13.1 Td 1.53 Tw (ucts containing zinc to the onset of anosmia. How-) Tj 0 -13.1 Td 3.03 Tw (ever, this hypothesis is based on data from polio) Tj 0 -13.1 Td 1 Tw (studies conducted in the 1930s using a concentrated) Tj 0 -13.1 Td .52 Tw (zinc sulfate solution. Current nasal products, such as) Tj 0 -13.1 Td 1.11 Tw (Zicam Cold Remedy, contain zinc gluconate, which) Tj 0 -13.1 Td 1.2 Tw (is an entirely different compound.) Tj -22 -26 Td (Matrixx 2/6/2004 press release) Tj (.) Tj 12 -26 Td .2 Tw (On February 19, 2004, Appellees filed a Form 8-K with the) Tj -12 -13.1 Td .17 Tw (SEC, in which Matrixx stated that it had ) Tj (convened a two-day) Tj 0 -13.1 Td 1.5 Tw (meeting of physicians and scientists to review current infor-) Tj 0 -13.1 Td 1.46 Tw (mation on smell disorders.) Tj ( CAC ) Tj 0 Tw ( ) Tj 1.46 Tw (45. The form stated that) Tj 1 0 0 1 0 792 Tm /F2 11 Tf 100 Tz 156 -136.5 Td 1.1 Tw 0 Tc (14520) Tj 52.6525 0 Td (S) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (IRACUSANO) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( v. NECA-IBEW P) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (ENSION) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( F) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (UND) Tj /F2 11 Tf 100 Tz 0 Ts ET Q q 1 0 0 1 0 792 cm 0 G .5 w 156 -140.25 m 456 -140.25 l s Q endstream endobj 45 0 obj 3080 endobj 43 0 obj << /Type /Page /MediaBox [0 0 612 792] /Parent 30 0 R /Resources << /Font << /F1 6 0 R /F2 7 0 R /F4 9 0 R >> /ProcSet 1 0 R >> /Contents 44 0 R >> endobj %%Page: 13 13 47 0 obj << /Length 48 0 R >> stream q BT 0 Tr 0 g 1 0 0 1 156 643.5 Tm /F2 12 Tf 100 Tz 0 -8.4 Td 1 Tw 0 Tc (the meeting was in response to the September 20, 2003, pre-) Tj 0 -13.5 Td 1.12 Tw (sentation to the American Rhinologic Society. ) Tj (The form fur-) Tj 0 -13.5 Td 4.27 Tw (ther stated that, ) Tj ([i]n the opinion of the panel, there is) Tj 0 -13.5 Td 2.83 Tw (insufficient scientific evidence at this time to determine if) Tj 0 -13.5 Td 2.58 Tw (zinc gluconate, when used as recommended, affects a per-) Tj 0 -13.5 Td 1.2 Tw (son's ability to smell.) Tj () Tj 12 -26.7 Td 3.25 Tw (On March 4, 2004, Ferrugia, the reporter on the ) Tj /F4 12 Tf 100 Tz (Good) Tj -12 -13.5 Td 4.8 Tw (Morning America) Tj /F2 12 Tf 100 Tz ( segment, reported on TheDenverChan-) Tj 0 -13.5 Td .44 Tw (nel.com that Matrixx ) Tj (now admit[ted] that they don't know if) Tj 0 -13.5 Td .23 Tw (their nasal gel could cause loss of smell.) Tj ( ) Tj (CAC ) Tj 0 Tw ( ) Tj .23 Tw (47. The arti-) Tj 0 -13.5 Td 4.66 Tw (cle stated that ) Tj ([t]he stunning information came after a) Tj 0 -13.5 Td 1.57 Tw (7NEWS investigation found that some consumers who have) Tj 0 -13.5 Td .93 Tw (used Zicam report the loss of smell.) Tj ( ) Tj /F4 12 Tf 100 Tz (Id.) Tj /F2 12 Tf 100 Tz ( The article reported) Tj 0 -13.5 Td 1.28 Tw (that Matrixx initially ) Tj (told us its studies showed the product) Tj 0 -13.5 Td .3 Tw ([was] safe,) Tj ( but that it would begin studies to determine if the) Tj 0 -13.5 Td .93 Tw (product could cause the loss of smell. ) Tj /F4 12 Tf 100 Tz (Id.) Tj /F2 12 Tf 100 Tz ( \(alteration in origi-) Tj 0 -13.5 Td 1.2 Tw (nal\). The article further provided as follows:) Tj 22 -26.6 Td 3.57 Tw (Doctors at the University of Colorado Taste and) Tj 0 -13.4 Td 1.47 Tw (Smell Clinic have an increasing number of patients) Tj 0 -13.4 Td 2.47 Tw (who say they lost their sense of smell after using) Tj 0 -13.4 Td .66 Tw (Zicam intranasal gel, which contains zinc gluconate.) Tj 0 -13.4 Td 3.42 Tw (Dr. Bruce Jafek has been documenting the cases) Tj 0 -13.4 Td .05 Tw (from around the country, and there have been several) Tj 0 -13.4 Td .03 Tw (lawsuits in at least five states. All along, Matrixx Ini-) Tj 0 -13.4 Td 2.08 Tw (tiatives, the maker of Zicam, said the product was) Tj 0 -13.4 Td 1.17 Tw (safe. But now it admits there are no studies dealing) Tj 0 -13.4 Td 4 Tw (with the issue. In a filing to the Securities and) Tj 0 -13.4 Td 4.06 Tw (Exchange Commission on issues affecting stock-) Tj 0 -13.4 Td 2.83 Tw (holders, Matrixx now discloses: ) Tj (There is insuffi-) Tj 0 -13.4 Td 4.25 Tw (cient evidence at this time to determine if zinc) Tj 0 -13.4 Td 3.66 Tw (gluconate, when used as recommended, affects a) Tj 0 -13.4 Td 0 Tw (person's ability to smell.) Tj ( What's more, after our ini-) Tj 0 -13.4 Td 3.05 Tw (tial investigation, dozens of consumers have filed) Tj 0 -13.4 Td 1.16 Tw (complaints with the Food and Drug Administration.) Tj 0 -13.4 Td .28 Tw (In response, the company formed a medical advisory) Tj 1 0 0 1 0 792 Tm /F2 11 Tf 100 Tz 428.5 -136.5 Td 1.1 Tw 0 Tc (14521) Tj -219.8475 0 Td (S) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (IRACUSANO) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( v. NECA-IBEW P) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (ENSION) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( F) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (UND) Tj /F2 11 Tf 100 Tz 0 Ts ET Q q 1 0 0 1 0 792 cm 0 G .5 w 156 -140.25 m 456 -140.25 l s Q endstream endobj 48 0 obj 3559 endobj 46 0 obj << /Type /Page /MediaBox [0 0 612 792] /Parent 49 0 R /Resources << /Font << /F1 6 0 R /F2 7 0 R /F4 9 0 R >> /ProcSet 1 0 R >> /Contents 47 0 R >> endobj %%Page: 14 14 51 0 obj << /Length 52 0 R >> stream q BT 0 Tr 0 g 1 0 0 1 156 643.5 Tm /F2 12 Tf 100 Tz 22 -8.4 Td 4.37 Tw 0 Tc (panel in February. It says it will now conduct:) Tj 0 -13 Td .96 Tw (. . . animal and human studies to further character-) Tj 0 -13 Td .26 Tw (ize these post-marketing complaints.) Tj ( Study findings) Tj 0 -13 Td .66 Tw (are expected to be available in 12 months. ) Tj (It seems) Tj 0 -13 Td 3.82 Tw (to me that those studies should have been done) Tj 0 -13.1 Td 3.28 Tw (before they put the product on the market,) Tj ( said) Tj 0 -13.1 Td 1.2 Tw (Jafek.) Tj /F4 12 Tf 100 Tz -22 -26 Td (Id.) Tj /F2 12 Tf 100 Tz ( ) Tj 12 -26 Td 1.13 Tw (On March 19, 2004, Matrixx filed its Form 10-K with the) Tj -12 -13.1 Td .51 Tw (SEC, stating that ) Tj (numerous suits alleging that its Zicam pro-) Tj 0 -13.1 Td 2.21 Tw (duct\(s\) caused anosmia had been filed.) Tj ( CAC ) Tj () Tj 0 Tw ( ) Tj 2.21 Tw (48. ) Tj (As of) Tj 0 -13.1 Td .05 Tw (December 31, 2003, suits involving three users of the Zicam) Tj 0 -13.1 Td 0 Tw (Cold Remedy nasal gel products had been filed in various fed-) Tj 0 -13.1 Td .8 Tw (eral and state courts.) Tj ( ) Tj /F4 12 Tf 100 Tz (Id.) Tj /F2 12 Tf 100 Tz ( Appellants stated that, ) Tj ([a]ccording) Tj 0 -13.1 Td 1.17 Tw (to Matrixx's own SEC filings, from late 2003 through Octo-) Tj 0 -13.1 Td 1.36 Tw (ber 2004 Matrixx has been sued by approximately 284 indi-) Tj 0 -13.1 Td 2.41 Tw (viduals in 19 different lawsuits alleging that Zicam caused) Tj 0 -13.1 Td .03 Tw (damage to their sense of smell,) Tj ( and included in the complaint) Tj 0 -13.1 Td 1.54 Tw (a table detailing the lawsuits. ) Tj (CAC ) Tj 0 Tw ( ) Tj 1.54 Tw (49. The table included) Tj 0 -13.1 Td .18 Tw (suits filed on October 14, 2003, December 8, 2003, December) Tj 0 -13.1 Td .09 Tw (18, 2003, and January 23, 2004, as well as numerous suits fol-) Tj 0 -13.1 Td 1.2 Tw (lowing the close of the class period.) Tj 12 -26 Td .88 Tw (Appellants alleged that the financial information contained) Tj -12 -13.1 Td 2.25 Tw (in Matrixx's Form 10-Q filed on November 12, 2003, was) Tj 0 -13.1 Td 1.52 Tw (false and misleading and violated SEC rules and the Gener-) Tj 0 -13.1 Td 1.14 Tw (ally Accepted Accounting Principles \() Tj (GAAP) Tj (\) promulgated) Tj 0 -13.1 Td 4.38 Tw (by the Financial Accounting Standards Board \() Tj (FASB) Tj (\).) Tj 0 -13.1 Td 1.7 Tw (Appellants asserted that, at the time Matrixx filed the Form) Tj 0 -13.1 Td 1.2 Tw (10-Q, ) Tj 22 -26.1 Td 3.32 Tw (Matrixx should have disclosed, if not provided a) Tj 0 -13.1 Td 1.9 Tw (reserve for, a potential contingency that had arisen) Tj 0 -13.1 Td .57 Tw (related to safety issues concerning its products. Dur-) Tj 0 -13.1 Td 1.95 Tw (ing the Class Period, Matrixx did not disclose that) Tj 0 -13.1 Td .18 Tw (several lawsuits had been filed against the Company,) Tj 1 0 0 1 0 792 Tm /F2 11 Tf 100 Tz 156 -136.5 Td 1.1 Tw 0 Tc (14522) Tj 52.6525 0 Td (S) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (IRACUSANO) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( v. NECA-IBEW P) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (ENSION) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( F) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (UND) Tj /F2 11 Tf 100 Tz 0 Ts ET Q q 1 0 0 1 0 792 cm 0 G .5 w 156 -140.25 m 456 -140.25 l s Q endstream endobj 52 0 obj 3382 endobj 50 0 obj << /Type /Page /MediaBox [0 0 612 792] /Parent 49 0 R /Resources << /Font << /F1 6 0 R /F2 7 0 R /F4 9 0 R >> /ProcSet 1 0 R >> /Contents 51 0 R >> endobj %%Page: 15 15 54 0 obj << /Length 55 0 R >> stream q BT 0 Tr 0 g 1 0 0 1 156 643.5 Tm /F2 12 Tf 100 Tz 22 -8.4 Td 1.47 Tw 0 Tc (including one prior to the start of the Class Period,) Tj 0 -13 Td 3.26 Tw (alleging that the Company's zinc gluconate-based) Tj 0 -13 Td 1.95 Tw (products had caused plaintiffs to suffer from anos-) Tj 0 -13 Td 1.28 Tw (mia and that anecdotal evidence had surfaced ques-) Tj 0 -13.1 Td 1.94 Tw (tioning the safety of the Company's mainstay cold) Tj 0 -13.1 Td .28 Tw (medication. The failure to disclose these known con-) Tj 0 -13.1 Td 1.2 Tw (tingencies violated GAAP.) Tj -22 -26 Td 3.9 Tw (CAC ) Tj 0 Tw ( ) Tj 3.9 Tw (55. Appellants listed the FASB rules violated by) Tj 0 -13.1 Td 4.32 Tw (Matrixx's Form 10-Q and asserted that ) Tj (the undisclosed) Tj 0 -13.1 Td .24 Tw (adverse information concealed by defendants during the Class) Tj 0 -13.1 Td .1 Tw (Period is the type of information which, because of SEC regu-) Tj 0 -13.1 Td 1.16 Tw (lations, . . . is expected by investors . . . to be disclosed and) Tj 0 -13.1 Td .51 Tw (is known by corporate officials . . . to be the type of informa-) Tj 0 -13.1 Td 2.1 Tw (tion which is expected to be and must be disclosed.) Tj ( ) Tj (CAC) Tj 0 -13.1 Td 1.2 Tw () Tj 0 Tw ( ) Tj 1.2 Tw (56-57.) Tj 12 -26 Td .05 Tw (Appellants alleged that, ) Tj ([a]s a result of defendants' materi-) Tj -12 -13.1 Td 2.25 Tw (ally false and misleading statements and failure to disclose) Tj 0 -13.1 Td 5.6 Tw (adverse information regarding Zicam, Matrixx securities) Tj 0 -13.1 Td 1.28 Tw (traded at artificially inflated prices during the Class Period.) Tj () Tj 0 -13.1 Td 1.93 Tw (CAC ) Tj () Tj 0 Tw ( ) Tj 1.93 Tw (58. Appellants also alleged that, ) Tj ([d]uring the Class) Tj 0 -13.1 Td 3.88 Tw (Period, defendants materially misled the investing public,) Tj 0 -13.1 Td .52 Tw (thereby inflating the price of Matrixx common stock, by pub-) Tj 0 -13.1 Td 1.23 Tw (licly issuing false and misleading statements and omitting to) Tj 0 -13.1 Td .85 Tw (disclose material adverse facts regarding Zicam, necessary to) Tj 0 -13.1 Td .6 Tw (make defendants' statements, as set forth herein not false and) Tj 0 -13.1 Td 1.2 Tw (misleading.) Tj ( CAC ) Tj () Tj 0 Tw ( ) Tj 1.2 Tw (59.) Tj 12 -26 Td .07 Tw (In the section of the complaint entitled ) Tj (Additional Scienter) Tj -12 -13.1 Td 1.2 Tw (Allegations,) Tj ( Appellants alleged as follows:) Tj 22 -26 Td 2 Tw ([D]efendants acted with scienter in that defendants) Tj 0 -13.1 Td .51 Tw (knew that the public statements or documents issued) Tj 0 -13.1 Td 1.83 Tw (or disseminated in the name of the Company were) Tj 0 -13.1 Td 4.55 Tw (materially false and misleading; knew that such) Tj 0 -13.1 Td .04 Tw (statements or documents would be issued or dissemi-) Tj 0 -13.1 Td 3.08 Tw (nated to the investing public; and knowingly and) Tj 1 0 0 1 0 792 Tm /F2 11 Tf 100 Tz 428.5 -136.5 Td 1.1 Tw 0 Tc (14523) Tj -219.8475 0 Td (S) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (IRACUSANO) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( v. NECA-IBEW P) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (ENSION) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( F) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (UND) Tj /F2 11 Tf 100 Tz 0 Ts ET Q q 1 0 0 1 0 792 cm 0 G .5 w 156 -140.25 m 456 -140.25 l s Q endstream endobj 55 0 obj 3373 endobj 53 0 obj << /Type /Page /MediaBox [0 0 612 792] /Parent 49 0 R /Resources << /Font << /F1 6 0 R /F2 7 0 R >> /ProcSet 1 0 R >> /Contents 54 0 R >> endobj %%Page: 16 16 57 0 obj << /Length 58 0 R >> stream q BT 0 Tr 0 g 1 0 0 1 156 643.5 Tm /F2 12 Tf 100 Tz 22 -8.4 Td 1.88 Tw 0 Tc (substantially participated or acquiesced in the issu-) Tj 0 -13.6 Td 2.32 Tw (ance or dissemination of such statements or docu-) Tj 0 -13.6 Td 1.1 Tw (ments as primary violations of the federal securities) Tj 0 -13.6 Td 1.17 Tw (laws. As set forth elsewhere herein in detail, defen-) Tj 0 -13.6 Td 5.04 Tw (dants, by virtue of their receipt of information) Tj 0 -13.6 Td .28 Tw (reflecting the true facts regarding Matrixx, their con-) Tj 0 -13.6 Td 2 Tw (trol over, and/or receipt and/or modification of the) Tj 0 -13.6 Td 2.32 Tw (Company's alleged materially misleading misstate-) Tj 0 -13.6 Td 2.66 Tw (ments and/or their associations with the Company) Tj 0 -13.6 Td 2.21 Tw (which made them privy to confidential proprietary) Tj 0 -13.6 Td 1.74 Tw (information concerning Matrixx, participated in the) Tj 0 -13.6 Td 1.2 Tw (fraudulent scheme alleged herein.) Tj 0 -27 Td 1.67 Tw (Defendants were aware since at least September of) Tj 0 -13.6 Td 2.67 Tw (2003, that numerous users of their Zicam product) Tj 0 -13.6 Td 1.1 Tw (had experienced a rare condition known as anosmia) Tj 0 -13.6 Td .87 Tw (or loss of smell. Findings of post treatment anosmia) Tj 0 -13.6 Td 2.03 Tw (were reported by Dr. Bruce Jafek, Miriam R. Lin-) Tj 0 -13.6 Td 1.28 Tw (schoten and Bruce W. Morrow of the University of) Tj 0 -13.6 Td .05 Tw (Colorado School of Medicine, Department of Otolar-) Tj 0 -13.6 Td 2.04 Tw (yngology at a medical conference in September of) Tj 0 -13.6 Td .23 Tw (2003. At the time, Dr. Jafek had reported 10 cases of) Tj 0 -13.6 Td 1.77 Tw (anosmia after Zicam use. As of April of 2004, Dr.) Tj 0 -13.5 Td 2.12 Tw (Jafek had evaluated over 100 such cases. On Sep-) Tj 0 -13.5 Td .92 Tw (tember 12, 2003, over one month before the start of) Tj 0 -13.5 Td 0 Tw (the Class Period, Matrixx informed Dr. Jafek that ) Tj (as) Tj 0 -13.5 Td 1.14 Tw (a legal matter) Tj ( he did ) Tj (not have their permission to) Tj 0 -13.5 Td 1.75 Tw (use their company name or product trademarks) Tj ( in) Tj 0 -13.5 Td .83 Tw (the poster reporting Dr. Jafek's research. In order to) Tj 0 -13.5 Td .32 Tw (avoid threatened legal action from the Company, Dr.) Tj 0 -13.5 Td 3.48 Tw (Jafek deleted any reference to Zicam or Matrixx) Tj 0 -13.5 Td .11 Tw (from the poster which he used to present his research) Tj 0 -13.5 Td 1.2 Tw (at a medical conference.) Tj 4.9 Ts /F5 6 Tf 100 Tz .5 Tw (4) Tj 0 Ts /F2 12 Tf 100 Tz 1.2 Tw ( ) Tj /F2 10 Tf 100 Tz -12 -26.6 Td 4.1 Ts /F5 6 Tf 100 Tz .07 Tw (4) Tj 0 Ts /F2 10 Tf 100 Tz (We do not disturb the district court's order granting, in part, Appellees') Tj -10 -11.5 Td 0 Tw (motion to strike portions of the CAC related to research published after the) Tj 0 -11.5 Td 1 Tw (close of the class period. ) Tj ET Q q 1 0 0 1 156 643.5 cm 0 G .5 w 0 -454.45 m 300 -454.45 l s Q q BT 0 Tr 0 g 1 0 0 1 0 792 Tm /F2 11 Tf 100 Tz 156 -136.5 Td 1.1 Tw 0 Tc (14524) Tj 52.6525 0 Td (S) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (IRACUSANO) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( v. NECA-IBEW P) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (ENSION) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( F) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (UND) Tj /F2 11 Tf 100 Tz 0 Ts ET Q q 1 0 0 1 0 792 cm 0 G .5 w 156 -140.25 m 456 -140.25 l s Q endstream endobj 58 0 obj 3457 endobj 56 0 obj << /Type /Page /MediaBox [0 0 612 792] /Parent 49 0 R /Resources << /Font << /F1 6 0 R /F2 7 0 R /F5 17 0 R >> /ProcSet 1 0 R >> /Contents 57 0 R >> endobj %%Page: 17 17 60 0 obj << /Length 61 0 R >> stream q BT 0 Tr 0 g 1 0 0 1 156 643.5 Tm /F2 12 Tf 100 Tz 0 -8.4 Td 1.2 Tw 0 Tc (CAC ) Tj 0 Tw ( ) Tj 1.2 Tw (63-64.) Tj 12 -27.2 Td .77 Tw (Appellees filed a motion to strike any allegations that con-) Tj -12 -13.7 Td 2.25 Tw (cerned user complaints and lawsuits that occurred after the) Tj 0 -13.7 Td .63 Tw (close of the class period. The district court denied the motion) Tj 0 -13.7 Td .36 Tw (in part and granted it in part. The court reasoned that the rele-) Tj 0 -13.7 Td .47 Tw (vant inquiry was not whether there was a link between Zicam) Tj 0 -13.7 Td 2.71 Tw (and anosmia, but whether Appellees knew that their state-) Tj 0 -13.7 Td .3 Tw (ments were false at the time they were made. The court there-) Tj 0 -13.7 Td 3 Tw (fore denied the motion to strike as to the complaints and) Tj 0 -13.7 Td 1.58 Tw (lawsuits that were filed because those allegations were rele-) Tj 0 -13.7 Td 1.67 Tw (vant to Appellees' knowledge of user complaints. However,) Tj 0 -13.7 Td 1.73 Tw (the court granted the motion to strike as to Jafek's ultimate) Tj 0 -13.7 Td .52 Tw (conclusions, which were published after the close of the class) Tj 0 -13.7 Td 1.2 Tw (period.) Tj 12 -27.2 Td 3.28 Tw (The district court then dismissed the complaint without) Tj -12 -13.7 Td 2.04 Tw (prejudice, reasoning, that the allegations of user complaints) Tj 0 -13.7 Td 1.41 Tw (were not material because they were not statistically signifi-) Tj 0 -13.7 Td 2.07 Tw (cant. The court also found that Appellants had failed suffi-) Tj 0 -13.7 Td 1.2 Tw (ciently to allege scienter.) Tj 12 -27.2 Td 3.41 Tw (The court further stated that any amendment would be) Tj -12 -13.7 Td 4.34 Tw (futile ) Tj ([a]bsent allegations Defendants ) Tj /F4 12 Tf 100 Tz (knew) Tj /F2 12 Tf 100 Tz ( there was a) Tj 0 -13.7 Td .51 Tw (definitive and statistically significant link between Zicam and) Tj 0 -13.7 Td .07 Tw (anosmia ) Tj /F4 12 Tf 100 Tz (during the Class Period) Tj /F2 12 Tf 100 Tz ( that was `sufficiently serious) Tj 0 -13.7 Td 1.33 Tw (and frequent to affect future earnings.') Tj 0 Tw ( ) Tj 1.33 Tw () Tj ( The court therefore) Tj 0 -13.7 Td 2.32 Tw (granted the motion to dismiss and dismissed the complaint) Tj 0 -13.7 Td 1 Tw (without prejudice. The court then entered judgment, dismiss-) Tj 0 -13.7 Td 1.95 Tw (ing the complaint and the action without prejudice.) Tj 4.9 Ts /F5 6 Tf 100 Tz (5) Tj 0 Ts /F2 12 Tf 100 Tz ( Appel-) Tj 0 -13.6 Td 1.2 Tw (lants timely appealed.) Tj /F2 10 Tf 100 Tz 10 -26.9 Td 4.1 Ts /F5 6 Tf 100 Tz 2.08 Tw (5) Tj 0 Ts /F2 10 Tf 100 Tz (Although the judgment dismisses the action without prejudice, it is) Tj -10 -11.6 Td .02 Tw (final for purposes of [28 U.S.C.] ) Tj 0 Tw ( ) Tj .02 Tw (1291 [because] it \(1\) is a full adjudica-) Tj 0 -11.6 Td .38 Tw (tion of the issues, and \(2\) clearly evidences the judge's intention that it be) Tj 0 -11.6 Td 2.34 Tw (the court's final act in the matter.) Tj ( ) Tj /F4 10 Tf 100 Tz (Elliott v. White Mountain Apache) Tj 0 -11.6 Td 1 Tw (Tribal Court) Tj /F2 10 Tf 100 Tz (, 566 F.3d 845, 846 \(9th Cir. 2009\). ) Tj ET Q q 1 0 0 1 156 643.5 cm 0 G .5 w 0 -430.85 m 300 -430.85 l s Q q BT 0 Tr 0 g 1 0 0 1 0 792 Tm /F2 11 Tf 100 Tz 428.5 -136.5 Td 1.1 Tw 0 Tc (14525) Tj -219.8475 0 Td (S) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (IRACUSANO) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( v. NECA-IBEW P) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (ENSION) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( F) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (UND) Tj /F2 11 Tf 100 Tz 0 Ts ET Q q 1 0 0 1 0 792 cm 0 G .5 w 156 -140.25 m 456 -140.25 l s Q endstream endobj 61 0 obj 3729 endobj 59 0 obj << /Type /Page /MediaBox [0 0 612 792] /Parent 49 0 R /Resources << /Font << /F1 6 0 R /F2 7 0 R /F4 9 0 R /F5 17 0 R >> /ProcSet 1 0 R >> /Contents 60 0 R >> endobj %%Page: 18 18 63 0 obj << /Length 64 0 R >> stream q BT 0 Tr 0 g 1 0 0 1 156 643.5 Tm /F1 12 Tf 100 Tz 79.134 -8.4 Td 1.2 Tw 0 Tc (STANDARD OF REVIEW) Tj /F2 12 Tf 100 Tz -67.134 -26 Td 1.13 Tw (The district court's dismissal for failure to state a claim is) Tj -12 -13 Td 1.62 Tw (reviewed de novo. ) Tj /F4 12 Tf 100 Tz (Zucco Partners, LLC v. Digimarc Corp.) Tj /F2 12 Tf 100 Tz (,) Tj 0 -13.1 Td 1.33 Tw (552 F.3d 981, 989 \(9th Cir. 2009\). We accept the plaintiffs') Tj 0 -13.1 Td .87 Tw (allegations as true and construe them in the light most favor-) Tj 0 -13.1 Td .03 Tw (able to the plaintiffs. ) Tj /F4 12 Tf 100 Tz (Id.) Tj /F2 12 Tf 100 Tz ( Dismissal is ) Tj (inappropriate unless the) Tj 0 -13.1 Td 2.6 Tw (plaintiffs' complaint fails to `state a claim to relief that is) Tj 0 -13.1 Td .86 Tw (plausible on its face.') Tj 0 Tw ( ) Tj .86 Tw ( ) Tj /F4 12 Tf 100 Tz (Id.) Tj /F2 12 Tf 100 Tz ( \(quoting ) Tj /F4 12 Tf 100 Tz (Bell Atl. Corp. v. Twom-) Tj 0 -13.1 Td 1.2 Tw (bly) Tj /F2 12 Tf 100 Tz (, 550 U.S. 544, 570 \(2007\)\).) Tj /F1 12 Tf 100 Tz 113.328 -26 Td (DISCUSSION) Tj /F1 12 Tf 100 Tz -101.328 -26 Td .18 Tw ([1]) Tj /F2 12 Tf 100 Tz ( ) Tj (Section 10\(b\) of the Exchange Act, 15 U.S.C. ) Tj 0 Tw ( ) Tj .18 Tw (78j\(b\),) Tj -12 -13.1 Td .11 Tw (in combination with SEC Rule 10b-5, prohibits `any act, prac-) Tj 0 -13.1 Td .3 Tw (tice, or course of business which operates or would operate as) Tj 0 -13.1 Td (a fraud or deceit upon any person, in connection with the pur-) Tj 0 -13.1 Td 2.36 Tw (chase or sale of any security.') Tj 0 Tw ( ) Tj 2.36 Tw ( ) Tj /F4 12 Tf 100 Tz (Rubke v. Capitol Bancorp) Tj 0 -13.1 Td .73 Tw (Ltd.) Tj /F2 12 Tf 100 Tz (, 551 F.3d 1156, 1164 \(9th Cir. 2009\) \(quoting 17 C.F.R.) Tj 0 -13.1 Td 1.8 Tw () Tj 0 Tw ( ) Tj 1.8 Tw (240.10b-5\(c\)\). In order adequately to allege a violation of) Tj 0 -13.1 Td .15 Tw (Rule 10b-5, ) Tj (a plaintiff must [allege] `\(1\) a material misrepre-) Tj 0 -13.1 Td 2.11 Tw (sentation or omission of fact, \(2\) scienter, \(3\) a connection) Tj 0 -13.1 Td .06 Tw (with the purchase or sale of a security, \(4\) transaction and loss) Tj 0 -13.1 Td 1.36 Tw (causation, and \(5\) economic loss.') Tj 0 Tw ( ) Tj 1.36 Tw ( ) Tj /F4 12 Tf 100 Tz (Id.) Tj /F2 12 Tf 100 Tz ( \(quoting ) Tj /F4 12 Tf 100 Tz (In re Daou) Tj 0 -13.1 Td 1.13 Tw (Sys., Inc.) Tj /F2 12 Tf 100 Tz (, 411 F.3d 1006, 1014 \(9th Cir. 2005\)\). The district) Tj 0 -13.1 Td .75 Tw (court dismissed the complaint on the grounds that Appellants) Tj 0 -13.1 Td 1.8 Tw (failed adequately to allege the first two elements; therefore,) Tj 0 -13.1 Td 1.2 Tw (we address only those two elements. ) Tj /F1 12 Tf 100 Tz 0 -26 Td (I.) Tj 9 Tw ( ) Tj 1.2 Tw (Materiality) Tj /F1 12 Tf 100 Tz 12 -26 Td 1.95 Tw ([2]) Tj /F2 12 Tf 100 Tz ( Appellants contend that Appellees' failure to disclose) Tj -12 -13.1 Td 2.24 Tw (information regarding the possible link between Zicam and) Tj 0 -13.1 Td .06 Tw (anosmia constituted the omission of a material fact. ) Tj (An omit-) Tj 0 -13.1 Td 1.72 Tw (ted fact is material if there is a substantial likelihood that a) Tj 0 -13.1 Td 1.18 Tw (reasonable shareholder would consider it important in decid-) Tj 0 -13.1 Td .14 Tw (ing how to vote.) Tj ( ) Tj /F4 12 Tf 100 Tz (TSC Indus., Inc. v. Northway, Inc.) Tj /F2 12 Tf 100 Tz (, 426 U.S.) Tj 0 -13.1 Td 1.2 Tw (438, 449 \(1976\). ) Tj 1 0 0 1 0 792 Tm /F2 11 Tf 100 Tz 156 -136.5 Td 1.1 Tw 0 Tc (14526) Tj 52.6525 0 Td (S) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (IRACUSANO) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( v. NECA-IBEW P) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (ENSION) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( F) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (UND) Tj /F2 11 Tf 100 Tz 0 Ts ET Q q 1 0 0 1 0 792 cm 0 G .5 w 156 -140.25 m 456 -140.25 l s Q endstream endobj 64 0 obj 3930 endobj 62 0 obj << /Type /Page /MediaBox [0 0 612 792] /Parent 49 0 R /Resources << /Font << /F1 6 0 R /F2 7 0 R /F4 9 0 R >> /ProcSet 1 0 R >> /Contents 63 0 R >> endobj %%Page: 19 19 66 0 obj << /Length 67 0 R >> stream q BT 0 Tr 0 g 1 0 0 1 156 643.5 Tm /F1 12 Tf 100 Tz 12 -8.4 Td 2.08 Tw 0 Tc ([3]) Tj /F2 12 Tf 100 Tz ( ) Tj () Tj 0 Tw ( ) Tj 2.08 Tw (`Questions of materiality . . . involv[e] assessments) Tj -12 -13.5 Td 1.7 Tw (peculiarly within the province of the trier of fact.') Tj 0 Tw ( ) Tj 1.7 Tw ( ) Tj /F4 12 Tf 100 Tz (SEC v.) Tj 0 -13.5 Td .62 Tw (Talbot) Tj /F2 12 Tf 100 Tz (, 530 F.3d 1085, 1097 \(9th Cir. 2008\) \(quoting ) Tj /F4 12 Tf 100 Tz (Arring-) Tj 0 -13.5 Td .96 Tw (ton v. Merrill Lynch, Pierce, Fenner & Smith, Inc.) Tj /F2 12 Tf 100 Tz (, 651 F.2d) Tj 0 -13.5 Td 1.06 Tw (615, 619 \(9th Cir. 1981\)\) \(alterations in original\). Thus, ) Tj (the) Tj 0 -13.5 Td 1.33 Tw (ultimate issue of materiality [is] appropriately resolved `as a) Tj 0 -13.5 Td .47 Tw (matter of law') Tj 0 Tw ( ) Tj .47 Tw ( only where the omissions are ) Tj () Tj 0 Tw ( ) Tj .47 Tw (`so obviously) Tj 0 -13.5 Td 1.21 Tw (important to an investor, that reasonable minds cannot differ) Tj 0 -13.5 Td .63 Tw (on the question of materiality.') Tj 0 Tw ( ) Tj .63 Tw ( ) Tj /F4 12 Tf 100 Tz (TSC) Tj /F2 12 Tf 100 Tz (, 426 U.S. at 450 \(quot-) Tj 0 -13.5 Td .56 Tw (ing ) Tj /F4 12 Tf 100 Tz (Johns Hopkins Univ. v. Hutton) Tj /F2 12 Tf 100 Tz (, 422 F.2d 1124, 1129 \(4th) Tj 0 -13.4 Td 1.2 Tw (Cir. 1970\)\). ) Tj 12 -26.7 Td 3.75 Tw (The district court summarized the ) Tj (allegations of links) Tj -12 -13.4 Td 5.1 Tw (between Zicam and anosmia for which Defendants had) Tj 0 -13.4 Td 3.57 Tw (knowledge as follows: ) Tj (a phone conversation between a) Tj 0 -13.4 Td .56 Tw (Matrixx vice-president and University of Colorado researcher) Tj 0 -13.4 Td 1.22 Tw (discussing one anosmia complaint, a 1999 study recognizing) Tj 0 -13.4 Td 1.03 Tw (a possible link, and a University of Colorado study citing 11) Tj 0 -13.4 Td 1.63 Tw (cases of anosmia in Zicam users.) Tj () Tj 4.9 Ts /F5 6 Tf 100 Tz (6) Tj 0 Ts /F2 12 Tf 100 Tz ( District Ct. Order at 11.) Tj 0 -13.4 Td .55 Tw (The court then found that Appellants had failed adequately to) Tj 0 -13.4 Td .5 Tw (allege materiality because the number of complaints of which) Tj 0 -13.4 Td 1.05 Tw (Appellees were aware was not ) Tj (statistically significant.) Tj ( The) Tj 0 -13.4 Td .18 Tw (court relied on the statistical significance standard used by the) Tj 0 -13.4 Td 5.28 Tw (Second Circuit in ) Tj /F4 12 Tf 100 Tz (In re Carter-Wallace, Inc. Securities) Tj /F2 10 Tf 100 Tz 10 -26.4 Td 4.1 Ts /F5 6 Tf 100 Tz .03 Tw (6) Tj 0 Ts /F2 10 Tf 100 Tz (The district court also reasoned that ) Tj (Matrixx conducted a double-blind) Tj -10 -11.4 Td 1.51 Tw (study regarding Zicam and not a single case of anosmia was reported.) Tj () Tj 0 -11.4 Td 1.95 Tw (This was presumably a reference to Matrixx's February 2, 2004, press) Tj 0 -11.4 Td .25 Tw (release, which states that ) Tj (the safety and efficacy of zinc gluconate for the) Tj 0 -11.4 Td .62 Tw (treatment of symptoms related to the common cold have been well estab-) Tj 0 -11.4 Td .15 Tw (lished in two double-blind, placebo-controlled, randomized clinical trials.) Tj () Tj 0 -11.4 Td 1.19 Tw (The press release, however, does not state that any tests established that) Tj 0 -11.4 Td 1.22 Tw (the application of zinc gluconate to the nose is safe. In fact, as reported) Tj 0 -11.4 Td 1.26 Tw (by Ferrugia on March 4, 2004, Matrixx allegedly subsequently admitted) Tj 0 -11.4 Td .55 Tw (that ) Tj () Tj 0 Tw ( ) Tj .55 Tw (`they don't know if their nasal gel could cause loss of smell,') Tj 0 Tw ( ) Tj .55 Tw ( and) Tj 0 -11.4 Td .08 Tw (that they would ) Tj (begin . . . testing to determine whether its zinc compound) Tj 0 -11.4 Td 1.95 Tw (could be harmful when sprayed in the nose.) Tj ( Moreover, the complaint) Tj 0 -11.4 Td 1.39 Tw (alleged that Clarot told Linschoten in September 2002 that Matrixx had) Tj 0 -11.4 Td 1 Tw (not conducted any studies and asked her to participate in studies. ) Tj ET Q q 1 0 0 1 156 643.5 cm 0 G .5 w 0 -329.35 m 300 -329.35 l s Q q BT 0 Tr 0 g 1 0 0 1 0 792 Tm /F2 11 Tf 100 Tz 428.5 -136.5 Td 1.1 Tw 0 Tc (14527) Tj -219.8475 0 Td (S) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (IRACUSANO) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( v. NECA-IBEW P) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (ENSION) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( F) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (UND) Tj /F2 11 Tf 100 Tz 0 Ts ET Q q 1 0 0 1 0 792 cm 0 G .5 w 156 -140.25 m 456 -140.25 l s Q endstream endobj 67 0 obj 4627 endobj 65 0 obj << /Type /Page /MediaBox [0 0 612 792] /Parent 68 0 R /Resources << /Font << /F1 6 0 R /F2 7 0 R /F4 9 0 R /F5 17 0 R >> /ProcSet 1 0 R >> /Contents 66 0 R >> endobj %%Page: 20 20 70 0 obj << /Length 71 0 R >> stream q BT 0 Tr 0 g 1 0 0 1 156 643.5 Tm /F4 12 Tf 100 Tz 0 -8.4 Td 3.83 Tw 0 Tc (Litigation) Tj /F2 12 Tf 100 Tz (, 150 F.3d 153, 157 \(2d Cir. 1998\), and ) Tj /F4 12 Tf 100 Tz (In re) Tj 0 -13.5 Td 2.42 Tw (Carter-Wallace, Inc. Securities Litigation) Tj /F2 12 Tf 100 Tz (, 220 F.3d 36 \(2d) Tj 0 -13.5 Td .11 Tw (Cir. 2000\). We conclude, however, that the district court erred) Tj 0 -13.5 Td 1.16 Tw (in relying on the statistical significance standard to conclude) Tj 0 -13.5 Td 1.2 Tw (that Appellants failed adequately to allege materiality.) Tj /F1 12 Tf 100 Tz 12 -26.7 Td 3.58 Tw ([4]) Tj /F2 12 Tf 100 Tz ( The Supreme Court has rejected the adoption of a) Tj -12 -13.5 Td 5.05 Tw (bright-line rule to determine materiality because ) Tj () Tj 0 Tw ( ) Tj 5.05 Tw (`[t]he) Tj 0 -13.5 Td .21 Tw (determination [of materiality] requires delicate assessments of) Tj 0 -13.5 Td .76 Tw (the inferences a ) Tj (reasonable shareholder) Tj ( would draw from a) Tj 0 -13.5 Td 1.34 Tw (given set of facts and the significance of those inferences to) Tj 0 -13.5 Td 3.22 Tw (him.') Tj 0 Tw ( ) Tj 3.22 Tw ( ) Tj /F4 12 Tf 100 Tz (Basic Inc. v. Levinson) Tj /F2 12 Tf 100 Tz (, 485 U.S. 224, 236 \(1988\)) Tj 0 -13.5 Td .25 Tw (\(quoting ) Tj /F4 12 Tf 100 Tz (TSC) Tj /F2 12 Tf 100 Tz (, 426 U.S. at 450\) \(second alteration in original\).) Tj 0 -13.5 Td 1.8 Tw (Instead, courts should engage in a ) Tj (fact-specific inquiry) Tj ( in) Tj 0 -13.5 Td .52 Tw (assessing materiality. ) Tj /F4 12 Tf 100 Tz (Id.) Tj /F2 12 Tf 100 Tz ( at 240. Thus, ) Tj ([d]etermining materi-) Tj 0 -13.5 Td .87 Tw (ality in securities fraud cases `should ordinarily be left to the) Tj 0 -13.5 Td 1.75 Tw (trier of fact.') Tj 0 Tw ( ) Tj 1.75 Tw ( ) Tj /F4 12 Tf 100 Tz (SEC v. Phan) Tj /F2 12 Tf 100 Tz (, 500 F.3d 895, \(9th Cir. 2007\)) Tj 0 -13.5 Td 2.36 Tw (\(quoting ) Tj /F4 12 Tf 100 Tz (In re Apple Computer Sec. Litig.) Tj /F2 12 Tf 100 Tz (, 886 F.2d 1109,) Tj 0 -13.4 Td 2.41 Tw (1113 \(9th Cir. 1989\)\); ) Tj /F4 12 Tf 100 Tz (see also ) Tj (No. 84 Employer-Teamster) Tj 0 -13.4 Td 1.25 Tw (Joint Council Pension Trust Fund v. Am. W. Holding Corp.) Tj /F2 12 Tf 100 Tz (,) Tj 0 -13.4 Td 1.96 Tw (320 F.3d 920, 934-35 \(9th Cir. 2003\) \(declining to adopt a) Tj 0 -13.4 Td .53 Tw (bright-line rule to determine materiality, engaging in the fact-) Tj 0 -13.4 Td .74 Tw (specific inquiry required by ) Tj /F4 12 Tf 100 Tz (Basic) Tj /F2 12 Tf 100 Tz (, and finding that the plain-) Tj 0 -13.4 Td 1.2 Tw (tiffs had sufficiently pleaded materiality\).) Tj /F1 12 Tf 100 Tz 12 -26.6 Td 3.25 Tw ([5]) Tj /F2 12 Tf 100 Tz ( In relying on the statistical significance standard to) Tj -12 -13.4 Td 1.37 Tw (determine materiality, the district court made a decision that) Tj 0 -13.4 Td 1.9 Tw (should have been left to the trier of fact. Instead, we agree) Tj 0 -13.4 Td 1.27 Tw (with the approach of the court in ) Tj /F4 12 Tf 100 Tz (In re Pfizer Inc. Securities) Tj 0 -13.4 Td 1.51 Tw (Litigation) Tj /F2 12 Tf 100 Tz (, 584 F. Supp. 2d 621 \(S.D.N.Y. 2008\), where the) Tj 0 -13.4 Td .84 Tw (United States District Court for the Southern District of New) Tj 0 -13.4 Td 1 Tw (York rejected the defendant pharmaceutical company's argu-) Tj 0 -13.4 Td .81 Tw (ment that the plaintiffs failed to plead materiality, which was) Tj 0 -13.4 Td 1.83 Tw (based on the contention that three studies revealing adverse) Tj 0 -13.4 Td 2.08 Tw (effects of the company's drug were not statistically signifi-) Tj 0 -13.4 Td .5 Tw (cant. The court reasoned that it ) Tj (cannot determine as a matter) Tj 0 -13.4 Td 4.24 Tw (of law whether such links were statistically insignificant) Tj 1 0 0 1 0 792 Tm /F2 11 Tf 100 Tz 156 -136.5 Td 1.1 Tw 0 Tc (14528) Tj 52.6525 0 Td (S) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (IRACUSANO) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( v. NECA-IBEW P) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (ENSION) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( F) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (UND) Tj /F2 11 Tf 100 Tz 0 Ts ET Q q 1 0 0 1 0 792 cm 0 G .5 w 156 -140.25 m 456 -140.25 l s Q endstream endobj 71 0 obj 4253 endobj 69 0 obj << /Type /Page /MediaBox [0 0 612 792] /Parent 68 0 R /Resources << /Font << /F1 6 0 R /F2 7 0 R /F4 9 0 R >> /ProcSet 1 0 R >> /Contents 70 0 R >> endobj %%Page: 21 21 73 0 obj << /Length 74 0 R >> stream q BT 0 Tr 0 g 1 0 0 1 156 643.5 Tm /F2 12 Tf 100 Tz 0 -8.4 Td 2.18 Tw 0 Tc (because statistical significance is a question of fact.) Tj ( ) Tj /F4 12 Tf 100 Tz (Id.) Tj /F2 12 Tf 100 Tz ( at) Tj 0 -13.1 Td 1.2 Tw (635-36. ) Tj /F1 12 Tf 100 Tz 12 -26 Td 3.33 Tw ([6]) Tj /F2 12 Tf 100 Tz ( Thus, we are to engage in the fact-specific inquiry) Tj -12 -13.1 Td 1.33 Tw (required by ) Tj /F4 12 Tf 100 Tz (Basic) Tj /F2 12 Tf 100 Tz (. In doing so, we must take the allegations) Tj 0 -13.1 Td 1.36 Tw (in the complaint as true and construe them in the light most) Tj 0 -13.1 Td .81 Tw (favorable to Appellants and determine whether the complaint) Tj 0 -13.1 Td 1.58 Tw (fails to state a claim to relief that is plausible on its face.) Tj () Tj /F4 12 Tf 100 Tz 0 -13.1 Td 2.28 Tw (Zucco) Tj /F2 12 Tf 100 Tz (, 552 F.3d at 989 \(internal quotation marks omitted\).) Tj 0 -13.1 Td 1.73 Tw (The following allegations in the CAC go to the question of) Tj 0 -13.1 Td 1.47 Tw (whether the information regarding the possible link between) Tj 0 -13.1 Td 1.08 Tw (Zicam and anosmia was information that a reasonable inves-) Tj 0 -13.1 Td 1.2 Tw (tor would have considered significant:) Tj 0 -26 Td .92 Tw () Tj 9 Tw ( ) Tj .92 Tw (In December 1999, Hirsch called Matrixx's customer ser-) Tj 16.2 -13.1 Td 3.38 Tw (vice line and reported one patient who had developed) Tj 0 -13.1 Td .97 Tw (anosmia after Zicam use and mentioned studies regarding) Tj 0 -13.1 Td 1.2 Tw (intranasal application of zinc.) Tj -16.2 -26 Td 1.01 Tw () Tj 9 Tw ( ) Tj 1.01 Tw (In September 2002, Clarot called Linschoten because one) Tj 16.2 -13.1 Td 2.31 Tw (of her patients had complained to Matrixx about Zicam) Tj 0 -13.1 Td 3.77 Tw (and anosmia. Clarot told Linschoten that Matrixx had) Tj 0 -13.1 Td 2.96 Tw (received similar complaints from other customers since) Tj 0 -13.1 Td 3.2 Tw (1999, and Linschoten told Clarot about studies linking) Tj 0 -13.1 Td 1.2 Tw (zinc sulfate to loss of smell.) Tj ( ) Tj -16.2 -26 Td 1.38 Tw () Tj 9 Tw ( ) Tj 1.38 Tw (On September 20, 2002, Linschoten sent Clarot an email) Tj 16.2 -13.1 Td .25 Tw (with abstracts on the link between zinc sulfate and the loss) Tj 0 -13.1 Td 1.2 Tw (of smell.) Tj ( ) Tj -16.2 -26 Td 1.18 Tw () Tj 9 Tw ( ) Tj 1.18 Tw (In September 2003, Jafek presented findings about ten or) Tj 16.2 -13.1 Td 3.3 Tw (eleven patients who suffered anosmia following Zicam) Tj 0 -13.1 Td 2.82 Tw (use. ) Tj (Matrixx, through Clarot, stopped Jafek from using) Tj 0 -13.1 Td 1.2 Tw (Matrixx's and Zicam's names in the presentation.) Tj ( ) Tj -16.2 -26.1 Td 3.72 Tw () Tj 9 Tw ( ) Tj 3.72 Tw (On October 14, 2003, two plaintiffs filed suit against) Tj 16.2 -13.1 Td .08 Tw (Matrixx in the United States District Court for the Western) Tj 0 -13.1 Td .68 Tw (District of Michigan, alleging that Zicam caused anosmia.) Tj 1 0 0 1 0 792 Tm /F2 11 Tf 100 Tz 428.5 -136.5 Td 1.1 Tw 0 Tc (14529) Tj -219.8475 0 Td (S) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (IRACUSANO) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( v. NECA-IBEW P) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (ENSION) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( F) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (UND) Tj /F2 11 Tf 100 Tz 0 Ts ET Q q 1 0 0 1 0 792 cm 0 G .5 w 156 -140.25 m 456 -140.25 l s Q endstream endobj 74 0 obj 3411 endobj 72 0 obj << /Type /Page /MediaBox [0 0 612 792] /Parent 68 0 R /Resources << /Font << /F1 6 0 R /F2 7 0 R /F4 9 0 R >> /ProcSet 1 0 R >> /Contents 73 0 R >> endobj %%Page: 22 22 76 0 obj << /Length 77 0 R >> stream q BT 0 Tr 0 g 1 0 0 1 156 643.5 Tm /F2 12 Tf 100 Tz 0 -8.4 Td .08 Tw 0 Tc () Tj 9 Tw ( ) Tj .08 Tw (On December 8, 2003, a plaintiff filed suit against Matrixx) Tj 16.2 -13.9 Td .56 Tw (in Los Angeles Superior Court regarding Zicam and anos-) Tj 0 -13.9 Td 1.2 Tw (mia.) Tj ( ) Tj -16.2 -27.5 Td .81 Tw () Tj 9 Tw ( ) Tj .81 Tw (On December 18, 2003, another suit regarding Zicam and) Tj 16.2 -13.9 Td .88 Tw (anosmia was filed against Matrixx in Alabama state court) Tj 0 -13.9 Td 1.2 Tw (and removed to federal court.) Tj ( ) Tj -16.2 -27.5 Td 1.97 Tw () Tj 9 Tw ( ) Tj 1.97 Tw (On January 23, 2004, five plaintiffs filed a consolidated) Tj 16.2 -13.9 Td 2.63 Tw (suit against Matrixx in the Superior Court of Maricopa) Tj 0 -13.9 Td 1.35 Tw (County, Arizona regarding Zicam and anosmia. An addi-) Tj 0 -13.9 Td .64 Tw (tional 261 plaintiffs later joined this action, after the close) Tj 0 -13.9 Td 1.2 Tw (of the class period. ) Tj -16.2 -27.5 Td 2.42 Tw () Tj 9 Tw ( ) Tj 2.42 Tw (By April 2004, Jafek ) Tj (had evaluated over 100 cases of) Tj 16.2 -13.9 Td 1.68 Tw (anosmia following Zicam use,) Tj ( and Linschoten had seen) Tj 0 -13.9 Td 1.45 Tw (65 cases, although the time period of these allegations is) Tj 0 -13.9 Td 1.2 Tw (not clear.) Tj /F1 12 Tf 100 Tz -4.2 -27.5 Td .92 Tw ([7]) Tj /F2 12 Tf 100 Tz ( We believe that the foregoing allegations are sufficient) Tj -12 -13.9 Td 2.21 Tw (to meet the pleading requirement under the PSLRA, which) Tj 0 -13.9 Td 1.2 Tw (requires that:) Tj 22 -27.5 Td .42 Tw (the complaint shall specify each statement alleged to) Tj 0 -13.8 Td .46 Tw (have been misleading, the reason or reasons why the) Tj 0 -13.8 Td .61 Tw (statement is misleading, and, if an allegation regard-) Tj 0 -13.8 Td 0 Tw (ing the statement or omission is made on information) Tj 0 -13.8 Td 1.04 Tw (or belief, the complaint shall state with particularity) Tj 0 -13.8 Td 1.2 Tw (all facts on which that belief is formed.) Tj -22 -27.4 Td .07 Tw (15 U.S.C. ) Tj 0 Tw ( ) Tj .07 Tw (78u-4\(b\)\(1\). The allegations in the CAC are suffi-) Tj 0 -13.8 Td .9 Tw (cient to meet that standard and, as well, to ) Tj (nudge[) Tj 0 Tw ( ) Tj .9 Tw (] [Appel-) Tj 0 -13.8 Td 1.21 Tw (lants'] claims across the line from conceivable to plausible.) Tj () Tj /F4 12 Tf 100 Tz 0 -13.8 Td 4.8 Tw (Twombly) Tj /F2 12 Tf 100 Tz (, 550 U.S. at 570. Appellants have sufficiently) Tj 0 -13.8 Td .52 Tw (alleged materiality, and the district court's finding to the con-) Tj 0 -13.8 Td 1.2 Tw (trary is reversed.) Tj 1 0 0 1 0 792 Tm /F2 11 Tf 100 Tz 156 -136.5 Td 1.1 Tw 0 Tc (14530) Tj 52.6525 0 Td (S) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (IRACUSANO) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( v. NECA-IBEW P) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (ENSION) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( F) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (UND) Tj /F2 11 Tf 100 Tz 0 Ts ET Q q 1 0 0 1 0 792 cm 0 G .5 w 156 -140.25 m 456 -140.25 l s Q endstream endobj 77 0 obj 3075 endobj 75 0 obj << /Type /Page /MediaBox [0 0 612 792] /Parent 68 0 R /Resources << /Font << /F1 6 0 R /F2 7 0 R /F4 9 0 R >> /ProcSet 1 0 R >> /Contents 76 0 R >> endobj %%Page: 23 23 79 0 obj << /Length 80 0 R >> stream q BT 0 Tr 0 g 1 0 0 1 156 643.5 Tm /F1 12 Tf 100 Tz 0 -8.4 Td 1.2 Tw 0 Tc (II.) Tj 9 Tw ( ) Tj 1.2 Tw (Scienter) Tj /F1 12 Tf 100 Tz 12 -26 Td .3 Tw ([8]) Tj /F2 12 Tf 100 Tz ( In order to plead scienter, the PSLRA requires the com-) Tj -12 -13 Td 1.06 Tw (plaint to ) Tj (state with particularity facts giving rise to a strong) Tj 0 -13 Td 1.66 Tw (inference that the defendant acted with the required state of) Tj 0 -13 Td 2.71 Tw (mind. 15 U.S.C. ) Tj 0 Tw ( ) Tj 2.71 Tw (78u-4\(b\)\(2\). The plaintiff ) Tj (must allege) Tj 0 -13 Td 1.24 Tw (that . . . the defendant had an intention `to deceive, manipu-) Tj 0 -13 Td 1.46 Tw (late, or defraud.') Tj 0 Tw ( ) Tj 1.46 Tw ( ) Tj /F4 12 Tf 100 Tz (Metzler Inv. GMBH v. Corinthian Colls.,) Tj 0 -13.1 Td 1.4 Tw (Inc.) Tj /F2 12 Tf 100 Tz (, 540 F.3d 1049, 1065-66 \(9th Cir. 2008\) \(quoting ) Tj /F4 12 Tf 100 Tz (Ernst) Tj 0 -13.1 Td .07 Tw (& Ernst v. Hochfelder) Tj /F2 12 Tf 100 Tz (, 425 U.S. 185, 193 \(1976\)\). ) Tj ([I]n deter-) Tj 0 -13.1 Td .54 Tw (mining whether the pleaded facts give rise to a `strong' infer-) Tj 0 -13.1 Td 2.07 Tw (ence of scienter, the court must take into account plausible) Tj 0 -13.1 Td .62 Tw (opposing inferences.) Tj ( ) Tj /F4 12 Tf 100 Tz (Tellabs, Inc. v. Makor Issues & Rights,) Tj 0 -13.1 Td .86 Tw (Ltd.) Tj /F2 12 Tf 100 Tz (, 551 U.S. 308, 310 \(2007\). The complaint will survive a) Tj 0 -13.1 Td 1.66 Tw (motion to dismiss ) Tj (only if a reasonable person would deem) Tj 0 -13.1 Td .94 Tw (the inference of scienter cogent and at least as compelling as) Tj 0 -13.1 Td 5.17 Tw (any opposing inference one could draw from the facts) Tj 0 -13.1 Td 1.02 Tw (alleged. ) Tj /F4 12 Tf 100 Tz (Id.) Tj /F2 12 Tf 100 Tz ( at 324. This does not mean that a plaintiff must) Tj 0 -13.1 Td .63 Tw (plead more than she would be required to prove at trial.) Tj ( ) Tj /F4 12 Tf 100 Tz (Id.) Tj /F2 12 Tf 100 Tz 0 -13.1 Td 3.46 Tw (at 311. Rather, ) Tj ([a] plaintiff alleging fraud under ) Tj 0 Tw ( ) Tj 3.46 Tw (10\(b\)) Tj 0 -13.1 Td .67 Tw (action . . . must plead facts rendering an inference of scienter) Tj /F4 12 Tf 100 Tz 0 -13.1 Td 1.2 Tw (at least as likely as) Tj /F2 12 Tf 100 Tz ( any plausible opposing inference.) Tj ( ) Tj /F4 12 Tf 100 Tz (Id.) Tj /F1 12 Tf 100 Tz 12 -26 Td .44 Tw ([9]) Tj /F2 12 Tf 100 Tz ( To establish scienter, ) Tj (a complaint must `allege that the) Tj -12 -13.1 Td 1.38 Tw (defendants made false or misleading statements either inten-) Tj 0 -13.1 Td .66 Tw (tionally or with deliberate recklessness.') Tj 0 Tw ( ) Tj .66 Tw ( ) Tj /F4 12 Tf 100 Tz (Zucco) Tj /F2 12 Tf 100 Tz (, 552 F.3d at) Tj 0 -13.1 Td .96 Tw (991 \(quoting ) Tj /F4 12 Tf 100 Tz (Daou) Tj /F2 12 Tf 100 Tz (, 411 F.3d at 1015\). We must first ) Tj (deter-) Tj 0 -13.1 Td 4.04 Tw (mine whether any of the plaintiff) Tj 0 Tw ( ) Tj 4.04 Tw ('s allegations, standing) Tj 0 -13.1 Td 1.15 Tw (alone, are sufficient to create a strong inference of scienter.) Tj () Tj /F4 12 Tf 100 Tz 0 -13.1 Td .36 Tw (Id.) Tj /F2 12 Tf 100 Tz ( at 992. If not, we are to ) Tj (conduct a `holistic' review of the) Tj 0 -13.1 Td .61 Tw (same allegations to determine whether the insufficient allega-) Tj 0 -13.1 Td .85 Tw (tions combine to create a strong inference of intentional con-) Tj 0 -13.1 Td 0 Tw (duct or deliberate recklessness.) Tj ( ) Tj /F4 12 Tf 100 Tz (Id.) Tj /F2 12 Tf 100 Tz ( Recklessness is defined as) Tj 22 -26 Td 6.8 Tw (a highly unreasonable omission, involving not) Tj 0 -13.1 Td 1.66 Tw (merely simple, or even inexcusable negligence, but) Tj 0 -13.1 Td .81 Tw (an extreme departure from the standards of ordinary) Tj 0 -13.1 Td .05 Tw (care, and which presents a danger of misleading buy-) Tj 1 0 0 1 0 792 Tm /F2 11 Tf 100 Tz 428.5 -136.5 Td 1.1 Tw 0 Tc (14531) Tj -219.8475 0 Td (S) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (IRACUSANO) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( v. NECA-IBEW P) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (ENSION) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( F) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (UND) Tj /F2 11 Tf 100 Tz 0 Ts ET Q q 1 0 0 1 0 792 cm 0 G .5 w 156 -140.25 m 456 -140.25 l s Q endstream endobj 80 0 obj 4335 endobj 78 0 obj << /Type /Page /MediaBox [0 0 612 792] /Parent 68 0 R /Resources << /Font << /F1 6 0 R /F2 7 0 R /F4 9 0 R >> /ProcSet 1 0 R >> /Contents 79 0 R >> endobj %%Page: 24 24 82 0 obj << /Length 83 0 R >> stream q BT 0 Tr 0 g 1 0 0 1 156 643.5 Tm /F2 12 Tf 100 Tz 22 -8.4 Td .4 Tw 0 Tc (ers or sellers that is either known to the defendant or) Tj 0 -13 Td .53 Tw (is so obvious that the actor must have been aware of) Tj 0 -13 Td 1.2 Tw (it.) Tj /F4 12 Tf 100 Tz -22 -26 Td .39 Tw (In re Silicon Graphics Inc. Sec. Litig.) Tj /F2 12 Tf 100 Tz (, 183 F.3d 970, ) Tj (976 \(9th) Tj 0 -13 Td 2.98 Tw (Cir. 1999\) \(quoting ) Tj /F4 12 Tf 100 Tz (Hollinger v. Titan Capital Corp.) Tj /F2 12 Tf 100 Tz (, 914) Tj 0 -13 Td 1.2 Tw (F.2d 1564, 1569 \(9th Cir. 1990\) \(en banc\)\).) Tj 12 -26 Td 2.25 Tw (The district court here concluded that the CAC failed to) Tj -12 -13 Td 2.77 Tw (allege the requisite scienter because it ) Tj (fails to allege any) Tj 0 -13.1 Td 2.6 Tw (motive or state of mind with relation to the alleged omis-) Tj 0 -13.1 Td .83 Tw (sions. In order adequately to allege scienter, Appellants rely) Tj 0 -13.1 Td 1.5 Tw (on their allegations that Appellees knew about the problems) Tj 0 -13.1 Td 2.88 Tw (with Zicam but chose not to reveal them. Appellants also) Tj 0 -13.1 Td .11 Tw (argue that the importance of Zicam to Matrixx's business sup-) Tj 0 -13.1 Td 5 Tw (ports the inference that Appellees intentionally withheld) Tj 0 -13.1 Td 1.46 Tw (information of the link between Zicam and anosmia. Appel-) Tj 0 -13.1 Td 1.6 Tw (lants also point to the revelations following the close of the) Tj 0 -13.1 Td .74 Tw (class period that, contrary to their statements during the class) Tj 0 -13.1 Td .96 Tw (period, Matrixx actually did not know if Zicam caused anos-) Tj 0 -13.1 Td 2.7 Tw (mia and decided to conduct studies after they had already) Tj 0 -13.1 Td 1.2 Tw (vouched for the safety of Zicam.) Tj 12 -26 Td .04 Tw (Matrixx's first allegedly misleading statement was its Octo-) Tj -12 -13.1 Td 2 Tw (ber 22, 2003, press release, announcing the 163% net sales) Tj 0 -13.1 Td .18 Tw (increase, attributed to Zicam, and stating that the Zicam brand) Tj 0 -13.1 Td .96 Tw (was ) Tj (poised for growth.) Tj ( The second statement was the con-) Tj 0 -13.1 Td .11 Tw (ference call on October 23, 2003, again attributing the compa-) Tj 0 -13.1 Td 1.28 Tw (ny's positive results to Zicam and projecting further growth.) Tj 0 -13.1 Td 3.24 Tw (By ) Tj (the time of the press release and the conference call,) Tj 0 -13.1 Td 3 Tw (Hirsch had called the customer service line regarding one) Tj 0 -13.1 Td 3.04 Tw (patient, Clarot had spoken with Linschoten regarding cus-) Tj 0 -13.1 Td 2.46 Tw (tomer complaints, Jafek had presented his report of eleven) Tj 0 -13.1 Td 1 Tw (patients, and the first lawsuit against Matrixx had been filed.) Tj 0 -13.1 Td 1.76 Tw (Appellees accordingly were aware of at least fourteen com-) Tj 0 -13.1 Td 1.74 Tw (plaints regarding Zicam and anosmia at the time they made) Tj 0 -13.1 Td 1.94 Tw (these statements. In addition, Appellants alleged that Clarot) Tj 0 -13.1 Td 5 Tw (told Linschoten in the September 2002 phone call that) Tj 1 0 0 1 0 792 Tm /F2 11 Tf 100 Tz 156 -136.5 Td 1.1 Tw 0 Tc (14532) Tj 52.6525 0 Td (S) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (IRACUSANO) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( v. NECA-IBEW P) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (ENSION) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( F) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (UND) Tj /F2 11 Tf 100 Tz 0 Ts ET Q q 1 0 0 1 0 792 cm 0 G .5 w 156 -140.25 m 456 -140.25 l s Q endstream endobj 83 0 obj 3512 endobj 81 0 obj << /Type /Page /MediaBox [0 0 612 792] /Parent 68 0 R /Resources << /Font << /F1 6 0 R /F2 7 0 R /F4 9 0 R /F5 17 0 R >> /ProcSet 1 0 R >> /Contents 82 0 R >> endobj %%Page: 25 25 85 0 obj << /Length 86 0 R >> stream q BT 0 Tr 0 g 1 0 0 1 156 643.5 Tm /F2 12 Tf 100 Tz 0 -8.4 Td 1.58 Tw 0 Tc (Matrixx had received customer complaints of loss of smell) Tj 0 -13.2 Td .66 Tw (as early as 1999.) Tj ( Appellants then alleged that the November) Tj 0 -13.2 Td .87 Tw (12, 2003, Form 10-Q was misleading because it spoke of the) Tj 0 -13.2 Td 1.32 Tw (risk of product liability actions against the company without) Tj 0 -13.2 Td 1.2 Tw (revealing that a lawsuit already had been filed.) Tj 4.9 Ts /F5 6 Tf 100 Tz .5 Tw (7) Tj 0 Ts /F2 12 Tf 100 Tz 12 -26.2 Td 1 Tw (In ) Tj /F4 12 Tf 100 Tz (Berson v. Applied Signal Tech., Inc.) Tj /F2 12 Tf 100 Tz (, 527 F.3d 982 \(9th) Tj -12 -13.2 Td .07 Tw (Cir. 2008\), the defendants argued that a passage in the compa-) Tj 0 -13.2 Td 1.67 Tw (ny's SEC filings regarding backlogged work alerted reason-) Tj 0 -13.2 Td .57 Tw (able investors to the risk that the company might not get paid) Tj 0 -13.2 Td .04 Tw (for work that had actually been stopped. We rejected the argu-) Tj 0 -13.2 Td .39 Tw (ment, stating that ) Tj ([t]he passage . . . speaks entirely of as-yet-) Tj 0 -13.2 Td 1.42 Tw (unrealized risks and contingencies. Nothing alerts the reader) Tj 0 -13.2 Td 1.63 Tw (that some of these risks may already have come to fruition,) Tj 0 -13.2 Td .33 Tw (and that what the company refers to as backlog includes work) Tj 0 -13.2 Td 1.07 Tw (that is substantially delayed and at serious risk of being can-) Tj 0 -13.2 Td .37 Tw (celled altogether.) Tj ( ) Tj /F4 12 Tf 100 Tz (Id.) Tj /F2 12 Tf 100 Tz ( at 986. We therefore disagreed with the) Tj 0 -13.2 Td 1.41 Tw (district court's finding that the statements were not mislead-) Tj 0 -13.2 Td .11 Tw (ing, reasoning that, ) Tj (once defendants chose to tout the compa-) Tj 0 -13.2 Td 2.79 Tw (ny's backlog, they were bound to do so in a manner that) Tj 0 -13.2 Td 1.07 Tw (wouldn't mislead investors as to what that backlog consisted) Tj 0 -13.2 Td (of.) Tj ( ) Tj /F4 12 Tf 100 Tz (Id.) Tj /F2 12 Tf 100 Tz ( at 987; ) Tj /F4 12 Tf 100 Tz (cf. ) Tj (In re Elan Corp. Sec. Litig.) Tj /F2 12 Tf 100 Tz (, 543 F. Supp.) Tj 0 -13.2 Td 1.7 Tw (2d 187, 208 \(S.D.N.Y. 2008\) \() Tj (By choosing to speak about) Tj 0 -13.2 Td 1.17 Tw (the safety of [their drug], Defendants assumed a duty to dis-) Tj 0 -13.2 Td 1.23 Tw (close material information regarding adverse events.) Tj (\). After) Tj 0 -13.2 Td .03 Tw (addressing scienter and loss causation, we reversed the district) Tj 0 -13.2 Td 1.33 Tw (court's dismissal of the complaint. ) Tj /F4 12 Tf 100 Tz (Berson) Tj /F2 12 Tf 100 Tz (, 527 F.3d at 987-) Tj 0 -13.2 Td 1.2 Tw (90.) Tj /F1 12 Tf 100 Tz 12 -26.2 Td 3.62 Tw ([10]) Tj /F2 12 Tf 100 Tz ( Similar to ) Tj /F4 12 Tf 100 Tz (Berson) Tj /F2 12 Tf 100 Tz (, the passage in the Form 10-Q) Tj -12 -13.2 Td 4.17 Tw (speaks about the risks of product liability claims in the) Tj 0 -13.2 Td 1.85 Tw (abstract, with no indication that the risk ) Tj (may already have) Tj 0 -13.2 Td .79 Tw (come to fruition.) Tj ( ) Tj /F4 12 Tf 100 Tz (Id.) Tj /F2 12 Tf 100 Tz ( at 986. At the time that Appellees filed) Tj 0 -13.2 Td .9 Tw (the Form 10-Q, the CAC alleges facts sufficient for a jury to) Tj /F2 10 Tf 100 Tz 10 -26 Td 4.1 Ts /F5 6 Tf 100 Tz 3.33 Tw (7) Tj 0 Ts /F2 10 Tf 100 Tz (As Matrixx later admitted, up to and including the class period,) Tj -10 -11.2 Td 1.29 Tw (Matrixx had conducted no studies on the safety of Zicam regarding any) Tj 0 -11.2 Td 1 Tw (link to anosmia. ) Tj ET Q q 1 0 0 1 156 643.5 cm 0 G .5 w 0 -455.35 m 300 -455.35 l s Q q BT 0 Tr 0 g 1 0 0 1 0 792 Tm /F2 11 Tf 100 Tz 428.5 -136.5 Td 1.1 Tw 0 Tc (14533) Tj -219.8475 0 Td (S) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (IRACUSANO) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( v. NECA-IBEW P) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (ENSION) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( F) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (UND) Tj /F2 11 Tf 100 Tz 0 Ts ET Q q 1 0 0 1 0 792 cm 0 G .5 w 156 -140.25 m 456 -140.25 l s Q endstream endobj 86 0 obj 4148 endobj 84 0 obj << /Type /Page /MediaBox [0 0 612 792] /Parent 87 0 R /Resources << /Font << /F1 6 0 R /F2 7 0 R /F4 9 0 R /F5 17 0 R >> /ProcSet 1 0 R >> /Contents 85 0 R >> endobj %%Page: 26 26 89 0 obj << /Length 90 0 R >> stream q BT 0 Tr 0 g 1 0 0 1 156 643.5 Tm /F2 12 Tf 100 Tz 0 -8.4 Td .96 Tw 0 Tc (find that Clarot was aware of the potential anosmia problem.) Tj 0 -13 Td 2.85 Tw (Moreover, the inference that high-level executives such as) Tj 0 -13 Td 1.82 Tw (Johnson, Hemelt, and Clarot would know that the company) Tj 0 -13 Td 2.77 Tw (was being sued in a product liability action is sufficiently) Tj 0 -13 Td 1.2 Tw (strong to survive a motion to dismiss.) Tj 12 -26 Td 2.53 Tw (In response to the January 30, 2004, article in the Dow) Tj -12 -13 Td 1.28 Tw (Jones Newswires that the FDA was investigating complaints) Tj 0 -13 Td .3 Tw (of anosmia linked to Zicam, Matrixx issued a press release on) Tj 0 -13 Td .06 Tw (February 2, 2004. By the time of this press release, three more) Tj 0 -13.1 Td 2.28 Tw (lawsuits regarding anosmia had been filed against Matrixx.) Tj 0 -13.1 Td .16 Tw (This press release cites the two double-blind studies regarding) Tj 0 -13.1 Td .47 Tw (the ) Tj (safety and efficacy of zinc gluconate for the treatment of) Tj 0 -13.1 Td 1.03 Tw (symptoms related to the common cold,) Tj ( but, again, the press) Tj 0 -13.1 Td .41 Tw (release did not say whether Matrixx studied the intranasal use) Tj 0 -13.1 Td .34 Tw (of zinc gluconate for safety, as opposed to efficacy. The press) Tj 0 -13.1 Td 3.18 Tw (release also states that ) Tj (statements alleging that intranasal) Tj 0 -13.1 Td .66 Tw (Zicam products cause anosmia . . . are completely unfounded) Tj 0 -13.1 Td 2.37 Tw (and misleading,) Tj ( and then devotes three paragraphs to dis-) Tj 0 -13.1 Td 1.93 Tw (crediting the author of the article and urging Dow Jones to) Tj 0 -13.1 Td 1.2 Tw (investigate the author.) Tj /F1 12 Tf 100 Tz 12 -26 Td 1.6 Tw ([11]) Tj /F2 12 Tf 100 Tz ( By the time of the February 2, 2004 press release, a) Tj -12 -13.1 Td 1.74 Tw (strong inference can be drawn that Appellees knew that the) Tj 0 -13.1 Td 1.41 Tw (statements alleging a link between Zicam and anosmia were) Tj 0 -13.1 Td .5 Tw (not ) Tj (completely unfounded and misleading.) Tj ( Appellees alleg-) Tj 0 -13.1 Td 1.96 Tw (edly knew about the presentation by Jafek to the American) Tj 0 -13.1 Td 3 Tw (Rhinologic Society, Clarot's conversation with Linschoten,) Tj 0 -13.1 Td 1.53 Tw (and several lawsuits alleging that Zicam caused anosmia. In) Tj 0 -13.1 Td 5.1 Tw (addition, Matrixx's statements in the press release, that) Tj 0 -13.1 Td .87 Tw (Zicam's safety was ) Tj (well established) Tj ( by their trials, conflict) Tj 0 -13.1 Td .91 Tw (with the allegations that Clarot told Linschoten in September) Tj 0 -13.1 Td 1.66 Tw (2002 that Matrixx had not conducted any studies and asked) Tj 0 -13.1 Td 3.93 Tw (her to participate in studies. The references in the press) Tj 0 -13.1 Td 1 Tw (release to clinical trials establishing Zicam's safety also con-) Tj 0 -13.1 Td .32 Tw (flict with the March 4, 2004, news report that Matrixx did not) Tj 0 -13.1 Td 2.18 Tw (know if Zicam could cause anosmia and formed a medical) Tj 0 -13.1 Td 1.2 Tw (advisory panel to conduct studies.) Tj 1 0 0 1 0 792 Tm /F2 11 Tf 100 Tz 156 -136.5 Td 1.1 Tw 0 Tc (14534) Tj 52.6525 0 Td (S) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (IRACUSANO) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( v. NECA-IBEW P) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (ENSION) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( F) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (UND) Tj /F2 11 Tf 100 Tz 0 Ts ET Q q 1 0 0 1 0 792 cm 0 G .5 w 156 -140.25 m 456 -140.25 l s Q endstream endobj 90 0 obj 3599 endobj 88 0 obj << /Type /Page /MediaBox [0 0 612 792] /Parent 87 0 R /Resources << /Font << /F1 6 0 R /F2 7 0 R >> /ProcSet 1 0 R >> /Contents 89 0 R >> endobj %%Page: 27 27 92 0 obj << /Length 93 0 R >> stream q BT 0 Tr 0 g 1 0 0 1 156 643.5 Tm /F2 12 Tf 100 Tz 12 -8.4 Td 2.57 Tw 0 Tc (Matrixx's February 6, 2004, press release, following the) Tj /F4 12 Tf 100 Tz -12 -13.5 Td 1.71 Tw (Good Morning America) Tj /F2 12 Tf 100 Tz ( segment regarding Jafek's findings,) Tj 0 -13.5 Td 2.18 Tw (repeated the statements that the safety of zinc gluconate to) Tj 0 -13.5 Td 2.45 Tw (treat cold symptoms had been established in clinical trials,) Tj 0 -13.5 Td 1.77 Tw (stated that the common cold affects the sense of smell, and) Tj 0 -13.5 Td .33 Tw (stated that the studies linking zinc to anosmia were conducted) Tj 0 -13.5 Td 4.78 Tw (in the 1930s using a different zinc compound. Matrixx) Tj 0 -13.5 Td 1.2 Tw (2/6/2004 press release.) Tj 12 -26.7 Td 3.85 Tw (Appellants have not alleged that Appellees engaged in) Tj -12 -13.5 Td 1.6 Tw (unusual or suspicious stock sales at the same time that they) Tj 0 -13.5 Td .44 Tw (were attempting to downplay the reports of anosmia. ) Tj /F4 12 Tf 100 Tz (See ) Tj (Sili-) Tj 0 -13.5 Td .33 Tw (con Graphics) Tj /F2 12 Tf 100 Tz (, 183 F.3d at 986 \(stating that ) Tj (unusual or suspi-) Tj 0 -13.5 Td 6.14 Tw (cious stock sales by corporate insiders may constitute) Tj 0 -13.5 Td 6.34 Tw (circumstantial evidence of scienter) Tj (\) \(internal quotation) Tj 0 -13.5 Td .25 Tw (marks omitted\). The Supreme Court has stated, however, that,) Tj 0 -13.5 Td .57 Tw ([w]hile it is true that motive can be a relevant consideration,) Tj 0 -13.5 Td 1.4 Tw (and personal financial gain may weigh heavily in favor of a) Tj 0 -13.4 Td .82 Tw (scienter inference, we agree with the Seventh Circuit that the) Tj 0 -13.4 Td .53 Tw (absence of a motive allegation is not fatal.) Tj ( ) Tj /F4 12 Tf 100 Tz (Tellabs) Tj /F2 12 Tf 100 Tz (, 551 U.S.) Tj 0 -13.4 Td 1.2 Tw (at 324.) Tj 12 -26.6 Td 1.5 Tw (On a holistic review of the CAC, the following picture is) Tj -12 -13.4 Td 2.71 Tw (alleged. Matrixx received some customer complaints about) Tj 0 -13.4 Td 1.26 Tw (Zicam and anosmia from 1999 to 2002. In 2002, Clarot was) Tj 0 -13.4 Td .83 Tw (sufficiently concerned that he called Linschoten about one of) Tj 0 -13.4 Td .45 Tw (her patients who had complained and then called to ask if she) Tj 0 -13.4 Td 3.65 Tw (would participate in studies. In September 2003, Matrixx) Tj 0 -13.4 Td 1.5 Tw (knew that Jafek and his colleagues were presenting findings) Tj 0 -13.4 Td 3 Tw (about ten or eleven patients who developed anosmia after) Tj 0 -13.4 Td 4.07 Tw (Zicam use and did not allow Jafek to use Matrixx's or) Tj 0 -13.4 Td 1.33 Tw (Zicam's name in the presentation. In October 2003, Matrixx) Tj 0 -13.4 Td 1.51 Tw (touted the potential for growth and profitability of Zicam in) Tj 0 -13.4 Td 2.66 Tw (a press release and an earnings conference call. A lawsuit) Tj 0 -13.4 Td 3.14 Tw (alleging anosmia in one Zicam user was filed in October) Tj 0 -13.4 Td .5 Tw (2003. In November 2003, Matrixx filed a Form 10-Q, but did) Tj 0 -13.4 Td .51 Tw (not disclose the lawsuit in the section entitled ) Tj (Risk Factors.) Tj () Tj 1 0 0 1 0 792 Tm /F2 11 Tf 100 Tz 428.5 -136.5 Td 1.1 Tw 0 Tc (14535) Tj -219.8475 0 Td (S) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (IRACUSANO) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( v. NECA-IBEW P) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (ENSION) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( F) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (UND) Tj /F2 11 Tf 100 Tz 0 Ts ET Q q 1 0 0 1 0 792 cm 0 G .5 w 156 -140.25 m 456 -140.25 l s Q endstream endobj 93 0 obj 3600 endobj 91 0 obj << /Type /Page /MediaBox [0 0 612 792] /Parent 87 0 R /Resources << /Font << /F1 6 0 R /F2 7 0 R /F4 9 0 R >> /ProcSet 1 0 R >> /Contents 92 0 R >> endobj %%Page: 28 28 95 0 obj << /Length 96 0 R >> stream q BT 0 Tr 0 g 1 0 0 1 156 643.5 Tm /F2 12 Tf 100 Tz 0 -8.4 Td 3.5 Tw 0 Tc (More lawsuits were filed in December 2003 and January) Tj 0 -12.9 Td 1.2 Tw (2004. ) Tj 12 -25.7 Td 4.75 Tw (On February 2, 2004, Matrixx issued a press release) Tj -12 -12.9 Td .2 Tw (responding to the January 30, 2004, Dow Jones report that the) Tj 0 -12.9 Td .12 Tw (FDA was investigating Zicam and anosmia. This press release) Tj 0 -12.9 Td .61 Tw (called the report ) Tj (completely unfounded and misleading) Tj ( and) Tj 0 -12.9 Td 1.44 Tw (asserted that clinical trials had established the safety of zinc) Tj 0 -12.9 Td 3.71 Tw (gluconate. On February 6, 2004, ) Tj /F4 12 Tf 100 Tz (Good Morning America) Tj /F2 12 Tf 100 Tz 0 -12.9 Td 0 Tw (reported on the possible link between Zicam and anosmia, and) Tj 0 -12.9 Td .25 Tw (Matrixx issued another press release asserting that zinc gluco-) Tj 0 -12.9 Td 3.96 Tw (nate's safety was well established in clinical trials, even) Tj 0 -12.9 Td .11 Tw (though it was subsequently reported that Matrixx had not con-) Tj 0 -12.9 Td 1.7 Tw (ducted such studies. In a February 19, 2004, filing with the) Tj 0 -12.9 Td 1.9 Tw (SEC, Matrixx stated that it had convened a panel of physi-) Tj 0 -12.9 Td 2.58 Tw (cians and scientists to review the information and asserted) Tj 0 -12.9 Td .25 Tw (that there was insufficient evidence to determine whether zinc) Tj 0 -13 Td 1.77 Tw (gluconate affected the sense of smell. On March 4, 2004, a) Tj 0 -13 Td 3.16 Tw (news article reported that Matrixx would begin studies to) Tj 0 -13 Td 1.2 Tw (determine if Zicam caused anosmia.) Tj 4.9 Ts /F5 6 Tf 100 Tz .5 Tw (8) Tj 0 Ts /F1 12 Tf 100 Tz 12 -25.7 Td .3 Tw ([12]) Tj /F2 12 Tf 100 Tz ( Viewing the CAC as a whole, the inference of scienter) Tj -12 -13 Td .93 Tw (is ) Tj (cogent and at least as compelling) Tj ( as any ) Tj (plausible non-) Tj 0 -13 Td .95 Tw (culpable explanation[) Tj 0 Tw ( ) Tj .95 Tw (]) Tj ( for Appellees' conduct. ) Tj /F4 12 Tf 100 Tz (Tellabs) Tj /F2 12 Tf 100 Tz (, 551) Tj 0 -13 Td 2.44 Tw (U.S. at 324. Withholding reports of adverse effects of and) Tj 0 -13 Td 2.24 Tw (lawsuits concerning the product responsible for the compa-) Tj 0 -13 Td .83 Tw (ny's remarkable sales increase is ) Tj (an extreme departure from) Tj 0 -13 Td .27 Tw (the standards of ordinary care) Tj ( and ) Tj (presents a danger of mis-) Tj 0 -13 Td .7 Tw (leading buyers or sellers.) Tj ( ) Tj /F4 12 Tf 100 Tz (Silicon Graphics) Tj /F2 12 Tf 100 Tz (, 183 F.3d at 976.) Tj 0 -13 Td .5 Tw (We therefore conclude that the inference that Appellees with-) Tj 0 -13 Td .71 Tw (held the information intentionally or with deliberate reckless-) Tj 0 -13 Td 1.13 Tw (ness is at least as compelling as the inference that Appellees) Tj 0 -13 Td 1.2 Tw (withheld the information innocently.) Tj /F2 10 Tf 100 Tz 10 -25.6 Td 4.1 Ts /F5 6 Tf 100 Tz 2.85 Tw (8) Tj 0 Ts /F2 10 Tf 100 Tz (We do not address Appellants' allegations that Appellees violated) Tj -10 -11 Td .14 Tw (GAAP and FASB principles in the November 12, 2003, Form 10-Q. ) Tj (Vio-) Tj 0 -11 Td .66 Tw (lations of GAAP standards can . . . provide evidence of scienter,) Tj ( but the) Tj 0 -11 Td .67 Tw (violations must be described with sufficient particularity. ) Tj /F4 10 Tf 100 Tz (Daou) Tj /F2 10 Tf 100 Tz (, 411 F.3d) Tj 0 -11 Td 1 Tw (at 1016. ) Tj ET Q q 1 0 0 1 156 643.5 cm 0 G .5 w 0 -433.95 m 300 -433.95 l s Q q BT 0 Tr 0 g 1 0 0 1 0 792 Tm /F2 11 Tf 100 Tz 156 -136.5 Td 1.1 Tw 0 Tc (14536) Tj 52.6525 0 Td (S) Tj /F2 7.7 Tf 101.2 Tz .79 Tw (IRACUSANO) Tj /F2 11 Tf 100 Tz 0 Ts 1.1 Tw ( v. 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