Saul:
1. There are two issues wrt to a 10b-5 action: when is a fact material, and when is there is a duty to disclose?
2. The most straightforward way to establish a material fact is when a company says that it is, as DNDN did in their 10K's when describing any delay in FDA approval wrt to the outcome of a FDA manufacturing inspection as a material investment risk. In addition, the proportion of Form 483's in relation to the number of facilities and surveillance inspections a company handles annually can be a factor. Thus, the only pre-approval inspection of DNDN's only and start-up production facility during a 6 month priority review cycle of their first BLA is a far cry from the hundreds of inspections and many Form 483's that a large pharma deals with over the years (this, for example allowed Abbott off the hook when they received a large fine for not clearing up recurring 483 problems). Was it just a coincidence that the Quality Assurance expert on the BOD was one of the selling shareholders? Another factor is the proximity in time of a regulatory event to another important event with significance to investors. A prediction that a clinical trial will be enrolled during the following year is very different, for example, from not reporting an event near a May 15 PDUFA date that would likely delay FDA approval when DNDN said they expected to launch commercial sales of their first product.
3. A duty to disclose arises when a regulatory event occurs with potential negative impact and is not reported when a company purports to review all material facts to that date and /or an insider or insiders sell shares. There is also a legal presumption that if an insider was aware of the undisclosed fact, that is presumed to be a reason for the sale, A 10b-5 sales program that one of the selling directors filed and sold pursuant to is a good reason for a sale so long as it was filed prior to the bad event; if filed afterwards it becomes a red flag.
4. David Miller may be a fine biotech analyst, but he is no attorney with experience and a record of success in 10b-5 actions.
5. One final observation: If you were the only DNDN shareholder and one of your employees didn't tell you about the failed preapproval inspection, sold $2.7 million of his shares while you believed that he had told you everything of relevance, and later told you at a shareholders' meeting that the Form 483 issue could not be cleared up until the end of the year, which he knew about for 3 months before the PDUFA date and less than two months from the time of his sales, would you continue to trust him, pay him $700K a year in salary and bonuses, and give him another 100,000 options? When is enough enough? The fact that it may have influenced the DNDN desision not to raise funds at a more opportune time and not to challenge the FDA decision wrt to clinical trial efficacy and take Pazdur and his cronies into a Federal Court to explain their actions is just another reason to be ticked off.
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