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Securities law

Ninth Circuit Affirms Dismissal of Securities Fraud Suit against Talphera, Inc.

Strategic Insights

— 2 min read

A recent securities fraud lawsuit against Talphera, Inc. (formerly AcelRx Pharmaceuticals) and two top executives has been upheld by the United States Court of Appeals for the Ninth Circuit. The Ninth Circuit ruled that a company slogan, "Tongue and Done," used in investor presentations was not misleading to reasonable investors, given the accompanying disclosures. This decision clarifies the interplay between marketing materials, context, and the reasonable investor standard for reliance and materiality in claims under Section 10(b) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5.

Key Takeaways:

  • The Ninth Circuit held that the plaintiffs failed to adequately plead both falsity and a strong inference of scienter in the securities fraud suit against Talphera, Inc.
  • The court emphasized that a reasonable investor is presumed to act with care and to seek out relevant information, and that a statement or omission could mislead investors only if it was made in a context that did not provide the necessary information.
  • The "Tongue and Done" slogan used by Talphera, Inc. in investor presentations was not misleading to reasonable investors, given the accompaniments disclosures and clarifying information provided by the company.
  • The court noted that the FDA warning letter about the propriety of the slogan was not dispositive of falsity under the Exchange Act, as it targeted a different audience (consumers and prescribers of drugs) than securities cases (investors).
  • The Ninth Circuit also held that the omission of certain steps of DSUVIA's administration from the CEO's speech did not make the statement misleading, as the FDA requires disclosure of specific instructions to healthcare providers, not investors.
  • The court determined that a strong inference of scienter only exists if that inference is at least as compelling as any alternative explanation, and in this case, the more likely explanation was that the company's officers made a good-faith decision to use the slogan.
  • The decision highlights the importance of context in evaluating the materiality of statements made by companies, particularly in cases involving dual regulatory scrutiny.

Statistics:

  • The Ninth Circuit's decision was issued on August 20, 2025.
  • The lawsuit was dismissed with prejudice for failure to adequately plead facts giving rise to a strong inference of scienter.
  • The Court's ruling emphasized the importance of considering the total mix of information when assessing whether a statement or omission could mislead investors.

Sources:

  • Sneed v. Talphera, Inc., 2025 WL 2406424 (9th Cir. Aug. 20, 2025)
  • Securities Exchange Act of 1934, 15 U.S.C. § 78j(b)
  • Securities and Exchange Commission Rule 10b-5, 17 C.F.R. § 240.10b-5
  • Federal Food, Drug, and Cosmetic Act ("FDCA"), 21 U.S.C. § 301 et seq.
  • Food & Drug Administration ("FDA") website
  • Sheppard Mullin Richter & Hampton LLP (John Stigi) article, available at

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