The Materiality Standard After Matrixx Initiatives, Inc. v. Siracusano

June 16, 2012

The recent, unanimous decision of the U.S. Supreme Court in Matrixx Initiatives, Inc. v. Siracusano resolved a circuit split on the materiality standard under Rule 10b-5 of the Securities Exchange Act of 1934. By affirming the Ninth Circuit, the Court re-established the materiality standard set forth twenty-three years ago in Basic Inc. v. Levinson. Although the Court relied heavily on this past decision, it did provide some guidance to pharmaceutical companies regarding the disclosure requirements of adverse event reports. With the circuit split now settled, it appears that adverse event reports, standing alone, will generally not be enough to satisfy the materiality standard. However, when in conjunction with affirmative statements concerning the safety and profitability of the drug, these adverse event reports may be material as to not make the statements made misleading. The question remains whether normal advertising of the drug would breach this threshold and require the disclosure of the adverse event reports.