FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

JAMES SIRACUSANO, Individually           
and on behalf of all others
similarly situated,
                  Plaintiff-Appellant,         No. 06-15677
                                                D.C. Nos.
                                         
NECA-IBEW PENSION FUND,
                 Claimant-Appellant,         CV 04-0886 MHM
                                             CV 04-1012 MHM
                  v.
                                                OPINION
MATRIXX INITIATIVES, INC.; CARL J.
JOHNSON; WILLIAM J. HEMELT,
              Defendants-Appellees.
                                         
        Appeal from the United States District Court
                 for the District of Arizona
        Mary H. Murguia, District Judge, Presiding

                   Argued and Submitted
          June 9, 2009—San Francisco, California

                    Filed October 28, 2009

    Before: Mary M. Schroeder, A. Wallace Tashima and
              Carlos T. Bea, Circuit Judges.

                  Opinion by Judge Tashima




                             14507
14510    SIRACUSANO v. NECA-IBEW PENSION FUND




                      COUNSEL

Joseph D. Daley, Coughlin Stoia Geller Rudman & Robbins
LLP, San Diego, California, for the plaintiff-appellant.

Michael G. Yoder, O’Melveny & Myers LLP, Newport
Beach, California, for the defendants-appellees.
             SIRACUSANO v. NECA-IBEW PENSION FUND                    14511
                               OPINION

TASHIMA, Circuit Judge:

   Matrixx Initiatives, Inc. (“Matrixx”) is a pharmaceutical
company that sells cold products through its wholly-owned
subsidiary, Zicam, LLC. One of its main products is Zicam
Cold Remedy, which comes in several different forms.1
Plaintiffs-Appellants are lead plaintiff, NECA-IBEW Pension
Fund, and named plaintiff, James Siracusano, in a class action
brought against Matrixx and three Matrixx executives (collec-
tively “Appellees”) under the Private Securities Litigation
Reform Act of 1995 (“PSLRA”). Appellants alleged that
Appellees violated the Securities Exchange Act of 1934 by
failing to disclose material information regarding Zicam Cold
Remedy — specifically, that Zicam causes a condition called
anosmia, which is a loss of the sense of smell, in its users. The
district court granted in part and denied in part Appellees’
motion to strike portions of the complaint and granted Appel-
lees’ motion to dismiss the complaint and the action. We have
jurisdiction pursuant to 28 U.S.C. § 1291. We reverse and
remand for further proceedings.

                          BACKGROUND2
  1
     On June 16, 2009, the Food and Drug Administration (“FDA”) issued
a warning letter to Matrixx, setting forth the FDA’s conclusion that several
Zicam Cold Remedy products “may pose a serious risk to consumers who
use them.” http://www.fda.gov/ICECI/EnforcementActions/Warning
Letters/ucm166909.htm (visited July 19, 2009; information moved to
http://www.fda.gov/ForConsumers/ConsumerUpdates/ucm166931.htm).
The FDA stated that it had received “more than 130 reports of anosmia,
(loss of sense of smell, which in some cases can be long-lasting or perma-
nent), associated with use of these products.” 

following allegations are taken from the Consolidated Amended
Complaint (“CAC”). In reviewing the district court’s dismissal for failure
to state a claim, we accept the plaintiffs’ allegations as true and construe
them in the light most favorable to the plaintiffs. Zucco Partners, LLC v.
Digimarc Corp., 

, 989 (9th Cir. 2009). As such, the allega-
tions are hereafter stated as fact.
14512      SIRACUSANO v. NECA-IBEW PENSION FUND
   On April 27, 2004, Appellants filed a class action against
Matrixx and three individual defendants — Carl Johnson,
Matrixx’s Chief Executive Officer, President and a director;
William Hemelt, Matrixx’s Chief Financial Officer and Exec-
utive Vice President; and Timothy Clarot, Matrixx’s Vice
President and Director of Research and Development — on
behalf of investors who purchased Matrixx securities during
the class period, October 22, 2003, to February 6, 2004.
Zicam Cold Remedy accounted for approximately 70 percent
of Zicam’s sales during the class period. Zicam Cold Reme-
dy’s active ingredient is zinc gluconate and can be applied as
a nasal spray or a gel. Appellants alleged that Appellees were
aware that numerous users of Zicam had developed anosmia,
but that they failed to disclose the risk and instead issued false
and misleading statements regarding Zicam.

I.   Allegations of Adverse Information Regarding Zicam

   In December 1999, Dr. Alan Hirsch, the Neurological
Director of the Smell & Taste Treatment and Research Foun-
dation, Ltd., “called Matrixx’s customer service line to
inquire into the amount of zinc contained in Zicam nasal gel.”
CAC ¶ 25. Hirsch spoke with a Mr. Landau and explained
that at least one of Hirsch’s patients had developed anosmia
after using Zicam. Hirsch stated that other studies had indi-
cated potential problems with “intranasal application of zinc,”
and offered to conduct a clinical study on the issue. Mr. Lan-
dau declined his offer.

   In September 2002, Clarot, Vice President of Research and
Development, called Miriam Linschoten, Ph.D., of the Uni-
versity of Colorado Health Sciences Center. Clarot contacted
Linschoten because a patient Linschoten had treated for loss
of smell following use of Zicam also had complained to
Matrixx. Linschoten expressed concern that Zicam, an over-
the-counter product, contained no warning that it could cause
a loss of smell. Clarot told Linschoten that Matrixx had
received similar complaints from other customers as early as
           SIRACUSANO v. NECA-IBEW PENSION FUND           14513
1999. Linschoten asked whether Matrixx had performed any
studies, told Clarot about existing studies linking zinc sulfate
to the loss of smell, and offered to send Clarot information
regarding those studies. Clarot replied that Matrixx had not
done any studies but that “it had hired a consultant to review
the product.” CAC ¶ 26.

   On September 20, 2002, Linschoten sent an email to Clarot
including abstracts on the link between zinc sulfate and the
loss of smell. Clarot called Linschoten to ask if she would
participate in animal studies to be conducted by Matrixx, but
Linschoten declined because she focused on human, not ani-
mal, research.

   Linschoten, Dr. Bruce Jafek of the University of Colorado
School of Medicine, and another colleague planned to submit
their findings regarding ten patients who had developed anos-
mia following Zicam use in a presentation to the American
Rhinologic Society on September 20, 2003. On September 12,
2003, “Matrixx sent a letter to Jafek stating that he did not
have permission to use Matrixx’s name or the names of its
products” in the presentation. CAC ¶ 29. Jafek asked for per-
mission to use the Zicam name, but Matrixx refused. The pre-
sentation to the American Rhinologic Society accordingly
was made without naming Zicam. “Jafek’s findings regarding
Zicam were ultimately disclosed to the public on February 6,
2004 on Good Morning America.” 

April of 2004, Dr. Jafek had evaluated over 100
cases of anosmia following Zicam use.” CAC ¶ 30. Linscho-
ten had treated approximately 65 such patients, all of whom
complained of “an ‘immediate, severe burning’ immediately
following use of Zicam nasal gel, followed by a loss of
smell.” None of the patients had fully recovered. 

Hirsch “have observed that the Zicam nasal spray does reach
the upper area of the nasal cavity where smell reception
occurs.”
14514       SIRACUSANO v. NECA-IBEW PENSION FUND
II.   Allegations of Misleading Statements

   On October 22, 2003, Matrixx issued a press release
announcing that its net sales for the third quarter of 2003 had
increased by 163% over the third quarter of 2002. Johnson
was quoted in the press release as follows:

      The Zicam brand is poised for growth in the upcom-
      ing cough and cold season with improved retail
      exposure by virtue of three [new] unique oral deliv-
      ery forms of our Zicam Cold Remedy product, the
      resumption of our television advertising campaigns
      in recent weeks and the momentum from last year’s
      successful season. Additionally, our retail partners
      have come to rely on the Zicam brand not only as an
      efficacious product for their customers, but also for
      the profitability that Zicam branded products pro-
      duce for their respective bottom-lines.

Matrixx 10/22/2003 press release. Appellants alleged that
these statements were materially false and misleading because
they failed to disclose Appellees’ awareness of the material
health risk that Zicam posed to consumers.

   On October 23, 2003, Appellees held an earnings confer-
ence call, at which Johnson expressed his “enthusiasm for the
most recently completed quarter” and his “optimis[m] about
the future.” 10/23/03 Tr. at 1. Johnson explained that

      we have very strong momentum going into the
      upcoming cough and cold season. In addition, what
      lies behind these results is a unique product in the
      Zicam product line, a product that offers a unique
      benefit, the ability for consumers to actually reduce
      the duration and severity of the common cold, not
      just mask the symptoms, and tremendous support
      that we are receiving from our retail customers.
            SIRACUSANO v. NECA-IBEW PENSION FUND                   14515

Johnson further expressed the expectation for the year
that “our revenues will be up in excess of 50% and that earn-
ings per share for the full year will be in the 25-30¢ range.”

Hemelt stated that the growth “was driven by
increased sales of all 10 of our Zicam products,” explaining
that approximately one-third of the increase in sales was due
to “three new Zicam oral cold remedy products,” and that the
remainder of the increase “was due to increased sales of our
other seven Zicam products.” 

Johnson and Hemelt
then answered questions.

   At one point, they were asked to “make any comment on
the litigation MTXX or its officers are involved in, or whether
or not there is any SEC [Securities and Exchange Commis-
sion] investigation.” 

They replied that “[t]he officers
of this company are not involved in any litigation,” and that
they were not aware of any SEC investigation.3 

Johnson concluded by reiterating “the optimism we have for
the future.” 

There was no mention of the anosmia
issue.

   On November 12, 2003, Matrixx filed its Form 10-Q report
for the third quarter of 2003 with the SEC. The section of the
Form 10-Q that Appellants alleged was false and misleading
was this paragraph from the section on Risk Factors:

      We may incur significant costs resulting from prod-
      uct liability claims

      We are subject to significant liability should use or
      consumption of our products cause injury, illness or
      death. Although we carry product liability insurance,
  3
    A lawsuit was filed against Matrixx and Zicam on October 14, 2003,
in the United States District Court for the Western District of Michigan,
alleging that Zicam caused anosmia. Matrixx was served on October 23,
2003, the day of the earnings conference call. Christensen v. Matrixx Ini-
tiatives, Inc., No. 03-cv-0146, Docket No. 3.
14516      SIRACUSANO v. NECA-IBEW PENSION FUND
    there can be no assurance that our insurance will be
    adequate to protect us against product liability
    claims or that insurance coverage will continue to be
    available on reasonable terms. A product liability
    claim, even one without merit or for which we have
    substantial coverage, could result in significant legal
    defense costs, thereby increasing our expenses and
    lowering our earnings. Such a claim, whether or not
    proven to be valid, could have a material adverse
    effect on our product branding and goodwill, result-
    ing in reduced market acceptance of our products.
    This in turn could materially adversely affect our
    results of operations and financial condition.

CAC ¶ 35. Appellants alleged that these statements were
materially false and misleading because Appellees “failed to
disclose that a lawsuit alleging that Zicam caused anosmia
had already been filed and, given the findings of the research-
ers at the University of Colorado it was highly likely that
additional suits would be filed in the future.” 

a press release on January 7, 2004, in which
it “upwardly revised its guidance for fiscal year 2003. The
Company expects total 2003 revenues to grow by greater than
80 percent compared to 2002 and fully diluted earnings per
share to be in the range of $0.33 to $0.38.” CAC ¶ 37.
Matrixx reported that “[t]he increase in the guidance for 2003
reflects a much greater incidence of colds than previously
anticipated.” 

30, 2004, an article in the Dow Jones
Newswires reported that the FDA was “looking into com-
plaints that an over-the-counter common-cold medicine man-
ufactured by a unit of Matrixx Initiatives Inc. (MTXX) may
be causing some users to lose their sense of smell.” The arti-
cle stated that “[t]he FDA’s interest follows at least three law-
suits filed by individuals against Matrixx and Zicam LLC, a
wholly-owned subsidiary, by users of Zicam Cold Remedy.”
          SIRACUSANO v. NECA-IBEW PENSION FUND          14517
Appellants alleged that Matrixx’s stock declined after this
report, “falling from $13.55 per share on January 30, 2004 to
$11.97 per share on February 2, 2004.” CAC ¶ 41.

   On February 2, 2004, Matrixx issued a press release, “re-
spond[ing] to the Dow Jones ‘In The Money report: FDA
Looks Into Complaints About Zicam,’ by Carol S. Remond,
alleging that the FDA is investigating consumer complaints
regarding intranasal zinc gluconate-induced loss of smell.”
Matrixx 2/2/2004 press release. The press release stated:

    Matrixx Initiatives, Inc., the manufacturer of
    Zicam(R) Cold Remedy, is not aware of an FDA
    inquiry into the safety of our intranasal zinc-
    gluconate products . . . .

    All Zicam products are manufactured and marketed
    according to FDA guidelines for homeopathic medi-
    cine. Our primary concern is the health and safety of
    our customers and the distribution of factual infor-
    mation about our products. Matrixx believes state-
    ments alleging that intranasal Zicam products cause
    anosmia (loss of smell) are completely unfounded
    and misleading.

    In no clinical trial of intranasal zinc gluconate gel
    products has there been a single report of lost or
    diminished olfactory function (sense of smell).
    Rather, the safety and efficacy of zinc gluconate for
    the treatment of symptoms related to the common
    cold have been well established in two double-blind,
    placebo-controlled, randomized clinical trials. In
    fact, in neither study were there any reports of anos-
    mia related to the use of this compound. The overall
    incidence of adverse events associated with zinc glu-
    conate was extremely low, with no statistically sig-
    nificant difference between the adverse event rates
    for the treated and placebo subsets.
14518     SIRACUSANO v. NECA-IBEW PENSION FUND
    A multitude of environmental and biologic influ-
    ences are known to affect the sense of smell. Chief
    among them is the common cold. As a result, the
    population most likely to use cold remedy products
    is already at increased risk of developing anosmia.
    Other common causes of olfactory dysfunction
    include age, nasal and sinus infections, head trauma,
    anatomical obstructions, and environmental irritants.

    The circumstances surrounding the development of
    Ms. Remond’s column are extremely suspect. The
    article appeared online in public financial message
    boards almost immediately following its availability
    through the Dow Jones ‘In The Money’
    subscription-only service. At least one of these mes-
    sage board postings was made by a registered user-
    name frequently used by Floyd Schneider, a
    defendant currently being sued for defamation by
    Matrixx Initiatives. From at least August 2001 to the
    present, Schneider has posted false and defamatory
    statements about Matrixx on various Internet mes-
    sage boards using a variety of anonymous aliases. It
    has come to our attention that Schneider has also
    attempted to interfere with Matrixx’ business by
    contacting our retail customers.

    Ms. Remond’s article appears on today’s Dow Jones
    Newswire — the very day that Matrixx Initiatives is
    deposing Schneider. We believe that the timing of
    this article was manipulated by Schneider to inter-
    rupt the deposition process. We know that Ms.
    Remond and Schneider were in close communication
    during the development of Ms. Remond’s article and
    even discussed the disclosure statement detailing the
    basis for our suit against Schneider, which has not
    yet been made public. Therefore, it is particularly
    troubling that Ms. Remond neglected to mention the
    defamation action or that Schneider was one of her
           SIRACUSANO v. NECA-IBEW PENSION FUND          14519
    chief sources of information. We consider her failure
    to mention these facts to be a significant omission in
    fair and balanced reporting.

    Matrixx Initiatives would like to underscore that we
    intend to vigorously pursue those individuals
    involved in any effort to improperly discredit the
    company and its products. Furthermore, we strongly
    urge Dow Jones to open its own investigation to
    determine whether Dow Jones’ credibility was
    undermined by the use of copyrighted material in an
    attempt to do further harm to the value and reputa-
    tion of Matrixx Initiatives and its products.

Matrixx 2/2/2004 press release. Appellants alleged that
Matrixx’s “vigorous, but baseless, denials had their intended
effect: the stock price rose, closing at $13.40 per share on
February 3, 2004.” CAC ¶ 41.

   On February 6, 2004, the television show Good Morning
America did a report on Matrixx’s zinc gluconate products
and anosmia. Reporter John Ferrugia reported that Jafek had
treated “ ‘more than a dozen patients’ ” and that four lawsuits
had been filed, and others were “ ‘being prepared.’ ” CAC
¶ 42. Appellants alleged that, “[i]n response to the Good
Morning America segment . . . , the price of Matrixx common
stock plummeted, falling from $13.05 per share on February
5, 2004, to close at $9.94 per share on February 6 — a one-
day drop of 23.8% on unusually heavy trading volume.” CAC
¶ 43.

   On February 6, 2004, Matrixx issued another press release,
describing the reports linking anosmia with zinc gluconate
intranasal gels as “completely unfounded and misleading.”
Matrixx 2/6/2004 press release. Matrixx “assure[d] our con-
sumers that Zicam Cold Remedy intranasal zinc gluconate
products are manufactured and marketed according to Food
14520     SIRACUSANO v. NECA-IBEW PENSION FUND
and Drug Administration guidelines for homeopathic medi-
cine.” 

asserted as follows:

    In no clinical trial of intranasal zinc gluconate gel
    products has there been a single report of lost or
    diminished olfactory function (sense of smell).
    Rather, the safety and efficacy of zinc gluconate for
    the treatment of symptoms related to the common
    cold have been well established in two double-blind,
    placebo-controlled, randomized clinical trials. In
    fact, in neither study were there any reports of anos-
    mia related to the use of this compound. The overall
    incidence of adverse events associated with zinc glu-
    conate was extremely low, with no statistically sig-
    nificant difference between the adverse event rates
    for the treated and placebo subsets.

    A multitude of environmental and biologic influ-
    ences are known to affect the sense of smell. Chief
    among them is the common cold. As a result, the
    population most likely to use cold remedy products
    is already at increased risk of developing anosmia.
    ...

    A few researchers have attempted to link nasal prod-
    ucts containing zinc to the onset of anosmia. How-
    ever, this hypothesis is based on data from polio
    studies conducted in the 1930s using a concentrated
    zinc sulfate solution. Current nasal products, such as
    Zicam Cold Remedy, contain zinc gluconate, which
    is an entirely different compound.

Matrixx 2/6/2004 press release.

  On February 19, 2004, Appellees filed a Form 8-K with the
SEC, in which Matrixx stated that it had “convened a two-day
meeting of physicians and scientists to review current infor-
mation on smell disorders.” CAC ¶ 45. The form stated that
           SIRACUSANO v. NECA-IBEW PENSION FUND            14521
the meeting was in response to the September 20, 2003, pre-
sentation to the American Rhinologic Society. The form fur-
ther stated that, “[i]n the opinion of the panel, there is
insufficient scientific evidence at this time to determine if
zinc gluconate, when used as recommended, affects a per-
son’s ability to smell.”

   On March 4, 2004, Ferrugia, the reporter on the Good
Morning America segment, reported on TheDenverChan-
nel.com that Matrixx “now admit[ted] that they don’t know if
their nasal gel could cause loss of smell.” CAC ¶ 47. The arti-
cle stated that “[t]he stunning information came after a
7NEWS investigation found that some consumers who have
used Zicam report the loss of smell.” 

reported
that Matrixx initially “told us its studies showed the product
[was] safe,” but that it would begin studies to determine if the
product could cause the loss of smell. 

origi-
nal). The article further provided as follows:

    Doctors at the University of Colorado Taste and
    Smell Clinic have an increasing number of patients
    who say they lost their sense of smell after using
    Zicam intranasal gel, which contains zinc gluconate.
    Dr. Bruce Jafek has been documenting the cases
    from around the country, and there have been several
    lawsuits in at least five states. All along, Matrixx Ini-
    tiatives, the maker of Zicam, said the product was
    safe. But now it admits there are no studies dealing
    with the issue. In a filing to the Securities and
    Exchange Commission on issues affecting stock-
    holders, Matrixx now discloses: “There is insuffi-
    cient evidence at this time to determine if zinc
    gluconate, when used as recommended, affects a
    person’s ability to smell.” What’s more, after our ini-
    tial investigation, dozens of consumers have filed
    complaints with the Food and Drug Administration.
    In response, the company formed a medical advisory
14522       SIRACUSANO v. NECA-IBEW PENSION FUND
      panel in February. It says it will now conduct:
      “. . . animal and human studies to further character-
      ize these post-marketing complaints.” Study findings
      are expected to be available in 12 months. “It seems
      to me that those studies should have been done
      before they put the product on the market,” said
      Jafek.

19, 2004, Matrixx filed its Form 10-K with the
SEC, stating that “numerous suits alleging that its Zicam pro-
duct(s) caused anosmia had been filed.” CAC ¶ 48. “As of
December 31, 2003, suits involving three users of the Zicam®
Cold Remedy nasal gel products had been filed in various fed-
eral and state courts.” 

that, “[a]ccording
to Matrixx’s own SEC filings, from late 2003 through Octo-
ber 2004 Matrixx has been sued by approximately 284 indi-
viduals in 19 different lawsuits alleging that Zicam caused
damage to their sense of smell,” and included in the complaint
a table detailing the lawsuits. CAC ¶ 49. The table included
suits filed on October 14, 2003, December 8, 2003, December
18, 2003, and January 23, 2004, as well as numerous suits fol-
lowing the close of the class period.

   Appellants alleged that the financial information contained
in Matrixx’s Form 10-Q filed on November 12, 2003, was
false and misleading and violated SEC rules and the Gener-
ally Accepted Accounting Principles (“GAAP”) promulgated
by the Financial Accounting Standards Board (“FASB”).
Appellants asserted that, at the time Matrixx filed the Form
10-Q,

      Matrixx should have disclosed, if not provided a
      reserve for, a potential contingency that had arisen
      related to safety issues concerning its products. Dur-
      ing the Class Period, Matrixx did not disclose that
      several lawsuits had been filed against the Company,
           SIRACUSANO v. NECA-IBEW PENSION FUND            14523
    including one prior to the start of the Class Period,
    alleging that the Company’s zinc gluconate-based
    products had caused plaintiffs to suffer from anos-
    mia and that anecdotal evidence had surfaced ques-
    tioning the safety of the Company’s mainstay cold
    medication. The failure to disclose these known con-
    tingencies violated GAAP.

CAC ¶ 55. Appellants listed the FASB rules violated by
Matrixx’s Form 10-Q and asserted that “the undisclosed
adverse information concealed by defendants during the Class
Period is the type of information which, because of SEC regu-
lations, . . . is expected by investors . . . to be disclosed and
is known by corporate officials . . . to be the type of informa-
tion which is expected to be and must be disclosed.” CAC
¶¶ 56-57.

   Appellants alleged that, “[a]s a result of defendants’ materi-
ally false and misleading statements and failure to disclose
adverse information regarding Zicam, Matrixx securities
traded at artificially inflated prices during the Class Period.”
CAC ¶ 58. Appellants also alleged that, “[d]uring the Class
Period, defendants materially misled the investing public,
thereby inflating the price of Matrixx common stock, by pub-
licly issuing false and misleading statements and omitting to
disclose material adverse facts regarding Zicam, necessary to
make defendants’ statements, as set forth herein not false and
misleading.” CAC ¶ 59.

  In the section of the complaint entitled “Additional Scienter
Allegations,” Appellants alleged as follows:

    [D]efendants acted with scienter in that defendants
    knew that the public statements or documents issued
    or disseminated in the name of the Company were
    materially false and misleading; knew that such
    statements or documents would be issued or dissemi-
    nated to the investing public; and knowingly and
14524        SIRACUSANO v. NECA-IBEW PENSION FUND
      substantially participated or acquiesced in the issu-
      ance or dissemination of such statements or docu-
      ments as primary violations of the federal securities
      laws. As set forth elsewhere herein in detail, defen-
      dants, by virtue of their receipt of information
      reflecting the true facts regarding Matrixx, their con-
      trol over, and/or receipt and/or modification of the
      Company’s alleged materially misleading misstate-
      ments and/or their associations with the Company
      which made them privy to confidential proprietary
      information concerning Matrixx, participated in the
      fraudulent scheme alleged herein.

      Defendants were aware since at least September of
      2003, that numerous users of their Zicam product
      had experienced a rare condition known as anosmia
      or loss of smell. Findings of post treatment anosmia
      were reported by Dr. Bruce Jafek, Miriam R. Lin-
      schoten and Bruce W. Morrow of the University of
      Colorado School of Medicine, Department of Otolar-
      yngology at a medical conference in September of
      2003. At the time, Dr. Jafek had reported 10 cases of
      anosmia after Zicam use. As of April of 2004, Dr.
      Jafek had evaluated over 100 such cases. On Sep-
      tember 12, 2003, over one month before the start of
      the Class Period, Matrixx informed Dr. Jafek that “as
      a legal matter” he did “not have their permission to
      use their company name or product trademarks” in
      the poster reporting Dr. Jafek’s research. In order to
      avoid threatened legal action from the Company, Dr.
      Jafek deleted any reference to Zicam or Matrixx
      from the poster which he used to present his research
      at a medical conference.4
  4
   We do not disturb the district court’s order granting, in part, Appellees’
motion to strike portions of the CAC related to research published after the
close of the class period.
             SIRACUSANO v. NECA-IBEW PENSION FUND                     14525
CAC ¶¶ 63-64.

   Appellees filed a motion to strike any allegations that con-
cerned user complaints and lawsuits that occurred after the
close of the class period. The district court denied the motion
in part and granted it in part. The court reasoned that the rele-
vant inquiry was not whether there was a link between Zicam
and anosmia, but whether Appellees knew that their state-
ments were false at the time they were made. The court there-
fore denied the motion to strike as to the complaints and
lawsuits that were filed because those allegations were rele-
vant to Appellees’ knowledge of user complaints. However,
the court granted the motion to strike as to Jafek’s ultimate
conclusions, which were published after the close of the class
period.

   The district court then dismissed the complaint without
prejudice, reasoning, that the allegations of user complaints
were not material because they were not statistically signifi-
cant. The court also found that Appellants had failed suffi-
ciently to allege scienter.

   The court further stated that any amendment would be
futile “[a]bsent allegations Defendants knew there was a
definitive and statistically significant link between Zicam and
anosmia during the Class Period that was ‘sufficiently serious
and frequent to affect future earnings.’ ” The court therefore
granted the motion to dismiss and dismissed the complaint
without prejudice. The court then entered judgment, dismiss-
ing the complaint and the action without prejudice.5 Appel-
lants timely appealed.
  5
    Although the judgment dismisses the action without prejudice, it is
“final for purposes of [28 U.S.C.] § 1291 [because] it (1) is a full adjudica-
tion of the issues, and (2) clearly evidences the judge’s intention that it be
the court’s final act in the matter.” Elliott v. White Mountain Apache
Tribal Court, 

, 846 (9th Cir. 2009).
14526      SIRACUSANO v. NECA-IBEW PENSION FUND
                   STANDARD OF REVIEW

   The district court’s dismissal for failure to state a claim is
reviewed de novo. Zucco Partners, LLC v. Digimarc Corp.,

, 989 (9th Cir. 2009). We accept the plaintiffs’
allegations as true and construe them in the light most favor-
able to the plaintiffs. 

“inappropriate unless the
plaintiffs’ complaint fails to ‘state a claim to relief that is
plausible on its face.’ ” 

Atl. Corp. v. Twom-
bly, 

, 570 (2007)).

                        DISCUSSION

   [1] “Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b),
in combination with SEC Rule 10b-5, prohibits ‘any act, prac-
tice, or course of business which operates or would operate as
a fraud or deceit upon any person, in connection with the pur-
chase or sale of any security.’ ” Rubke v. Capitol Bancorp
Ltd., 

, 1164 (9th Cir. 2009) (quoting 17 C.F.R.
§ 240.10b-5(c)). In order adequately to allege a violation of
Rule 10b-5, “a plaintiff must [allege] ‘(1) a material misrepre-
sentation or omission of fact, (2) scienter, (3) a connection
with the purchase or sale of a security, (4) transaction and loss
causation, and (5) economic loss.’ ” 

re Daou
Sys., Inc., 

, 1014 (9th Cir. 2005)). The district
court dismissed the complaint on the grounds that Appellants
failed adequately to allege the first two elements; therefore,
we address only those two elements.

I.   Materiality

   [2] Appellants contend that Appellees’ failure to disclose
information regarding the possible link between Zicam and
anosmia constituted the omission of a material fact. “An omit-
ted fact is material if there is a substantial likelihood that a
reasonable shareholder would consider it important in decid-
ing how to vote.” TSC Indus., Inc. v. Northway, Inc., 

, 449 (1976).
             SIRACUSANO v. NECA-IBEW PENSION FUND                    14527
   [3] “ ‘Questions of materiality . . . involv[e] assessments
peculiarly within the province of the trier of fact.’ ” SEC v.
Talbot, 

, 1097 (9th Cir. 2008) (quoting Arring-
ton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 

, 619 (9th Cir. 1981)) (alterations in original). Thus, “the
ultimate issue of materiality [is] appropriately resolved ‘as a
matter of law’ ” only where the omissions are “ ‘so obviously
important to an investor, that reasonable minds cannot differ
on the question of materiality.’ ” 

(quot-
ing Johns Hopkins Univ. v. Hutton, 

, 1129 (4th
Cir. 1970)).

   The district court summarized the “allegations of links
between Zicam and anosmia for which Defendants had
knowledge” as follows: “a phone conversation between a
Matrixx vice-president and University of Colorado researcher
discussing one anosmia complaint, a 1999 study recognizing
a possible link, and a University of Colorado study citing 11
cases of anosmia in Zicam users.”6 District Ct. Order at 11.
The court then found that Appellants had failed adequately to
allege materiality because the number of complaints of which
Appellees were aware was not “statistically significant.” The
court relied on the statistical significance standard used by the
Second Circuit in In re Carter-Wallace, Inc. Securities
   6
     The district court also reasoned that “Matrixx conducted a double-blind
study regarding Zicam and not a single case of anosmia was reported.”
This was presumably a reference to Matrixx’s February 2, 2004, press
release, which states that “the safety and efficacy of zinc gluconate for the
treatment of symptoms related to the common cold have been well estab-
lished in two double-blind, placebo-controlled, randomized clinical trials.”
The press release, however, does not state that any tests established that
the application of zinc gluconate to the nose is safe. In fact, as reported
by Ferrugia on March 4, 2004, Matrixx allegedly subsequently admitted
that “ ‘they don’t know if their nasal gel could cause loss of smell,’ ” and
that they would “begin . . . testing to determine whether its zinc compound
could be harmful when sprayed in the nose.” Moreover, the complaint
alleged that Clarot told Linschoten in September 2002 that Matrixx had
not conducted any studies and asked her to participate in studies.
14528      SIRACUSANO v. NECA-IBEW PENSION FUND
Litigation, 

, 157 (2d Cir. 1998), and In re
Carter-Wallace, Inc. Securities Litigation, 

(2d
Cir. 2000). We conclude, however, that the district court erred
in relying on the statistical significance standard to conclude
that Appellants failed adequately to allege materiality.

   [4] The Supreme Court has rejected the adoption of a
bright-line rule to determine materiality because “ ‘[t]he
determination [of materiality] requires delicate assessments of
the inferences a “reasonable shareholder” would draw from a
given set of facts and the significance of those inferences to
him.’ ” Basic Inc. v. Levinson, 

, 236 (1988)
(quoting 

) (second alteration in original).
Instead, courts should engage in a “fact-specific inquiry” in
assessing materiality. 

Thus, “[d]etermining materi-
ality in securities fraud cases ‘should ordinarily be left to the
trier of fact.’ ” SEC v. Phan, 

, (9th Cir. 2007)
(quoting In re Apple Computer Sec. Litig., 

,
1113 (9th Cir. 1989)); see also No. 84 Employer-Teamster
Joint Council Pension Trust Fund v. Am. W. Holding Corp.,

, 934-35 (9th Cir. 2003) (declining to adopt a
bright-line rule to determine materiality, engaging in the fact-
specific inquiry required by Basic, and finding that the plain-
tiffs had sufficiently pleaded materiality).

   [5] In relying on the statistical significance standard to
determine materiality, the district court made a decision that
should have been left to the trier of fact. Instead, we agree
with the approach of the court in In re Pfizer Inc. Securities
Litigation, 

(S.D.N.Y. 2008), where the
United States District Court for the Southern District of New
York rejected the defendant pharmaceutical company’s argu-
ment that the plaintiffs failed to plead materiality, which was
based on the contention that three studies revealing adverse
effects of the company’s drug were not statistically signifi-
cant. The court reasoned that it “cannot determine as a matter
of law whether such links were statistically insignificant
           SIRACUSANO v. NECA-IBEW PENSION FUND            14529
because statistical significance is a question of fact.” 

   [6] Thus, we are to engage in the fact-specific inquiry
required by Basic. In doing so, we must take the allegations
in the complaint as true and construe them in the light most
favorable to Appellants and determine whether the complaint
“fails to state a claim to relief that is plausible on its face.”

(internal quotation marks omitted).
The following allegations in the CAC go to the question of
whether the information regarding the possible link between
Zicam and anosmia was information that a reasonable inves-
tor would have considered significant:

•   In December 1999, Hirsch called Matrixx’s customer ser-
    vice line and reported one patient who had developed
    anosmia after Zicam use and mentioned studies regarding
    intranasal application of zinc.

•   In September 2002, Clarot called Linschoten because one
    of her patients had complained to Matrixx about Zicam
    and anosmia. Clarot told Linschoten that Matrixx had
    received similar complaints from other customers since
    1999, and Linschoten told Clarot about studies linking
    zinc sulfate to loss of smell.

•   On September 20, 2002, Linschoten sent Clarot an email
    with abstracts on the link between zinc sulfate and the loss
    of smell.

•   In September 2003, Jafek presented findings about ten or
    eleven patients who suffered anosmia following Zicam
    use. Matrixx, through Clarot, stopped Jafek from using
    Matrixx’s and Zicam’s names in the presentation.

•   On October 14, 2003, two plaintiffs filed suit against
    Matrixx in the United States District Court for the Western
    District of Michigan, alleging that Zicam caused anosmia.
14530       SIRACUSANO v. NECA-IBEW PENSION FUND
•   On December 8, 2003, a plaintiff filed suit against Matrixx
    in Los Angeles Superior Court regarding Zicam and anos-
    mia.

•   On December 18, 2003, another suit regarding Zicam and
    anosmia was filed against Matrixx in Alabama state court
    and removed to federal court.

•   On January 23, 2004, five plaintiffs filed a consolidated
    suit against Matrixx in the Superior Court of Maricopa
    County, Arizona regarding Zicam and anosmia. An addi-
    tional 261 plaintiffs later joined this action, after the close
    of the class period.

•   By April 2004, Jafek “had evaluated over 100 cases of
    anosmia following Zicam use,” and Linschoten had seen
    65 cases, although the time period of these allegations is
    not clear.

   [7] We believe that the foregoing allegations are sufficient
to meet the pleading requirement under the PSLRA, which
requires that:

     the complaint shall specify each statement alleged to
     have been misleading, the reason or reasons why the
     statement is misleading, and, if an allegation regard-
     ing the statement or omission is made on information
     or belief, the complaint shall state with particularity
     all facts on which that belief is formed.

15 U.S.C. § 78u-4(b)(1). The allegations in the CAC are suffi-
cient to meet that standard and, as well, to “nudge[ ] [Appel-
lants’] claims across the line from conceivable to plausible.”

. Appellants have sufficiently
alleged materiality, and the district court’s finding to the con-
trary is reversed.
            SIRACUSANO v. NECA-IBEW PENSION FUND           14531
II.   Scienter

   [8] In order to plead scienter, the PSLRA requires the com-
plaint to “state with particularity facts giving rise to a strong
inference that the defendant acted with the required state of
mind.” 15 U.S.C. § 78u-4(b)(2). The plaintiff “must allege
that . . . the defendant had an intention ‘to deceive, manipu-
late, or defraud.’ ” Metzler Inv. GMBH v. Corinthian Colls.,
Inc., 

, 1065-66 (9th Cir. 2008) (quoting Ernst
& Ernst v. Hochfelder, 

, 193 (1976)). “[I]n deter-
mining whether the pleaded facts give rise to a ‘strong’ infer-
ence of scienter, the court must take into account plausible
opposing inferences.” Tellabs, Inc. v. Makor Issues & Rights,
Ltd., 

, 310 (2007). The complaint will survive a
motion to dismiss “only if a reasonable person would deem
the inference of scienter cogent and at least as compelling as
any opposing inference one could draw from the facts
alleged.” 

This does not mean that a plaintiff must
“plead more than she would be required to prove at trial.” 

Rather, “[a] plaintiff alleging fraud under § 10(b)
action . . . must plead facts rendering an inference of scienter
at least as likely as any plausible opposing inference.” 

establish scienter, “a complaint must ‘allege that the
defendants made false or misleading statements either inten-
tionally or with deliberate recklessness.’ ” 

(quoting 

). We must first “deter-
mine whether any of the plaintiff ’s allegations, standing
alone, are sufficient to create a strong inference of scienter.”

If not, we are to “conduct a ‘holistic’ review of the
same allegations to determine whether the insufficient allega-
tions combine to create a strong inference of intentional con-
duct or deliberate recklessness.” 

defined as

      a highly unreasonable omission, involving not
      merely simple, or even inexcusable negligence, but
      an extreme departure from the standards of ordinary
      care, and which presents a danger of misleading buy-
14532      SIRACUSANO v. NECA-IBEW PENSION FUND
    ers or sellers that is either known to the defendant or
    is so obvious that the actor must have been aware of
    it.

In re Silicon Graphics Inc. Sec. Litig., 

, 976 (9th
Cir. 1999) (quoting Hollinger v. Titan Capital Corp., 

, 1569 (9th Cir. 1990) (en banc)).

   The district court here concluded that the CAC failed to
allege the requisite scienter because it “fails to allege any
motive or state of mind with relation to the alleged omis-
sions.” In order adequately to allege scienter, Appellants rely
on their allegations that Appellees knew about the problems
with Zicam but chose not to reveal them. Appellants also
argue that the importance of Zicam to Matrixx’s business sup-
ports the inference that Appellees intentionally withheld
information of the link between Zicam and anosmia. Appel-
lants also point to the revelations following the close of the
class period that, contrary to their statements during the class
period, Matrixx actually did not know if Zicam caused anos-
mia and decided to conduct studies after they had already
vouched for the safety of Zicam.

   Matrixx’s first allegedly misleading statement was its Octo-
ber 22, 2003, press release, announcing the 163% net sales
increase, attributed to Zicam, and stating that the Zicam brand
was “poised for growth.” The second statement was the con-
ference call on October 23, 2003, again attributing the compa-
ny’s positive results to Zicam and projecting further growth.
By the time of the press release and the conference call,
Hirsch had called the customer service line regarding one
patient, Clarot had spoken with Linschoten regarding cus-
tomer complaints, Jafek had presented his report of eleven
patients, and the first lawsuit against Matrixx had been filed.
Appellees accordingly were aware of at least fourteen com-
plaints regarding Zicam and anosmia at the time they made
these statements. In addition, Appellants alleged that Clarot
told Linschoten in the September 2002 phone call that
            SIRACUSANO v. NECA-IBEW PENSION FUND              14533
“Matrixx had received customer complaints of loss of smell
as early as 1999.” Appellants then alleged that the November
12, 2003, Form 10-Q was misleading because it spoke of the
risk of product liability actions against the company without
revealing that a lawsuit already had been filed.7

   In Berson v. Applied Signal Tech., Inc., 

(9th
Cir. 2008), the defendants argued that a passage in the compa-
ny’s SEC filings regarding backlogged work alerted reason-
able investors to the risk that the company might not get paid
for work that had actually been stopped. We rejected the argu-
ment, stating that “[t]he passage . . . speaks entirely of as-yet-
unrealized risks and contingencies. Nothing alerts the reader
that some of these risks may already have come to fruition,
and that what the company refers to as backlog includes work
that is substantially delayed and at serious risk of being can-
celled altogether.” 

We therefore disagreed with the
district court’s finding that the statements were not mislead-
ing, reasoning that, “once defendants chose to tout the compa-
ny’s backlog, they were bound to do so in a manner that
wouldn’t mislead investors as to what that backlog consisted
of.” 

cf. In re Elan Corp. Sec. Litig., 

187, 208 (S.D.N.Y. 2008) (“By choosing to speak about
the safety of [their drug], Defendants assumed a duty to dis-
close material information regarding adverse events.”). After
addressing scienter and loss causation, we reversed the district
court’s dismissal of the complaint. 

-
90.

   [10] Similar to Berson, the passage in the Form 10-Q
speaks about the risks of product liability claims in the
abstract, with no indication that the risk “may already have
come to fruition.” 

At the time that Appellees filed
the Form 10-Q, the CAC alleges facts sufficient for a jury to
  7
    As Matrixx later admitted, up to and including the class period,
Matrixx had conducted no studies on the safety of Zicam regarding any
link to anosmia.
14534      SIRACUSANO v. NECA-IBEW PENSION FUND
find that Clarot was aware of the potential anosmia problem.
Moreover, the inference that high-level executives such as
Johnson, Hemelt, and Clarot would know that the company
was being sued in a product liability action is sufficiently
strong to survive a motion to dismiss.

   In response to the January 30, 2004, article in the Dow
Jones Newswires that the FDA was investigating complaints
of anosmia linked to Zicam, Matrixx issued a press release on
February 2, 2004. By the time of this press release, three more
lawsuits regarding anosmia had been filed against Matrixx.
This press release cites the two double-blind studies regarding
the “safety and efficacy of zinc gluconate for the treatment of
symptoms related to the common cold,” but, again, the press
release did not say whether Matrixx studied the intranasal use
of zinc gluconate for safety, as opposed to efficacy. The press
release also states that “statements alleging that intranasal
Zicam products cause anosmia . . . are completely unfounded
and misleading,” and then devotes three paragraphs to dis-
crediting the author of the article and urging Dow Jones to
investigate the author.

   [11] By the time of the February 2, 2004 press release, a
strong inference can be drawn that Appellees knew that the
statements alleging a link between Zicam and anosmia were
not “completely unfounded and misleading.” Appellees alleg-
edly knew about the presentation by Jafek to the American
Rhinologic Society, Clarot’s conversation with Linschoten,
and several lawsuits alleging that Zicam caused anosmia. In
addition, Matrixx’s statements in the press release, that
Zicam’s safety was “well established” by their trials, conflict
with the allegations that Clarot told Linschoten in September
2002 that Matrixx had not conducted any studies and asked
her to participate in studies. The references in the press
release to clinical trials establishing Zicam’s safety also con-
flict with the March 4, 2004, news report that Matrixx did not
know if Zicam could cause anosmia and formed a medical
advisory panel to conduct studies.
           SIRACUSANO v. NECA-IBEW PENSION FUND           14535
   Matrixx’s February 6, 2004, press release, following the
Good Morning America segment regarding Jafek’s findings,
repeated the statements that the safety of zinc gluconate to
treat cold symptoms had been established in clinical trials,
stated that the common cold affects the sense of smell, and
stated that the studies linking zinc to anosmia were conducted
in the 1930s using a different zinc compound. Matrixx
2/6/2004 press release.

   Appellants have not alleged that Appellees engaged in
unusual or suspicious stock sales at the same time that they
were attempting to downplay the reports of anosmia. See Sili-
con 

(stating that “unusual or suspi-
cious stock sales by corporate insiders may constitute
circumstantial evidence of scienter”) (internal quotation
marks omitted). The Supreme Court has stated, however, that,
“[w]hile it is true that motive can be a relevant consideration,
and personal financial gain may weigh heavily in favor of a
scienter inference, we agree with the Seventh Circuit that the
absence of a motive allegation is not fatal.” 

.

   On a holistic review of the CAC, the following picture is
alleged. Matrixx received some customer complaints about
Zicam and anosmia from 1999 to 2002. In 2002, Clarot was
sufficiently concerned that he called Linschoten about one of
her patients who had complained and then called to ask if she
would participate in studies. In September 2003, Matrixx
knew that Jafek and his colleagues were presenting findings
about ten or eleven patients who developed anosmia after
Zicam use and did not allow Jafek to use Matrixx’s or
Zicam’s name in the presentation. In October 2003, Matrixx
touted the potential for growth and profitability of Zicam in
a press release and an earnings conference call. A lawsuit
alleging anosmia in one Zicam user was filed in October
2003. In November 2003, Matrixx filed a Form 10-Q, but did
not disclose the lawsuit in the section entitled “Risk Factors.”
14536       SIRACUSANO v. NECA-IBEW PENSION FUND
More lawsuits were filed in December 2003 and January
2004.

   On February 2, 2004, Matrixx issued a press release
responding to the January 30, 2004, Dow Jones report that the
FDA was investigating Zicam and anosmia. This press release
called the report “completely unfounded and misleading” and
asserted that clinical trials had established the safety of zinc
gluconate. On February 6, 2004, Good Morning America
reported on the possible link between Zicam and anosmia, and
Matrixx issued another press release asserting that zinc gluco-
nate’s safety was well established in clinical trials, even
though it was subsequently reported that Matrixx had not con-
ducted such studies. In a February 19, 2004, filing with the
SEC, Matrixx stated that it had convened a panel of physi-
cians and scientists to review the information and asserted
that there was insufficient evidence to determine whether zinc
gluconate affected the sense of smell. On March 4, 2004, a
news article reported that Matrixx would begin studies to
determine if Zicam caused anosmia.8

   [12] Viewing the CAC as a whole, the inference of scienter
is “cogent and at least as compelling” as any “plausible non-
culpable explanation[ ]” for Appellees’ conduct. 

. Withholding reports of adverse effects of and
lawsuits concerning the product responsible for the compa-
ny’s remarkable sales increase is “an extreme departure from
the standards of ordinary care” and “presents a danger of mis-
leading buyers or sellers.” Silicon 

.
We therefore conclude that the inference that Appellees with-
held the information intentionally or with deliberate reckless-
ness is at least as compelling as the inference that Appellees
withheld the information innocently.
   8
     We do not address Appellants’ allegations that Appellees violated
GAAP and FASB principles in the November 12, 2003, Form 10-Q. “Vio-
lations of GAAP standards can . . . provide evidence of scienter,” but the
violations must be described with sufficient particularity. 

.
           SIRACUSANO v. NECA-IBEW PENSION FUND           14537
                       CONCLUSION

   The district court’s reliance on the statistical significance
standard to conclude that Appellants failed to establish mate-
riality is inconsistent with the Supreme Court’s rejection of
bright-line rules and its emphasis on having materiality deter-
mined by the trier of fact. Viewing the CAC in the light most
favorable to Appellants, we conclude that Appellants have
sufficiently pled materiality to survive dismissal. Similarly,
the inference that Appellees withheld the information regard-
ing Zicam and anosmia intentionally or with deliberate reck-
lessness is at least as compelling as any plausible nonculpable
explanation. For the foregoing reasons, the judgment of the
district court is REVERSED and the case REMANDED for
further proceedings consistent with this opinion.

  REVERSED and REMANDED.