1. Assess Matrixx’s position that reports of adverse events associated with a pharmaceutical company’s products cannot be “material,” absent a sufficient number of reports to establish a statistically significant risk.

2. Do Section 10(b) and Rule 10b-5 create an affirmative duty to disclose any and all material information to investors so they can be fully informed about their investment choices?

3. Having evaluated what the company told investors and with knowledge from the record as to the omitted facts asserted in this case, would a reasonable investor believe that the omitted facts would have significantly altered the “total mix” of information—positive, neutral, and negative—needed to make a sound investment decision?

Matrixx develops, manufactures, and markets overthe- counter pharmaceutical products. Its core product, Zicam Cold Remedy, with its active ingredient zinc gluconate, accounted for approximately 70 percent of Matrixx’s sales. Individuals who purchased Matrixx securities between October 22, 2003, and February 6, 2004, filed a securities fraud class action against Matrixx under Section 10(b) of the 1934 Act. In October 2003 Matrixx made a statement to the market that Zicam was “poised for growth in the upcoming cold and cough season.” It expressed its expectations that revenues would “be up in excess of 50%.” In January 2004 it raised its revenue guidance, predicting an 80 percent increase.

On January 30, 2004, Dow Jones Newswires reported that the Food and Drug Administration (FDA) was “‘looking into complaints that an over-the-counter common-cold medicine manufactured by a unit of Matrixx Initiatives, Inc. may be causing some users to lose their sense of smell’” in light of at least three product liability lawsuits. Matrixx’s stock fell from $13.55 to $11.97 per share after the report. In response, on February 2, Matrixx issued a press release that stated in part:

Matrixx believes statements alleging that intranasal Zicam products caused 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….

The day after Matrixx issued this press release, its stock price bounced back to $13.40 per share. On February 6, 2004, Good Morning America, a nationally broadcast morning news program, reported that Dr. Jafek had discovered more than a dozen patients suffering from anosmia after using Zicam. It also noted that four lawsuits had been filed against Matrixx. The price of Matrixx stock plummeted to $9.94 per share that same day. Zicam again issued a press release, largely repeating its February 2 statement. Prior to these public statements, between October 2003 and February 2004, medical experts had revealed to Matrixx a plausible causal relationship between Zicam  …………