Full opinion text
OPINION WOLFSON, District Judge: Presently before the Court is a motion by Defendants PharmaNet Development Group, Inc. (“PharmaNet” or the “Company”), Jefferey P. McMullen (“McMullen”), and John P. Hamill (“Hamill”) (collectively, “Defendants”), to dismiss Lead Plaintiff Macomb County Employees’ Retirement System’s (“Macomb County” or “Plaintiff’) Amended Class Action Complaint (“Amended Complaint”), pursuant to Federal Rules of Civil Procedure 9(b) and 12(b)(6). In this putative class action securities litigation, Plaintiff alleges that it and other similarly situated investors purchased PharmaNet’s stock between November 1, 2007 and October 29, 2008 (the “Class Period”), and that Defendants have violated Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated under, 17 C.F.R. § 240.10b-5; in addition, Plaintiff avers that Defendants McMullen and Hamill (collectively, “Individual Defendants”) have violated Section 20(a) of the Exchange Act, 15 U.S.C. § 78t(a). Specifically, Plaintiff asserts that Defendants fraudulently inflated PharmaNet’s stock by misrepresenting the Company’s financial figures and concealing from the market serious problems that PharmaNet faced, and that Plaintiff and other investors relied on these material misrepresentations and omissions to their detriment. Defendants move to dismiss the Amended Complaint based on the fact that Plaintiff has failed to plead the elements of a Section 10(b) claim with particularity. For the reasons stated herein, Defendants’ motion is granted and Plaintiffs claims are dismissed without prejudice; however, Plaintiff shall have 30 days from the date of the Order accompanying this Opinion to amend its Amended Complaint consistent with this Opinion. BACKGROUND For the purposes of this motion, the Court will accept the facts as alleged in the Amended Complaint as true. Defendant PharmaNet is a contract/clinical research organization (“CRO”) that provides a range of drug development services globally to the pharmaceutical, biotechnology, generic drug, and medical device industries. Am. Compl. at ¶ 18. During the Class Period, PharmaNet was (and remains) headquartered in Princeton, New Jersey, Id. at ¶¶ 1,15, and “operated in two business segments: (i) the early-stage segment, which primarily consisted of Phase I and bioequivalency clinical trial services and bioanalytical laboratory services, and included designing studies, assisting clients in preparing study protocols, recruiting and screening study participants, conducting early stage clinical trials and collecting and reporting data to clients; and (ii) the late-stage segment, which primarily consisted of Phase II through Phase IV clinical trial services and a comprehensive array of related services, including data management and bio statistics, medical and scientific affairs, regulatory affairs and submissions, clinical information technology services and consulting services.” Id. at ¶ 58. Defendant McMullen has served as President, CEO and a member of the Board of Directors of PharmaNet since March 2006, December 2005 and June 2005, respectively. Id. at ¶ 19. Defendant Hamill has served as Executive Vice President, CFO, Treasurer and Secretary of PharmaNet since 2006. Id. at ¶ 20. Hamill also began functionally serving as Chief Accounting Officer (“CAO”) of PharmaNet in November of 2007. Id. In 1996, McMullen co-founded PharmaNet, Inc. (“PNI”), PharmaNet’s predecessor. Id. In December of 2004, PNI was acquired, through a merger, by SFBC International, Inc. (“SFBC”), and PNI then became known as SFBC. Id. at ¶¶ 19, 58, 64. After the merger, SFBC “began routinely disclosing the size and amount of its contractual backlog, [defined in PharmaNet’s quarterly and annual filings] as the anticipated direct revenue from written notification of awards, letters of intent and written contracts,” a practice continued by PharmaNet. Id. at ¶ 68. By the start of the Class Period, PharmaNet touted backlog to its investors and urged financial analysts to rely on backlog as the most important measure of its financial health and business prospects, and tied backlog to its book-to-bill ratio. Id. at ¶ 70. PharmaNet also disclosed backlog on a quarterly basis, and Defendants McMullen and Hamill discussed backlog in annual reports and other filings and during earnings conference calls. Id. at ¶ 71. PharmaNet reported in its 2007 Annual Report that backlog was valued at $457 million, as opposed to $353 million the previous year, an increase of nearly 30%. Id. Revenue from late-stage clinical trials made up 85% of the 2007 backlog. Id. Beginning in 2005, a series of adverse information regarding SFBC was made public, including, the payment of extra compensation to clinical trial participants in order to procure their participation in more than one study at a time and subsequent requests by SFBC for those participants to sign affidavits denying the improprieties, coupled with threats of deportation to coerce cooperation. See Id. at ¶¶ 60-61. When these improprieties became known, SFBC’s stock fell 68% and the Senate Finance Committee launched an investigation into SFBC’s treatment of patients. In December 2005, shareholders began filing suit against SFBC, and shortly thereafter, the Securities and Exchange Commission (“SEC”) also launched an investigation. Id. at ¶ 60. Consequently, several high-level executives of SFBC resigned amidst the firestorm, including Lisa Krinsky, SFBC’s founder, President and Chairman. Id. at ¶¶ 59, 61. SFBC’s problems continued, as it was forced to raze its Miami testing facility, which “handled more than two-thirds of [its] workload and generated nearly 30% of [its] operating revenue.” Id. at ¶ 62. SFBC’s testing operations were subsequently transferred to Canada, but in December 2005, a participant involved in a drug trial in Montreal infected other participants and SFBC employees with tuberculosis. Id. at ¶ 62-63. This caused several pharmaceutical companies to cease doing business with SFBC, including Isotecknika, Inc. and Bristol-Myers Squibb. Id. Following these negative events, in August 2006, SFBC changed its name to PharmaNet Development Group, Inc. (a defendant in this case). Id. at ¶ 64. Numerous federal securities fraud class actions and federal shareholder derivative actions were filed, and then consolidated and settled on August 1, 2007 for $28.5 million (“the Settlement”). Id. at ¶¶ 64-65. A portion of the Settlement, $10.4 million, was not covered by insurance, and PharmaNet was authorized to issue up to $4 million of common stock to the shareholder class to cover this shortfall. Id. at ¶ 65-66. This additional common stock was to be valued according to the “volume weighted closing price for the 10 trading days leading up to the date the district court enters an order formally approving the settlement” Id. at ¶ 66 (quoting PharmaNet’s 2007 Annual Report). The Settlement was approved on March 10, 2008, and PharmaNet issued 135,870 shares of common stock valued at $4 million, or $29.44 per share, on March 24, 2008. Id. In this action, Plaintiffs securities claims relate to PharmaNet’s quarterly releases and earnings calls in November 2007, February 2008, April 2008, September 2008, and October 2008, as well as statements pertaining to PharmaNet’s financial performance during the Class Period. See Id. ¶¶ 136-52, 156-72, 177-84. Plaintiff, relying, inter alia, on the statements of twelve Confidential Witnesses (“CWs”), see Amend. Compl. at ¶¶ 32-55, 82-102, 106-18, 124-34, alleges that a series of more than two-dozen public statements made by Defendants were materially misleading. See Id. at ¶¶ 136-204. These include: the failure to accurately portray the reasons for a growing number of contract cancellations; inclusion in the backlog of contracts that were unlikely to generate revenue; failure to promptly recognize an impairment charge to PharmaNet’s goodwill and indefinite-lived assets; and the improper inclusion of unsigned changed orders in backlog and in revenue, which served to intentionally and fraudulently inflate PharmaNet’s financial figures. Id. at ¶¶4, 8, 79-80. Plaintiff asserts that this allegedly fraudulent financial picture enabled PharmaNet insiders to profit from insider trading and to artificially buoy the price of PharmaNet’s stock in order to fund the Settlement, restore PharmaNet’s damaged reputation, fund potential acquisitions and provide an alternative to less viable capital sources. Id. at ¶¶3, 9-10, 205. Plaintiff further alleges that as Defendants’ improprieties became known to the market, PharmaNet’s stock price fell from $85.95 per share at the beginning of the Class Period to $1.16 at the end, thus causing Plaintiff and the putative class of shareholders significant damages. Id. at ¶¶ 11-12, 17, 26, 242^43. Plaintiffs allegations of misrepresentations and omissions on the part of Defendants fall into four categories: (1) undisclosed substantial “client dissatisfaction” with PharmaNet, which contributed to cancellations, thus making favorable financial statements inaccurate; (2) fraudulent inflation of PharmaNet’s backlog due to cancelled projects and unsigned change orders; (3) unsigned change orders recognized as revenue; and (4) failure to timely record impairment charges. As these allegations are central to the Court’s legal analysis, the Court will discuss them in more detail below. DISCUSSION I. Pleading Requirements of a 10b-5 Claim A. Elements of a 10b-5 Claim The Securities Act of 1933, 48 Stat. 74, as amended, 15 U.S.C. § 77a et seq., (“Securities Act”) and The Securities Exchange Act of 1934, 48 Stat. 881, as amended, 15 U.S.C. § 78a et seq., were enacted, respectively, to ensure “full and fair disclosure of the character of securities sold in interstate and foreign commerce and through the mails, and to prevent frauds in the sale thereof ...” Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 725, 728, 95 S.Ct. 1917, 44 L.Ed.2d 539 (1975), and “to provide for the regulation of securities exchanges and of over-the-counter markets operating in interstate and foreign commerce and through the mails, to prevent inequitable and unfair practices on such exchanges and markets ...” Id. at 728, 95 S.Ct. 1917. Section 10(b) of the Exchange Act states, in pertinent part: It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange (b) To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, or any seeurities-based swap agreement ... any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors. 15 U.S.C. § 78j(b). In 1942, under the authority granted to it by the statute, the SEC promulgated Rule 10b-5, 17 CFR § 240.10b-5. Blue Chip, 421 U.S. at 729, 95 S.Ct. 1917. Rule 10b-5 provides, in pertinent part: It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange: (a) To employ any device, scheme, or artifice to defraud, (b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or (C) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security. 17 C.F.R. § 240.10b-5. Although the statute does not expressly provide for a private cause of action, the Supreme Court has long held that such a cause of action exists. See Blue Chip, 421 U.S. at 729, 95 S.Ct. 1917 (citing Superintendent of Insurance v. Bankers Life & Cas. Co., 404 U.S. 6, 13 n. 9, 92 S.Ct. 165, 30 L.Ed.2d 128 (1971)). A cause of action under Section 10b-5 consists of the following elements: “(1) a material misrepresentation ...; (2) scienter, i.e., [defendant’s] wrongful state of mind; (3) a connection with the purchase or sale of a security; (4) reliance, often referred to ... as ‘transactional causation’; (5) economic loss; and (6) loss causation, i.e., a causal connection between the material misrepresentation and the loss.” Dura Pharm., Inc. v. Broudo, 544 U.S. 336, 341-42, 125 S.Ct. 1627, 161 L.Ed.2d 577 (2005); McCabe v. Ernst & Young, LLP, 494 F.3d 418, 424 (3d Cir.2007); In re Bradley Pharms., Inc. Secs. Litig., 421 F.Supp.2d 822, 826 (D.N.J.2006). In this case, Defendants submit that Plaintiffs allegations of misrepresentations and omissions under Section 10(b) fail to adequately plead material misrepresentations, a strong inference of scienter, or loss causation. B. Heightened Pleading Requirements of Rule 9(b) In reviewing a motion to dismiss under Fed.R.Civ.P. 12(b)(6), “the court must accept all well-pleaded allegations in the complaint as true and draw all reasonable inferences in favor of the non-moving party.” In re Intelligroup Securities Litigation, 527 F.Supp.2d 262, 275 (D.N.J.2007); Allegheny Gen. Hosp. v. Philip Morris, Inc., 228 F.3d 429, 434-35 (3d Cir.2000); see also Fed.R.Civ.P. 12(b)(6). However, when the allegations are grounded in fraud, this standard is heightened by Fed.R.Civ.P. 9(b). This Rule requires that allegations of fraud must be plead with particularity, and it has been “rigorously applied in securities fraud cases.” Id. (quoting In re Burlington, 114 F.3d at 1417). To this end, Congress enacted the Private Securities Litigation Reform Act of 1995 (“PSLRA”) 15 U.S.C. § 78u et seq. The purpose of requiring particularized pleadings is to prevent abusive securities litigations. See Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 313, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007) (“Private securities fraud actions, however, if not adequately contained, can be employed abusively to impose substantial costs on companies and individuals whose conduct conforms to the law”); Merrill Lynch, Pierce, Fenner & Smith Inc. v. Dabit, 547 U.S. 71, 81, 126 S.Ct. 1503, 164 L.Ed.2d 179 (2006) (identifying “ways in which the class-action device was being used to injure the entire U.S. economy” and listing examples such as “nuisance filings, targeting of deep-pocket defendants, vexatious discovery requests, and manipulation by class action lawyers of the clients whom they purportedly represent ...” (internal quotes and citations omitted)). “The PSLRA provides two distinct pleading requirements, both of which must be met in order for a complaint to survive a motion to dismiss.” Institutional Investors Group v. Avaya, Inc., 564 F.3d 242, 252 (3d Cir.2009) (“Avaya”). First, “under 15 U.S.C. § 78u-4(b)(1), the complaint must ‘specify each allegedly misleading statement, why the statement was misleading, and, if an allegation is made on information and belief, all facts supporting that belief with particularity.’ ” Id. (quoting Winer Family Trust v. Queen, 503 F.3d 319, 326 (3d Cir.2007)) (construing 15 U.S.C. § 78u-4(b)(l)). Second, the complaint must, “with respect to each act or omission alleged to violate this chapter, 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). Both provisions of the PSLRA require pleading of facts with “particularity.” Avaya, 564 F.3d at 253. This particularity language “echoes precisely Fed.R.Civ.P. 9(b).” In re Advanta Corp. Sec. Litig., 180 F.3d 525, 534 (3d Cir.1999); see Fed.R.Civ.P. 9(b) (“[A] party must state with particularity the circumstances constituting fraud or mistake.”). Indeed, although the PSLRA replaced Rule 9(b) as the pleading standard governing private securities class actions, Rule 9(b)’s particularity requirement “is comparable to and effectively subsumed by the requirements of [§ 78u-4(b)(1) of] the PSLRA.” Avaya, 564 F.3d at 253 (citations omitted). This standard “requires plaintiffs to plead the who, what, when, where and how: the first paragraph of any newspaper story.” Advanta, 180 F.3d at 534 (internal quotation marks omitted). Since the substantive allegations of Plaintiffs Amended Complaint are based upon the statements of confidential witnesses, these allegations regarding statements or omissions by Defendants are made upon “information and belief.” See Cal. Pub. Employees’ Ret. Sys. v. Chubb Corp., 394 F.3d 126, 146 n. 10 (3d Cir.2004) (“Chubb ”). In that regard, Section 78u-4(b)(1) adds an additional requirement that plaintiffs must also “state with particularity all facts on which that belief is formed.” Id.; Avaya, 564 F.3d at 253. The Third Circuit explained that when allegations are made on information and belief, the complaint must not only state the allegations with factual particularity, but must also describe the sources of information with particularity, providing the who, what, when, where and how of the sources, as well as the who, what, when, where and how of the information those sources convey. Id. “[A] complaint can meet the pleading requirement [of the PSLRA] by providing sufficient documentary evidence and/or a sufficient description of the personal sources of the plaintiffs beliefs.” Id. at 261 (quoting Chubb, 394 F.3d at 147). Therefore, when evaluating a complaint that is based upon the statements of confidential witnesses, courts “consider the detail provided by the confidential sources, the sources’ basis of knowledge, the reliability of the sources, the corroborative nature of other facts alleged, including from other sources, the coherence and plausibility of the allegations, and similar indicia.” Id., (quoting Chubb at 148). In contrast, “the PSLRA’s requirement for pleading scienter ... marks a sharp break with Rule 9(b).” Id. Under § 78u-4(b)(2), “a plaintiff can no longer plead the requisite scienter element generally, as he previously could under Rule 9(b).” Id. (citing Mizzaro v. Home Depot, Inc., 544 F.3d 1230, 1238 (11th Cir.2008)); see Fed.R.Civ.P. 9(b) (“Malice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.”). Instead, under the PSLRA’s “[ejxaeting” pleading standard for scienter, “any private securities complaint alleging that the defendant made a false or misleading statement must ... state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind.” Tellabs, 551 U.S. at 313, 127 S.Ct. 2499 (internal quotation marks omitted). II. Safe Harbor As a preliminary matter, Defendant argues that statements regarding PharmaNet’s backlog, financial projections and statements about future economic performance fall within the PSLRA’s Safe Harbor, 15 U.S.C. § 78u-5(e)(l). This section provides, in pertinent part: (1) [A] person ... shall not be liable with respect to any forward-looking statement, whether written or oral, if and to the extent that— (A) the forward-looking statement is— (i) identified as a forward looking statement, and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statement; or (ii) immaterial; or (B) the plaintiff fails to prove that the forward-looking statement— (i) if made by a natural person, was made with actual knowledge by that person that the statement was false or misleading; or (ii) if made by a business entity; was— (I) made by or with the approval of an executive officer of that entity; and (II) made or approved by such officer with actual knowledge by that officer that the statement was false or misleading. 15 U.S.C. § 78u-5(c)(1). The statute further clarifies that “forward-looking statements” include statements: “[CJontaining a projection of revenues, income (including income loss), earnings (including earnings loss) per share, capital expenditures, dividends, capital structure, or other financial items”; statements of “the plans and objectives of management for future operations, including plans or objectives relating to the products or services of the issuer”; or statements of “future economic performance, including any such statement contained in a discussion and analysis of financial condition by the management or in the results of operations included pursuant to the rules and regulations of the Commission.” Further, forward looking statements include “any statement of the assumptions underlying or relating to any statement described” in the definition. Avaya, 564 F.3d at 255 (quoting 15 U.S.C. § 78u-5(i)(1)(A)-(D)). Moreover, “a mixed present/future statement is not entitled to the safe harbor with respect to the part of the statement that refers to the present.” Id. (citing In re Stone & Webster, Inc., Sec. Litig., 414 F.3d 187, 213 (1st Cir.2005) (“The mere fact that a statement contains some reference to a projection of future events cannot sensibly bring the statement within the safe harbor if the allegation of falsehood relates to non-forward-looking aspects of the statement”)). Next, in order to fall within the safe harbor, a forward-looking statement must be identified as such and be “accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statement.” EP Medsystems, Inc. v. EchoCath, Inc., 235 F.3d 865, 872-873 (3d Cir.2000) (quoting 15 U.S.C. § 78u-5(c)(1)(A)(i)). Cautionary language must be “extensive yet specific.” In re Trump Casino Sec. Litig., 7 F.3d 357, 369 (3d Cir.1993). However, the safe harbor provision does not apply if the statement was made by a natural person (as compared to a business entity) who had “actual knowledge” at the time that the statement was false or misleading. 15 U.S.C. § 78u-5(c)(1)(B)(i). A forward-looking statement made by a business entity is protected unless it was made by or with the approval of an executive officer of that entity who had actual knowledge that the statement was false or misleading. 15 U.S.C. § 78u-5(c)(1)(B)(ii). Plaintiff dedicates at least seventeen pages of its Amended Complaint to statements made by Defendants that are allegedly materially misleading. Defendants do not specifically indicate which statements in the Amended Complaint are forward-looking; instead, they provide examples. Specifically, Defendants argue that the following statements should be regarded as forward-looking statements: statements relating to backlog (see, e.g., ¶¶ 136, 138, 147, 161), statements regarding PharmaNet’s financial projections (see, e.g., ¶¶ 138, 140, 159), and statements about future economic performance (see, e.g., ¶¶ 139, 149, 161). In the following sections, the Court will identify the statements in the Amended Complaint that correspond to each of these categories. A. Backlog In its Amended Complaint, Plaintiff alleges that the following statements regarding backlog were materially misleading: The November 2007 Press Release and Conference Call “Backlog consists of anticipated direct revenue from written awards, letters of intent and contracts that either have not started or are anticipated to begin in the near future.” (Amend. Compl. at ¶ 136.) “Book-to-bill is calculated by taking the change in backlog between periods plus direct revenues divided by direct revenues.” Id. “Backlog increased sequentially by 6%, by almost 34% year-to-date. The book to bill ratio is 1.3 for the third quarter 2007 and 1.4 year to date.” Id. at ¶ 138. The February 2008 Press Release and Conference Call “The Company’s backlog decreased to $475.4 million at December 31, 2007, compared to $472.5 million at September 30, 2007, primarily due to cancellations of certain projects in the early and late stage segments.” Id. at ¶ 147. “The quarter-to-date book-to-bill ratio was 0.8x at December 31, 2007, compared to 1.3x at September 30, 2007 reflecting the aforementioned cancellations.” Id. at ¶ 148. “The early stage backlog in the fourth quarter was impacted by the cancellation of certain projects. However, the majority of those projects have already been rescheduled for the early part of 2008.” Id. at ¶ 150. The April 2008 Press Release and Conference Call “Despite the cancellations totaling approximately $59 million that occurred over the past two quarters, backlog for the late state segment increased to $400.9 million at March 31, 2008, compared to $387.9 million at December 31, 2007.” Id. at ¶ 158. The Court’s first inquiry in the Safe Harbor analysis is whether the above-quoted statements are forward-looking. With respect to allegations concerning backlog, Defendants cite to Payne v. DeLuca, 433 F.Supp.2d 547 (W.D.Pa.2006), and other out-of-state cases, for the general proposition that backlog is forward-looking, and therefore protected by the Safe Harbor. Plaintiff primarily relies on Berson v. Applied Signal, 527 F.3d 982, 990 (9th Cir.2008), for the proposition that backlog, such as here, represents a company’s contractual entitlement to perform certain work, and therefore, the foregoing statements are not protected by the Safe Harbor provision. The Court finds Applied Signal’s treatment of backlog applicable in this case. In Applied Signal, the Ninth Circuit noted that the company at issue, like PharmaNet, defined backlog as “the dollar value of work it has contracted to do but hasn’t yet performed.” Id. at 990. The court reasoned that because backlog was “a snapshot of how much work the company has under contract right now,” not “a ‘projection’ of earnings or a ‘statement’ about ‘future economic performance,’ ” statements regarding backlog were not protected by the Safe Harbor. Id.; (quoting 15 U.S.C. § 78u-5(i)(1)). Similar to the backlog in Applied Signal, the statements regarding backlog identified in the Amended Complaint consist of “anticipated direct revenue from written awards, letters of intent and contracts that either have not started or are anticipated to begin in the near future.” While the backlog in Applied Signal consisted solely of contracts, this fact does not change the “present” nature of the backlog in this case. Indeed, each statement relating to backlog is a present fact that is not a projection of future economic performance; these statements concern the value of backlog at the time the statements were made to the public {e.g., “backlog for the late state segment increased to $400.9 million at March 31, 2008, compared to $387.9 million at December 31, 2007” see Am. Compl. at ¶ 158). The cases cited by Defendants are factually and otherwise distinguishable from the present case. For instance, in Weiss v. Mentor Graphics Corp., No. 97-1376, 1999 WL 985141, at *11 (D.Or. Oct. 6, 1999), the court distinguished forward-looking statements that relied on backlog from present statements regarding the value of backlog: [Tjhis court concluded that [defendants’] statements regarding backlog were not forward-looking because they were based on a confirmable, present fact— either [the corporation] had a strong backlog going into Q3 1996 or it did not. Now, however, plaintiffs claim is based on whether a strong back-log can be used at all to predict Q3 1996 performance ... [T]he prediction that [the corporation] would meet its financial projection for Q3 1996 was clearly forward-looking. The representation that a strong backlog was one reason for meeting those financial projections is a “statement of the assumptions underlying or relating to” the financial projections. As a result, referring to strong backlog as a predictor of future performance is a forward-looking statement. Id.; see also In re: Stone & Webster, Inc., Securities Litigation, 253 F.Supp.2d 102, 116-17 (D.Mass.2003) (finding that statements predicting “ ‘improved margins’ from projects in backlog” were forward-looking; this is distinguished from PharmaNet’s statements concerning backlog, which refer to the value of its backlog in the past and present); Payne, 433 F.Supp.2d at 603-05 (not addressing whether defendants’ statements were forward looking, and instead finding that plaintiff had failed to allege a material misrepresentation). Accordingly, because the statements relating to backlog in the Amended Complaint concern the present value of the backlog, the Court finds these statements are not forward-looking, and thus, do not fall within the ambit of the Safe Harbor. B. Financial Projections and Future Economic Performance The Amended Complaint asserts that the following statements projecting economic growth were materially misleading and not protected by the Safe Harbor Provision: The November 2007 Press Release and Conference Call (1) “We are increasing non-GAAP guidance for the balance of the year based on both our year-to-date performance and a forecast for the last quarter ... this new guidance reflects our confidence in the future of the business in the continuing favorable market environment.” Amend. Compl. at ¶ 138. (2) “For continuing operations in 2007, the company expects direct revenue to be between $361 million to $365 million.” Id. at ¶ 140. The February 2008 Press Release and Conference Call (3) “In 2008, we are looking forward to continued growth and market expansion, while optimizing our operations, increasing resource utilization and reducing costs.” Id. at ¶ 149. The April 2008 Press Release and Conference Call (4) “We believe the higher backlog clearly indicates that we continue to be competitive in the fundamentally strong market for outsourced CRO services and enjoy our clients’ confidence in our abilities.” Id. at ¶ 160. (5) “We expect to feel the impact of the unusually high level of cancellations throughout the year, but we believe our strength in backlog clearly indicates a trend of long-term growth, the continued confidence of our clients and our ability to compete in the growing market for outsourced CRO services.” Id. at ¶ 161. The September 2008 Press Release and Conference Call (6) “We are able to recover in the second quarter 2008 from earlier cancellations and we are confident that our determined business development efforts and existing backlog will drive us to profitability in 2009.” Id. at ¶ 168. Plaintiff argues that these statements are not forward-looking because Defendants tied them to historical and present facts, including the composition and health of backlog and historical financial results. For this proposition, Plaintiff relies on In re Nortel Networks Corp. Sec. Litig., 238 F.Supp.2d 613, 629 (S.D.N.Y.2003). In fact, Nortel’s fact-based holding does not support Plaintiffs position. The court there held that “many of the allegedly misleading statements identified in the [ JComplaint included recitations of historical facts,” Id., and because the complaint sufficiently alleged that “the Defendants had no basis for their optimistic statements and already knew (allegedly) that certain risks had become reality, the misstatements do not fall under the PSLRA’s safe harbor provisions.” Id. In contrast, while Defendants’ statements are based on underlying historical facts, the statements are nevertheless forward-looking. As discussed by the Third Circuit in Avaya, the Safe Harbor extends not only to statements “containing a projection of revenues” and “of future economic performance,” but also to “any statement of the assumptions underlying or relating to” such statements. Avaya, 564 F.3d at 255. Indeed, future projections to some degree are based on the historical and present financial situation of a company. In that respect, the Court finds that the above statements are indeed forward-looking. The Court’s next inquiry is whether these forward-looking statements are accompanied by meaningful cautionary statements. “In applying the Reform Act safe harbor provision, the court must ... decide if [a forward looking statement] is .accompanied by adequate cautionary statements ...” Payne, 433 F.Supp.2d at 561. The Third Circuit has required that “[c]autionary language ... be ‘extensive and specific.’ ” Avaya, 564 F.3d at 256 (quoting GSC Partners CDO Fund v. Washington, 368 F.3d 228, 243 n. 3 (3d Cir.2004)). Furthermore, “a vague or blanket (boilerplate) disclaimer which merely warns the reader that the investment has risks will ordinarily be inadequate to prevent misinformation. To suffice, the cautionary statements must be substantive and tailored to the specific future projections, estimates or opinions in the prospectus which the plaintiffs challenge.” Id. (quoting GSC, 368 F.3d at 243). Here, as its first contention, Plaintiff seemingly argues that a stricter requirement of the “bespeaks caution” doctrine should control the analysis of the sufficiency of “cautionary statements” under the PSLRA, 15 U.S.C. § 78u-5(c)(1)(A)(i). Relaxing the standard of the bespeaks caution doctrine, the PSLRA states that an issuer is not liable for a forward-looking statement if it is “accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statement.” See 15 U.S.C. § 78u-5(c)(1)(A)(i). While the Third Circuit has incorporated much of the “bespeaks caution” doctrine into its analysis of the PSLRA, see Avaya, 564 F.3d at 256, the stricter language of the “bespeaks caution” doctrine is noticeably absent, and the Third Circuit has repeatedly distinguished the two concepts. Accordingly, since the PSLRA applies to this case, the Court will follow standards pertaining to the adequacy of cautionary statements set forth in the PSLRA Turning now to the “cautionary statements” in the instant case, Defendants maintain that the following statements, which “routinely” accompanied PharmaNet’s press releases and security filings, alerted investors that PharmaNet’s forward-looking statements regarding its backlog, financial projections, and future economic performance were subject to significant regulatory, economic, financial, and operational risks. For example: We cannot assure you that this backlog will be indicative of future results. A number of factors may affect backlog, including: ... the loss or delay of projects; the change in the scope of work during the course of a project; and the cancellation of such contracts by our clients. [I]f our clients cancel or defer contracts, our future profitability may be adversely affected .... [A]ll of our contracts are generally cancelable by our clients with little or no notice. A client may cancel or delay existing contracts with us at its discretion and is likely to do so for a variety of reasons In addition, since a large portion of our operating costs are relatively fixed, variations in the timing and progress of contracts can materially affect our financial results. The loss or delay of a large project or contract or the loss or delay of multiple smaller contracts could have a material adverse effect on our business, financial condition and results of operations.” We cannot assure you that we will be able to realize all or most of the direct revenue included in backlog. Although backlog can provide meaningful information to our management, it is not necessarily a meaningful indicator of future results. See Form 10K filed on March 31, 2008 at 9, 11; FormlOK filed on May 9, 2008 at 26-27; Form 10Q filed on August 6, 2008 at 31-32. The Court finds that Defendants’ “cautionary language” is sufficiently “meaningful.” These statements and more were contained in PharmaNet’s SEC filings, which adequately detailed a list of specific factors and uncertainties that could affect PharmaNet’s future economic performance. See, e.g., PharmaNet’s Annual Report for the Period Ended December 31, 2007 (Form 10-K), at 9, 11; PharmaNet’s Quarterly Report for the Period Ended March 31, 2008 at 20, 26-27; see also Defendants’ Ex. 15 (Chart documenting relevant cautionary statements made by PharmaNet before and during the Class Period). Moreover, in each press release, Defendants also explained that the forward-looking statements involved risks and uncertainties that could cause actual outcomes and results to differ materially from projections and specifically directed readers to PharmaNet’s SEC filings. Id. In sum, Defendants’ cautionary statements do not “merely warn[ ] the reader that the investment has risks .... ” Avaya, 564 F.3d at 256. In fact, the language is not in the nature of a vague blanket disclaimer, but rather, is tailored specifically to risks associated with PharmaNet’s financial projections which were primarily based upon the company’s backlog, and alerts shareholders to the specific sources of that risk — such as loss or delay of projects, changes in the scope of projects, outright cancellation, and variations in timing and progress. See Silverman v. Motorola, Inc., No. 07-4507, 2008 WL 4360648, at *12, 2008 U.S. Dist. LEXIS 76799, at *33 (N.D.Ill. Sep. 23, 2008) (stating that it is sufficient to mention “important factors that could cause actual results to differ materially” without “listpng] every factor” or even “the particular factor that ultimately causes the forward-looking statement not to come true”); Avaya, 564 F.3d at 257-58. These statements, therefore, satisfy the requirements of 15 U.S.C. § 78u-5(c)(1)(A)(i). Finally, Plaintiff maintains that Defendants’ forward-looking statements are not protected by the Safe Harbor because Defendants knew the statements were false at the time they were made. To counter, Defendants posit that the Safe Harbor protects forward-looking statements accompanied by meaningful cautionary language, irrespective of the Defendants’ state of mind. In support of this position, Defendants rely on the following out-of-circuit cases: Miller v. Champion Enters., Inc., 346 F.3d 660, 672 (6th Cir.2003) (“[I]f the statement qualifies as ‘forward-looking’ and is accompanied by sufficient cautionary language, a defendant’s statement is protected regardless of the actual state of mind”); Harris v. Ivax Corp., 182 F.3d 799, 803 (11th Cir.1999) (same); Greebel v. FTP Software, Inc., 194 F.3d 185, 201 (1st Cir.1999); see also ATI Techs., Inc. Sec. Litig., 216 F.Supp.2d 418, 429 (E.D.Pa.2002). However, the Court need not address this issue. In fact, the Third Circuit in Avaya, confronted with the same argument and out-of-circuit rulings cited by Defendants here, declined to address this issue, because plaintiffs there failed to plead a strong inference that defendants acted with actual knowledge that their projections were false or misleading. See Avaya, 564 F.3d at 259. This point is dispositive here; since the Court concludes, infra, that Plaintiff fails to plead a strong inference of scienter with respect to Defendants’ actual knowledge, “this scienter conclusion provides a ground for dismissing [Plaintiffs] claims relating to the forward-looking statements, one that would apply even assuming defendants’ cautionary language was inadequate.” Id. III. Material Misrepresentations and Omissions “When a securities plaintiff challenges a statement made by a defendant, plaintiffs mere usage of catchwords or bold assertions that defendant’s statement was false or misleading because the defendant knew or must have known it to be false or misleading cannot lend support to plaintiff's claim.” Intelligroup, 527 F.Supp.2d at 281 (citing, e.g., GSC Partners, 368 F.3d at 239 (“[I]t is not enough for plaintiffs to merely allege that defendants ‘knew’ their statements were fraudulent or that defendants ‘must have known’ their statements were false”));. Further, [Plaintiffs] mere second-guessing of [defendant’s] calculations will not suffice; [the plaintiff] must show that [the defendant’s] judgment-at the moment exercised-was sufficiently egregious such that a reasonable [person] reviewing the facts and figures should have concluded that [these facts or figures] were misstated and [in addition,] that ... the public was likely to be misled. [Securities] law does not expect clairvoyance. Id. (quoting IKON Office Solutions, Inc., 277 F.3d 658, 673 (3d Cir.2002); Suprema Specialities, Inc. Sec. Litig., 334 F.Supp.2d 637, 647 (D.N.J.2004) (“Allegations that a company’s later financial difficulties imply that earlier financial statements were untrue or misleading are ‘fraud by hindsight’ and do not state a claim”) (citations omitted), rev’d on other grounds, 438 F.3d 256 (3d Cir.2006)). “When an allegation of fraud is based upon nondisclosure, there can be no fraud absent a duty to speak, [because a] duty to disclose under § 10(b) does not arise from the mere possession of nonpublic market information.” Chiarella v. United States, 445 U.S. 222, 235, 100 S.Ct. 1108, 63 L.Ed.2d 348 (1980); Salovaara v. Jackson Nat. Life Ins. Co., 246 F.3d 289, 294 (3d Cir.2001); Intelligroup, 527 F.Supp.2d at 281. Furthermore, Silence, absent a duty to disclose, is not misleading under Rule 10b-5. Except for specific periodic reporting requirements ... there is no general duty on the part of a company to provide the public with all material information Such a duty to disclose may arise [only] when there is [an incident of] insider trading, [or presence of] a statute requiring disclosure, or [there was] an inaccurate, incomplete or misleading prior disclosure [requiring a corrective statement]. Intelligroup, 527 F.Supp.2d at 282 (quoting Oran v. Stafford, 226 F.3d 275, 286-87 (3d Cir.2000)) (internal quotations omitted). Under Rule 10b-5, it is unlawful to “ ‘make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading ... in connection with the purchase or sale of any security.’ ” Avaya, 564 F.3d at 259 (quoting 17 C.F.R. § 240.10b-5(b)-(c)). The first requirement under the PSLRA is that a plaintiff specify with particularity each allegedly misleading statement, the reason or reasons why the statement is misleading, and if an allegation is made on information and belief, all facts supporting that belief. Id.; see 15 U.S.C. § 78u-4(b)(1); Tellabs, 127 S.Ct. at 2508; Winer Family Trust, 503 F.3d at 326. Defendants contend that Plaintiffs allegations are insufficient because they fail to demonstrate with sufficient particularity that Defendants’ non-forward looking statements were false or misleading when made — i.e., “the reason or reasons why the statements are misleading.” Specifically, Defendants take issue with the way Plaintiff has pled the allegedly misleading statements, the reliability of Plaintiffs confidential witnesses, and the sufficiency of the facts as pled in the Amended Complaint pursuant to Rule 9(b). A. Identifying the Misleading Statements For their first argument, Defendants reason that the Amended Complaint simply contains long block quotes of text from various press releases and conference call transcripts and then, in a general conclusory manner, provides a laundry list of vague reasons why those disclosures are allegedly false. However, the Court finds the Amended Complaint sufficiently identifies the allegedly actionable statements. In the section entitled “Defendants’ Materially False and Misleading Statements Issued During the Class Period” of the Amended Complaint, Plaintiff alleges, in chronological order, the misleading statements made in each of Defendants’ press releases, conference calls, and SEC filings. While simply referring to a series of public statements as misleading is insufficient, see In re Party City Sec. Litig., 147 F.Supp.2d 282, 300 (D.N.J.2001), the long block quotes in this section containing the alleged misrepresentations are emphasized in bold and italicized text. Moreover, following the allegations with respect to each of the press releases and conference calls, the Amended Complaint asserts reasons why the statements made therein were false or misleading — albeit the reasoning has not been sufficiently alleged as discussed below. See, e.g., Am. Compl at ¶¶ 145, 157, 165. The Amended Complaint also identifies who made the statements and when they were made. See, e.g., ¶¶ 136-42, 144, 146-52, 156, 158-63, 166-69; see Silverman, 2008 WL 4360648, at *8, 2008 U.S. Dist. LEXIS 76799 at *24 (“As we understand the complaint, plaintiffs are not alleging that the entire paragraphs are false, but only the highlighted statements ... ”). Accordingly, the Court finds Plaintiffs first argument on this issue unavailing. B. Confidential Witnesses and the Sufficiency of the Pleadings Plaintiffs claims in this action rest on the statements of twelve confidential witnesses. See Amend. Compl. at ¶¶ 32-55, 82-102, 106-18, 124-34. Defendants argue that the statements made by the confidential witnesses are unreliable and thus, the allegations relying on the statements provided by these witnesses do not sufficiently meet the pleading requirements of a Section 10(b) claim. In particular, Defendants submit that the statements made by all the confidential witnesses should be discounted because none of these low- and mid-level operational employees worked in PharmaNet’s finance department or otherwise had any involvement in the reporting of PharmaNet’s revenue, backlog, goodwill, or any other financial metric Plaintiff alleges to be materially misstated. More importantly, Defendants suggest that none of the confidential witnesses was privy to any information relevant to Plaintiffs claims. In response, Plaintiff maintains that the statements made by these witnesses are reliable because all the necessary information, i.e., time period, how the information was obtained and when, with respect to each of the witnesses is adequately pled. While a plaintiff in a securities fraud action can support a complaint through confidential sources, statements from such sources can only be used: (1) if the complaint sets forth other factual allegations, such as documentary evidence, which are sufficient alone to support a fraud allegation, or (2) when the confidential sources are described in the complaint with sufficient particularity to support the probability that a person in the position occupied by the [confidential] source would possess the information alleged. Intelligroup, 527 F.Supp.2d at 290 (internal citations omitted). In order to satisfy this burden, “the complaint must disclose: (1) the time period that the confidential source worked at the defendant-company, (2) the dates on which the relevant information was acquired, and (3) the facts detailing how the source obtained access to the information.” Id. (citing Chubb, 394 F.3d at 146). Additionally, “allegations attributed to the information obtained from a confidential source must contain specific details regarding the basis for the source’s personal knowledge and describe supporting events in detail.” Id (citing Chubb, 394 F.3d at 146). Where these requirements are not met, courts must ignore the insufficiently described witness’ statements for purposes of evaluating the plaintiff’s allegations. Id; Avaya, 564 F.3d at 263 (“[i]f [confidential] source allegations are found wanting with respect to these criteria, then [courts] must discount them steeply”). The Third Circuit’s decision in Chubb provides guidance on this issue. In Chubb, the Third Circuit affirmed the dismissal of a complaint where the plaintiffs relied on several confidential sources to corroborate allegations that the defendants knew of or recklessly disregarded accounting improprieties. 394 F.3d at 148-56. Those confidential sources were, as here, primarily former non-executive employees who provided neither data supporting their assertions nor credentials suggesting access to the company’s relevant information. Id at 152-53. In that regard, the court explained: Plaintiffs fail to identify with particularity any source for their accounting fraud claims that would reasonably have knowledge supporting the allegations that Chubb’s financial statements were false. Nor does the Second Amended Complaint identify the data, or source of data, used to arrive at its calculations. Nor do Plaintiffs provide any particulars regarding the amount by which reserves were distorted, or how much revenue was improperly recognized. Plaintiffs’ allegations do not suffice. Id at 153-54 (citations omitted). With this in mind, the Court turns to the parties’ arguments. Because the statements of each of these confidential witnesses are related and tied to a specific material misrepresentation or omission — i.e., backlog, revenue recognition, contract cancellations, and good will — the Court will discuss the reliability of the witnesses in those contexts. 1. Cancelled or Delayed Contracts Plaintiff alleges that PharmaNet’s backlog was inflated because “contracts that Defendants had represented were postponed were actually cancelled or otherwise not likely to generate revenue within the foreseeable future.” The only contract, however, Plaintiff identified in connection with this allegation is the Pfizer osteoporosis study. Plaintiff complains that “PharmaNet had no reasonable expectation of when the osteoporosis project would begin in earnest,” and that “the lengthy delay associated with the contract ... was tantamount to a cancellation.” To support these allegations, Plaintiff relies on statements of CW4, CW7, CW3 and CW9. Plaintiff alleges that CW9 and CW4 explained that the Pfizer osteoporosis contract was “pushed back” and delayed and that work did not begin at any time during their tenure at PharmaNet. Am. Comp, at ¶¶ 91-92. Through discussions with colleagues at PharmaNet, CW4 learned that Pfizer was not giving Pharmanet the data it needed to perform endpoint analyses on the new contract because Pfizer was upset with PharmaNet’s performance on a separate contract. Id at ¶ 93. CW7 corroborated these statements and added that CW7’s immediate supervisor indicated to CW7 that he/she and “other senior members of the Data Management team had been ‘ridiculed’ in meetings with their superiors regarding the way in which data management tasks were handled on the Pfizer projects.” Id at ¶ 94. CW12, a Pfizer executive, also stated that Pfizer would not execute a contract — even though Plaintiff alleges that a contract was already entered into with PharmaNet — without fully negotiating the scope of work and that “the mere fact a letter of intent may have existed between Pfizer and PharmaNet did not necessarily mean that an executed contract was forthcoming.” Id. at ¶ 112. Plaintiff alleges that the Pfizer contract was not likely to be performed at the time the contract was included in the backlog, and therefore, Defendants misled investors by inappropriately including this contract in their financial projections. At the outset, the Court notes that none of the confidential witnesses indicated that Pharmanet actually included the Pfizer osteoporosis study, or any other Pfizer study, in PharmaNet’s reported backlog. Indeed, no documentary source — press release, conference calls or SEC filing — indicate that the Pfizer study was included as part of PharmaNet’s backlog reported to the public. As alleged, CW7, CW4, CW9 and CW3 were not employed in a position to know which projects were included in reported backlog, or when the projects were added or removed from backlog. See, e.g., Am Compl. at ¶ 40 (CW3: a former marketing manager); ¶46 (CW7: Associate Data Analyst); ¶42 (CW4: a former senior endpoint management associate); ¶ 50 (CW9: a former clinical cardiovascular project manager); ¶ 55 (CW12: a Pfizer executive). While Plaintiff alleges that these witnesses worked with high-level executives and participated in company-wide meetings, the information provided by these witnesses was not first-hand, because Plaintiff fails to allege the sources of this information — whether the information came from the Individual Defendants at these meetings, or any other executives, that had first hand knowledge of this information. See Intelligroup, 527 F.Supp.2d at 361 (discounting information provided by confidential witnesses who were “not providing firsthand information,” but rather were repeating statements the witnesses heard). Without these particularized allegations, the Court finds that statements that the Pfizer contract was included in the accounting of the reported backlog are speculative and eonclusory. See Chubb, 394 F.3d at 155 (“[gjeneric and eonclusory allegations based upon rumor or conjecture are undisputedly insufficient to satisfy the heightened pleading standards of [the PSLRA]”). The allegations regarding Pfizer’s contract fail to plead a material misrepresentation for the additional reason that throughout the Class Period, PharmaNet informed its investors that “backlog” included “anticipated direct revenue from written awards, letters of intent and contracts that either have not started or are anticipated to begin in the near future.” See, e.g., Form 10-K filed on March 31, 2008 at 11. Moreover, PharmaNet disclaimed that “if clients delay projects, the project will remain in backlog, but will not generate revenue at the rate originally expected.” More particularly, PharmaNet incorporated the following “cautionary statement” in its public disclosures: Contracts included in backlog are subject to termination by our clients at any time. In the event that a client cancels a contract, we would be entitled to receive payment for all services performed up to the cancellation date, and subsequent client-authorized services related to terminating the cancelled of the project. The duration of the projects included in our backlog range from a few weeks to many years. We cannot assure you that this backlog is indicative of future results. A number of factors may affect backlog, including: • the variable size and duration of the projects, • the loss or delay of projects, • the change in the scope of work during the course of a project, and • the cancellation of such contracts by our clients. Also, if clients delay projects, the projects will remain in backlog but will not generate revenue at the rate originally expected. Accordingly, historical indications of the relationship of backlog to revenues are not indicative of future results. Id. Therefore, even if the Pfizer contract was included in the publicly disclosed backlog, such inclusion was not a material misrepresentation or omission because the cautionary statements accompanying the backlog in press releases and SEC filings sufficiently warned investors of such practice. 2. Unsigned Change Orders Plaintiff also alleges that Defendants inflated PharmaNet’s backlog by including future revenue from unauthorized change orders. In support of this allegation, Plaintiff relies on the statements made by CW2 and CW3. CW2 was an Assistant Director of Data Management Systems for PharmaNet from November 2006 through September 2008, see Am. Compl. at ¶ 36, and was responsible for developing project protocols for clients, including Pfizer, Inc. and Sanofi, which gave him access to information regarding data management systems, contract execution and negotiation, change order, billing and accounting practices, and staffing issues. Id. CW2 also participated in company-wide conference calls in which Defendants Hamill and McMullen often participated, as well as members of the Finance Department. Id. at ¶ 37. During these conference calls, participating parties discussed the status of clinical trials, as well as “negative variances,” which resulted from unsigned change orders. Id. at ¶ 83. Plaintiff also alleges that CW2’s position within PharmaNet allowed him to learn that Defendant Hamill was provided with reports which gave him constant updates on PharmaNet’s financial performance. Id. at ¶ 39. In addition, Plaintiff alleges that because PharmaNet’s legal department was “customarily” involved in contract cancellation disputes, and because the legal team did not dispute cancellations with customers without approval from PharmaNet’s executives, that Defendants McMullen and Hamill must have known about these disputes. Id. at ¶ 85. CW3 was employed as a Marketing Manager at PharmaNet’s corporate headquarters in Princeton, New Jersey, from January 2001 through June 2008. Id. at ¶ 40. Through this position, CW3 was able to obtain information pertaining to business development, change orders and contract cancellations. Id. CW3 also worked closely with Andy Malavski, the Vice President of Marketing and a confidant of McMullen, and Michael Laird, Vice President of Late Stage Business Development. Id. CW3 was also present at PharmaNet’s Annual Business Development Meetings in January 2007 and 2008, where PharmaNet’s sales and business strategies were discussed, among other issues. Id. CW3 also knew Hamill, the members of his informational network, and his business practices as CFO. Id. at ¶ 47. Through these various contacts, CW3 learned that McMullen and Hamill were informed daily of Business Development activities. Id. Specifically, CW3 alleges that “word came down” from the Business Development team that Pfizer was not going to begin the clinical studies scheduled to begin during the first quarter of 2008, and that “there was no certainty as to when or if PharmaNet would even get the business.” Id. at ¶ 115. CW3 explains that unnamed persons theorized that Pfizer was merely “dangling a carrot” of new business to discourage PharmaNet from suing over a cancelled Torcetrapib project. Id. at ¶ 116. CW3 further asserts that Defendant Hamill must have known about PharmaNet’s alleged practice of recognizing revenue from unsigned change orders. Id. at ¶ 130. Plaintiff alleges that both CW2 and CW3 confirmed that PharmaNet actually included revenue from unsigned change orders in its backlog, even though PharmaNet stressed that it did not. See Am. Compl. at ¶ 120 (“consistent with our conservative approach the value of the change order is not calculated in backlog or the revenue recognized until we have written authorization from the client”). According to CW3, during the first quarter of 2008, “the Finance department had to ‘back out’ of backlog a certain amount of revenue associated with unsigned change orders.” CW2 confirmed this practice and explained that “PharmaNet had included in its backlog substantial revenue from unsigned change orders generated on Sanofi projects, which Sanofi had consistently refused to approve.” Id. at ¶ 126. Plaintiff avers that CW2 learned about this practice in Data Management team meetings that took place during the first quarter of 2008 as this issue was widely discussed in monthly meetings. Id. Moreover, CW2 confirmed that “the $6.6 million decrease in direct revenue and $30 million in contract cancellations for the late-stage business that PharmaNet disclosed for its first quarter of 2008, are consistent with the amount of the change orders and the size of the cancelled contracts related to the Sanofi projects.” Id. at ¶ 127. The Court questions the bases of the confidential witnesses’ knowledge of the information alleged. CW2 was an assistant director of data management in PharmaNet and CW3 was a marketing manager and therefore, neither of them had any involvement in the reporting or calculating of PharmaNet’s backlog. As such, Plaintiffs allegations fail to set forth the bases — where they obtained their information — for their statements. While Plaintiff submits that CW2 learned about this type of practice in data management meetings where the issues of change orders were discussed, there were no allegations that identify with particularity from whom Plaintiff le