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March 17, 1997


The opinion of the court was delivered by: ASPEN

 MARVIN E. ASPEN, Chief Judge:

 Plaintiffs Roy, Marilyn, and Lillian Fugman, and the Estate of George Oskvarek, have brought suit against the defendants, Aprogenex, Inc., Joel Bresser, Donald Payne, and Luis Canterero, for securities fraud. *fn1" Aprogenex now moves to dismiss the Complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. For the reasons set forth below, the motion is granted in part and denied in part.

 I. Motion to Dismiss Standard

 Dismissal under Rule 12(b)(6) is improper "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957). For purposes of this motion, we must take all of the well-pleaded factual allegations in the complaint as true, and construe them in the light most favorable to the plaintiff. See Richmond v. Nationwide Cassel L.P., 52 F.3d 640, 644 (7th Cir. 1995). *fn2"

 II. Background

 Like many other contemporary securities fraud cases, this case involves a failed investment in speculative technology. The defendant, Aprogenex, is a Delaware corporation that sought to develop a diagnostic test system (the "GenSite system") to identify the presence and extent of certain prenatal genetic abnormalities and diseases. See Compl. P 14. The GenSite system was designed to perform tests which would identify abnormal fetal cells in the mother's blood and permit early diagnosis of up to 95% of prenatal genetic abnormalities. See id. Aprogenex believed that its test could be performed at one-third the cost of existing procedures while minimizing the risks associated with them, such as spontaneous miscarriage or injury to the fetus. See id. P 15. Given that the GenSite system would be cheaper, more reliable, and safer than the available alternatives, the company expected high profit margins and a large sales volume when the system reached the market. See id.

 The oral statements of Aprogenex officials regarding the company's prospects were even more effusively optimistic than those contained in the written disclosures. These officials repeatedly assured the plaintiffs, through their broker, Joseph Baba, that the GenSite system would be commercially viable. See id, PP 24-27. The Complaint contains a lengthy catalogue of these assurances, which included such items as: (1) a prediction that the European revenues from the GenSite kit would be $ 30-40 million in its first year of sales, at a profit margin of 60%; (2) a disclosure that financier Carl Icahn had expressed an interest in purchasing up to 20% of Aprogenex's stock; and (3) a claim that pre-clinical work on the GenSite system had been completed. See id. P 27. Despite these assurances, Baba became concerned when a report issued by Hoak Securities in the summer of 1995 suggested that Aprogenex had not yet completed the essential "cell enrichment" component of the GenSite system. See id. In response to Baba's inquiries, Aprogenex officials stated that the problems with the cell enrichment component had been "fixed," and reiterated their earlier claims that the system would be introduced into the European market in short order. See id. PP 27, 33-34. They also suggested that Abbott Laboratories and other big players in the industry were interested in the company and might engage in a "bidding war" to acquire its stock. See id. P 27. They dismissed the cautionary language in their public disclosures as inaccurate and indicated that the language existed only because it was "required by the lawyers." See id. Baba requested copies of the scientific reports that would substantiate the company's claims that the cell enrichment component was viable, but Aprogenex refused to provide these documents due to "confidentiality concerns." See id.

 Based on the information provided to him by Aprogenex during 1994 and 1995, Baba recommended that the plaintiffs purchase Aprogenex stock. See id. P 23. The plaintiffs accepted this advice, and made a series of stock purchases between November 29, 1994, and October 26, 1995. See id. & Ex. A. During this period, Baba relayed the various statements made by Aprogenex officials to the plaintiffs, and they relied on this information in their decisions to purchase Aprogenex stock and thereafter to retain the stock they already owned. See id.

 In early 1996, Aprogenex revealed that it had decided to abandon its efforts to develop the GenSite system and that it would focus on other "opportunities." See id. PP 29-30. It had never been able to develop the cell enrichment component of the GenSite system, and thus had never been close to marketing the system. See id. Its representations that the problems with the cell enrichment component had been "fixed" and that the product would be marketable in the near future had been false all along, and Aprogenex either knew or was reckless about their falsity. See id. P 27. Many of the other statements Aprogenex officials had made to encourage the plaintiffs to purchase and retain stock in the company--Carl Icahn's interest, the impending "bidding war" among other biotech firms interested in acquiring Aprogenex, the completion of pre-clinical testing--were also intentional or reckless fabrications. See id. Given Aprogenex's status as a start-up company, these false claims had a material impact on the value of its stock: unlike an established enterprise, whose stock can be valued based on book value or earnings-per-share, the stock value of a start-up is almost entirely dependent on the market's perception of the probable success of the company's product development efforts. See id. P 13. Because the price of Aprogenex stock was artificially inflated due to the company's intentional or reckless misrepresentations and omissions regarding the GenSite system, the plaintiffs collectively lost over $ 175,000 on their investments in Aprogenex stock. See id. P 23.

 III. Discussion

 A plaintiff presenting a claim for securities fraud must allege that the defendant: "(1) made a misstatement or omission, (2) of material fact, (3) with scienter, (4) in connection with the purchase or sale of securities, (5) upon which the plaintiff relied, and (6) that reliance proximately caused plaintiff's injuries." See In re Healthcare Compare Corp. Sec. Litig., 75 F.3d 276, 280 (7th Cir. 1996); see also 15 U.S.C. § 77j(b); 17 C.F.R. § 240.10b-5. Aprogenex does not dispute that the amended version of the Complaint at least superficially alleges all of these elements, but it nevertheless contends that the Complaint is inadequate in two ways: (1) it does not plead the elements of the fraud claim "with particularity" as required by Rule 9(b) of the Federal Rules of Civil Procedure and various provisions of the federal securities laws; and (2) the presence of cautionary language in Aprogenex's written publications renders the ...

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