On March 21, 2024, the United States Court of Appeals for the Third Circuit affirmed the dismissal of a putative class action against a biopharmaceutical company (the “Company”) and certain of its officers under Sections 10(b) and 20(a) of the Securities Exchange Act. In re Ocugen, Inc. Sec. Litig., No. 23-1570 (3d Cir. Mar. 21, 2024). Plaintiffs alleged that the Company’s statements and omissions about its partnership with an Indian biotechnology company to develop a COVID-19 vaccine for Emergency Use Authorization (“EUA”) with the U.S. Food and Drug Administration (“FDA”) were false and misleading. The Court affirmed the district court’s dismissal of the complaint with prejudice based on plaintiffs’ failure to allege a material misrepresentation.

In 2020, the Company partnered with an Indian company to develop COVAXIN, a COVID-19 vaccine candidate for the United States market. Under the partnership, the Company was responsible for obtaining EUA approval from the FDA. In February 2021, the Company stated that it had initiated discussions with the FDA “to develop a regulatory path to EUA,” and that it expected to distribute 100 million doses of COVAXIN in the U.S. in 2021. The Company made similar statements through June 2021, including that it was engaged in discussions with the FDA for EUA approval, that it planned to file for EUA in the first half of 2021, and that it expected that COVAXIN would be available in the U.S. by the second half of 2021. Additionally, when the FDA revised its EUA guidance specific to COVID-19 treatment and prevention drugs in May 2021, the Company stated that its plans remained “on track,” that the new guidance did not apply to COVAXIN, and that it believed it was meeting all the EUA criteria. In June 2021, the Company announced that the FDA recommended that it terminate its EUA path and that it would instead pursue a different application that would significantly extend the timeline for approval and distribution. Plaintiffs alleged that the news caused the Company stock price to drop dramatically.

The Court held that plaintiffs failed to allege any material misstatements or omissions. First, the Court held that the Company’s statements that it was having discussions with the FDA were not false or misleading and that plaintiffs had failed to identify any point in the EUA process at which the Company did not engage with the FDA as it had announced. Second, the Court held that the Company’s alleged statements and omissions regarding the differences between the FDA’s guidance and the Company’s study protocols of COVAXINE were not material. According to the Court, even assuming that the FDA’s guidance could be interpreted to make EUA approval of COVAXIN unlikely, statements about the Company’s expectations of COVAXIN’s EUA approval were statements of optimism and “immaterial because it is not the sort of information on which a reasonable investor would rely.” The Court also noted that both the FDA’s revised EUA guidance and the criteria and protocol of the COVAXIN clinical study were publicly available, and that the alleged misstatements and omissions did not significantly alter the mix of information available to reasonable investors regarding the nature of COVAXIN’s clinical trial. Next, the Court held that plaintiffs also failed to allege falsity by omission because the Company “disclosed a great deal of information about its departures from FDA guidance” and the alleged omission could not render any of the Company’s statements misleading.

Finally, the Court rejected plaintiffs’ argument that the Company’s opinion statements were without a reasonable basis under the Omnicare standard. The Court explained that the Company’s awareness of the FDA’s rigorous scientific and ethical standards did not lead to the conclusion that it also should have been aware that every aspect of the FDA “guidelines” was “mandatory,” or that it lacked a basis for its opinion that it could achieve EUA approval without strict adherence to all the FDA guidelines.

Links & Downloads -

In re Ocugen, Inc. Sec. Litig.

[View source.]