WilmerHale lawyers secured an appellate court victory for clients Ocular Therapeutix, Inc and former officers of the company when the US Court of Appeals for the First Circuit affirmed a district court ruling dismissing a class action lawsuit that accused the defendants of violating federal securities laws by purportedly misleading investors.
The appellate court, in its April 9, 2020 opinion, agreed with the lower court’s dismissal of the lawsuit, finding that the defendants did not mislead investors regarding its manufacturing process or its prospects for receiving Food and Drug Administration approval to market its lead drug candidate, DEXTENZA, to treat post-surgical ocular pain and inflammation.
The plaintiffs claimed that the defendants, in a wide range of statements, provided false and misleading information in annual reports filed with the Securities and Exchange Commission and during investor conference calls. The plaintiffs alleged that Ocular downplayed to investors the true challenges it faced after the FDA identified manufacturing deficiencies at Ocular in 2016 and 2017 that resulted in the federal agency twice rejecting the company’s new drug application for DEXTENZA.
After the district court dismissed the lawsuit in April 2019, the plaintiffs appealed, narrowing their claims to two types of statements. On appeal, plaintiffs took issue with the company asserting in SEC filings that it had utilized “current Good Manufacturing Practices.” Plaintiffs also cited an investor conference call during which then-company officials said its manufacturing process was “fully developed” and “in a fully developed mode.”
The First Circuit relied in its opinion on arguments WilmerHale’s legal team advanced in both its brief on appeal and in Partner Michael Bongiorno’s appellate argument that the plaintiffs’ allegations failed to meet the Private Securities Litigation Reform Act’s requirement that a complaint include allegations giving rise to a strong inference of scienter, i.e. the intention to mislead or defraud.
The First Circuit found that Ocular’s detailed and informative disclosures in its SEC filings and during the conference call in question undercut the plaintiffs’ claims regarding an intent to defraud.
“Read in the context of the complaint as a whole, these allegations do not give rise to a strong inference that defendants intentionally or recklessly misled investors,” the appeals court said.
Mr. Bongiorno, who led the WilmerHale legal team, said: “We are pleased the First Circuit agreed that the company issued appropriate and repeated warnings to investors regarding the FDA’s actions and that there was no basis for any claim for a strong inference of scienter as required by law.”
Besides Mr. Bongiorno, the firm’s legal team included Peter Kolovos, a partner; Peter Spaeth, a special counsel; Joseph Yu and John Byrnes, counsels, and Lindsey Silver, a senior associate.