# IN RE: OCUGEN, INC. SECURITIES LITIGATION

> District Court, E.D. Pennsylvania · March 3, 2023

URL: https://www.frixlaw.com/law-library/cases/10404889

## Case

- **Court:** District Court, E.D. Pennsylvania
- **Decided:** March 3, 2023
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

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- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10404889

## How later opinions describe it (automated extraction)

- rejecting the bright line rule that possible mergers need not be disclosed until there is an agreement-in-principle

## Opinion text

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA

: CIVIL ACTION
:
IN RE OCUGEN, INC. : Master File No. 21-2725
SECURITIES LITIGATION :
:

MEMORANDUM
KENNEY, J. MARCH 3, 2023

I. INTRODUCTION
Lead Plaintiff Andre Galan Bernd Benayon (“Plaintiff”), individually and on behalf of a
putative class, brings three claims against Ocugen, Inc. (“Ocugen” or the “Company”), Mr.
Musunuri (Ocugen’s Co-Founder, CEO, and Chairman), and Dr. Forrest (a member of Ocugen’s
Vaccine Scientific Advisory Board and Acting Chief Medical Officer) (collectively, “Defendants”
or, alternatively, “Individual Defendants” as to Mr. Musunuri and Dr. Forrest)1 alleging securities
fraud under Section 10(b) of the Exchange Act, 15 U.S.C. § 78(j)(b), and SEC Rule 10b-5, 17
C.F.R. § 240.10b-5, against all Defendants (Count I); control person liability under Section 20(a)
of the Exchange Act, 15 U.S.C. § 78(t), against Individual Defendants (Count II); and insider
trading under Section 20A of the Exchange Act, 15 U.S.C. § 78t-1(a), against Mr. Musunuri (Count
III). ECF No. 28. Before the Court is Defendants’ fully briefed and argued Motion to Dismiss.

1 Ocugen’s former CFO, Sanjay Subramanian, was named in the Amended Complaint but
was dismissed by stipulation on August 17, 2022. ECF No. 42.
ECF Nos. 41, 43, 44. For the reasons set forth below, the Court will grant Defendants’ Motion and
dismiss this case. An appropriate order will follow.

II. BACKGROUND
Ocugen is a biopharmaceutical company that was founded by Mr. Musunuri and non-party
Professor Uday Kompella in 2013 to develop treatments for rare sight-threatening diseases. ECF
No. 28 at 47. As of early 2019, the Food and Drug Administration (“FDA” or the “Agency”) had
not approved any of Ocugen’s drug treatments, and the company did not have any products
approved for sale. Id. at 47–48. In fact, Ocugen was a failing company; between 2013 and 2020

the Company saw only $50,620 in total revenue and in both 2019 and 2020 the Company incurred
over $20 million in net losses. Id. at 97. Accordingly, from 2013 through December 2020, the
Company was able to fund its operations only by raising approximately $90 million from the sale
of common stock, warrants, and convertible notes, and by securing debt. Id.
On September 27, 2019, as a result of a reverse-merger, Ocugen was publicly listed under
the ticker symbol “OCGN” on the NASDAQ which has a minimum trading price of $1.00 per

share. Id. at 8, 47–48, 97. However, between September 2019 and November 25, 2019, Ocugen’s
stock declined in value from $2.85 to $0.266 per share. Id. at 48. By June 2020, Ocugen had
abandoned efforts of a “promising” product and had terminated one-third of its employees. Id. at
1. By July 2020, Ocugen’s stock had declined further to $0.196 per share. Id. at 48. In November
2020, the Company reported via its SEC Form 10-Q that there was “substantial doubt” that Ocugen
would be able to continue its business operations. Id. at 97.

On December 22, 2020, following the emergence of COVID-19 as an unprecedented global
pandemic, Ocugen announced2 that it had executed a letter of intent to partner with Bharat Biotech
International Limited3 (“Bharat”) to develop and bring to the United States market the COVAXIN
vaccine. Id. at 2. COVAXIN, which was developed in collaboration with the Indian Council for
Medical Research and the Indian National Institute of Virology, is an inactivated whole-virion
vaccine that was ultimately approved for use in India in January 2021. Id. at 40, 42. An inactivated
virus vaccine is one in which the virus is chemically inactivated and the pathogen’s “outer shell,”
which is unable to cause infections, is injected into the body. Id. at 40. This triggers an immune
response to the proteins on the inactivated “shell,” also known as the antigens.4 Id. The inactivated

virus approach is an “established technology” that has been successfully utilized by Bharat, among
others. Id. COVAXIN was a marked shift from the Company’s previous focus on blindness
diseases and the Company’s priorities shifted accordingly.5

2 The press release announcing the partnership was entitled “Ocugen and Bharat Biotech to
Co-Develop COVAXINTM, a Whole-Virion Inactivated COVID-19 Vaccine, for the Market.” ECF
No. 28 at 50. Indeed, that COVAXIN was an inactivated virus vaccine has been at the forefront of
Ocugen’s marketing campaign from day one.
3 Bharat is an Indian biotechnology company. Id. at 2.
4 The inactivated virus approach differs from the mRNA or adenovirus vector technologies
used in other COVID-19 vaccines developed by Pfizer Inc. and BioNtech SE, Moderna, Inc., and
Johnson & Johnson. Id. at 40.
5 For example, Mr. Musunuri’s compensation model changed to adopt this new priority. In
March 2021, Ocugen’s Board of Directors modified its previous “cash bonus” framework and
revised performance-based metrics to encompass COVAXIN; one of Mr. Musunuri’s new
performance metrics for both cash and option incentive bonuses was to file an EUA application
for COVAXIN by the end of 2021. Id. at 101. Additionally, Mr. Musunuri’s compensation
increased from approximately $1.5 million in 2020 to $8 million in 2021. Id. at 102.
a. The FDA’s Guidance on COVID-19 Vaccines

On March 27, 2020, the U.S. Department of Health and Human Services declared that the
FDA could issue emergency use authorization (“EUA”) for unapproved drugs, or unapproved uses
of approved drugs, under certain circumstances6 rather than adhering to the typical, and more
rigorous biologics license application (“BLA”) process. See id. at 15. The EUA process affords
the FDA more flexibility in authorizing a drug for use and, importantly, allows for EUA before
the conclusion of Phase III clinical trials. Id.; 21 U.S.C. § 360bbb–3(c)(2). To aid in the EUA
process, the FDA provided non-binding guidance to COVID-19 vaccine developers throughout
the height of the pandemic. Id. 16–20, 23–26; see 21 C.F.R. § 10.115(d)(1) (“Guidance documents
do not establish legally enforceable rights or responsibilities [and] do not legally bind the public
or FDA.”). Although the guidance documents represented the “current thinking” of the FDA, each

also contained a disclaimer explaining that vaccine developers could “use an alternative approach
if it satisfie[d] the requirements of the applicable statutes and regulations.” ECF No. 41-1 at 6.
Two of the guidance statements at issue relate in relevant part to the diversity of clinical
trial participants. Specifically, guidance published in June 2020 “encourage[d] the inclusion of
diverse populations in all phases of vaccine clinical development” which included racial and ethnic
minorities, the elderly, those with comorbidities, pregnant persons, those of childbearing age, and

children. ECF No. 41-15 at 15. Similar sentiments were reiterated in a November 2020 guidance

6 The FDA was permitted to issue an EUA upon a finding that: (i) based on the totality of
scientific evidence available, including data from adequate and well-controlled trials, if available,
it was reasonable to believe that the product may be effective; (ii) the known and potential benefits
of the product outweighed the known and potential risks of the product; and (iii) there was no
adequate, approved, and available alternative to the product. ECF No. 28 at 24; 21 U.S.C. §
360bbb–3(c)(3). The binding authority did not place any requirements on vaccine developers with
respect to the demographic representation of clinical trials, nor did they foreclose EUAs to specific
types of vaccines.
which provided that inadequate participant diversity “can lead to insufficient information
pertaining to medical product safety and effectiveness for product labeling.” ECF No. 28 at 23.
The guidance further emphasized that different responses to medical products may be observed in
racially or ethnically distinct subgroups of the United States population and, therefore, the FDA

“recommend[ed]” that trials capture “data on race and ethnicity [which] may assist in identifying
population-specific” responses.7 Id.
The FDA also issued guidance documents in October 2020, February 2021, and May 2021,
with each guidance superseding the former. Id. at 19, 23–27. In each, the FDA described its
authority to issue EUAs and emphasized the importance of early and frequent communication with
the FDA throughout vaccine development. Id. The FDA further emphasized that EUA decisions
would be made on a case-by-case basis “considering the target population, the characteristics of

the product, the preclinical and human clinical study data on the product, and the totality of the
available scientific evidence relevant to the product.” Id.
In the October 2020 guidance, the FDA stated that EUA considerations would be based on
“data from at least one well-designed Phase III clinical trial that demonstrates the vaccine’s safety
and efficacy in a clear and compelling manner.” Id. at 25. The February 2021 guidance was
updated to address emerging COVID-19 variants but did not relax the Agency’s prior

recommendations with respect to EUA applications. Id. at 18–25.

7 Despite such guidance statements, the FDA pointed out that it had never “had requirements
for demographic composition of data to support licensure of a vaccine and . . . it would be very
difficult to outline such requirements for EUA.” ECF No. 28 at 22. Indeed, this statement captures
the EUA framework: the guidances reflected the best practices or ideal scenario but did not impose
strict requirements on vaccine sponsors in light of the emergency situation.
Several vaccines were granted EUAs by the FDA in late 2020 and early 2021: (i) an mRNA
vaccine developed by Pfizer Inc. and BioNTech SE (collectively “Pfizer”) on December 11, 2020;
(ii) an mRNA vaccine developed by Moderna, Inc. (“Moderna”) on December 18, 2020; and (iii)
an adenovirus vector vaccine developed by Johnson & Johnson on February 27, 2021. Id. at 26–

35. As a result, in May 2021, the FDA stated via guidance that it “may decline to review and
process further EUA requests other than those vaccines whose developers have engaged in an
ongoing manner with the Agency during the development of their manufacturing process and
clinical trials program.” Id. at 26. The guidance issued was generally applicable to the development
of all COVID-19 vaccines, though the May 2021 guidance also included an appendix addressing
concerns that previously authorized vaccines might have reduced efficacy against subsequent
variants such as those arising in the United Kingdom and South Africa. ECF No. 41-20 at 22.

b. COVAXIN’s Progress Towards EUA and the Impact on Ocugen Stock
COVAXIN development began on May 9, 2020. Id. at 40. Clinical trials lagged behind
those of other COVID-19 vaccines: the first participant was enrolled in COVAXIN’s Phase III
trial on November 11, 2020 – just one month prior to the FDA’s grant of EUA for the Pfizer
vaccine. Id. at 42. Shortly thereafter, and prior to any efficacy or safety data from the Phase III
trial, the Drug Controller General of India granted COVAXIN accelerated approval on January 3,

2021. Id. Clinical trials progressed throughout the class period. On March 3, 2021, Bharat released
initial Phase III data which claimed 81% efficacy in preventing COVID-19 in those without prior
infection. Id. at 46. According to Defendants, the India-based trial represented a diverse cross-
section of the Indian population based on age, weight, body mass index, underlying conditions,
and economic and social factors. Id. at 76. Ultimately, in July 2021, Bharat described the Phase III
trial as showing that COVAXIN had a 77.8% efficacy against symptomatic COVID-19 and 63.6%
efficacy against asymptomatic infections.8 Id. at 47.

On February 2, 2021, Ocugen announced that it had executed a definitive agreement with
Bharat for the commercialization of COVAXIN and that it planned to pursue an EUA for the
vaccine. Id. at 51. In connection with this announcement, Ocugen projected that it would distribute
100 million doses of COVAXIN in the United States during 2021. Id. That same day, Ocugen’s
stock increased from $1.81 per share on February 1, 2021, to $3.26 per share on February 2, 2021.
Id. at 53. Ocugen’s SEC filings, filed February 5, 2021, proclaimed that the Company was in “pre-
EUA discussions with the FDA.” Id. Ocugen provided that it planned to file for EUA in the first
half of 2021 to meet its goal of 100 million doses distributed in 2021. Id. According to Ocugen,
COVAXIN had “potential for significant revenues” in 2021. Id. Between February 5, 2021 and

February 8, 2021, Ocugen stock increased further from $5.25 to $15.81 per share and Ocugen saw
significant proceeds as a result. Id. at 53–54. For example, in April 2021, Ocugen announced the
closing of a $100 million direct stock offering that resulted in $93.4 million net proceeds to the
Company. Id. at 54.
In the four months following Ocugen’s initial announcement that it would seek EUA for
COVAXIN, Defendants maintained their projected timeline and spoke optimistically of

COVAXIN’s path towards EUA application submission. Indeed, Plaintiff points to fifteen such
representations as the basis of this action. See ECF No. 41-3 (organizing each statement alleged in

8 Throughout the Phase III trial, allegations surfaced claiming that there were insufficient
measures to ensure that the COVID-19 virus was fully inactivated, such that it would not infect
recipients, and criticizing the ethical and clinical practices employed in the trial. ECF No. 28 at
43–46.
chart format). These statements can be grouped into four categories: (i) SEC filings and related
website postings; (ii) news articles; (iii) press releases; and (iv) investor calls.

As an initial matter, Plaintiff points to five Form 8-Ks and related slide decks filed with
the SEC and six related postings on Ocugen’s website which, despite being circulated at different
times9, are substantively identical. Id. at 63–64, 67–68, 74–75, 79–80, 85–86, 89. The relevant
language in each provided that Ocugen: (i) was in “pre-EUA discussions with the FDA”; (ii) was
targeting 100 million doses per year beginning in 2021; (iii) planned to file an EUA application
with the FDA in the first half of 2021; (iv) planned to make COVAXIN shots available in the first
half of 2021; and (v) anticipated that the COVAXIN vaccine had “potential for significant revenues
this year.” See generally, id. The slide decks varied slightly, but each included to-date progress of
the COVAXIN development and trials as well as projections for next steps. Id. Each slide deck

was also posted to Ocugen’s website.10 Id.
In a February 2, 2021 press release announcing the definitive agreement with Bharat,
Ocugen provided that it would have “rights to the vaccine candidate and [would] be responsible
for clinical development, regulatory approval (including EUA) and commercialization for the
[United States] market.” Id. at 51. The press release specified that Bharat would “supply initial
doses to be used in the [United States] upon Ocugen’s receipt of an EUA” and that Ocugen

management had initiated discussions with the FDA. Id.

9 Ocugen filed the relevant materials with the SEC on February 5, March 5, March 31, May
7, and May 19 of 2021.
10 In the case of the May 19, 2021 website posting, it remained on the website after the FDA
issued revised guidance on May 25, 2021 indicating that the Agency would be more discerning in
granting additional EUAs.
An article published by the American Bazaar on March 2, 2021 quoted Mr. Musunuri as
stating that Ocugen had “initiated discussions with the FDA and BARDA[11] to develop the
regulatory path for the EUA and eventual full approval in the United States for Covaxin.” Id. at
65–66. According to the article, Mr. Musunuri “expect[ed] efficacy data early in March and [that

Ocugen would] proceed full speed ahead at that point towards [EUA].” Id. Mr. Musunuri reiterated
that Ocugen was “aiming for 100 million doses” in 2021. Id. Further, on March 15, 2021, Reuters
published an article entitled “Ocugen seeks to sell 100 million Indian vaccine doses in U.S. in
2021.” Id. at 68. Mr. Musunuri affirmed these plans and, according to Reuters, when asked about
the FDA he stated that “they’re fine with the way the interim analysis is being done.” Id. at 69.
On March 18, 2021, Mr. Musunuri spoke about Ocugen’s recent partnership with Bharat
on an investor call. In his opening remarks, Mr. Musunuri described COVAXIN as “provid[ing]

an excellent opportunity . . . to enter the infections disease market” because it was “different from
other COVID-19 vaccine options currently authorized for emergency use in the United States”
which “rely on new mRNA, or adenovirus technology, while COVAXIN utilizes a traditional
approach as an advanced stage whole-virion inactivated vaccine.” ECF No. 41-37 at 4. He went
on to describe the Phase III trials and noted that the Company was “in active discussions with the
FDA” and that “[b]ased on [the] discussions,” planned to file an EUA application in April 2021.
Id.

Subsequently, on March 31, 2021, Ocugen held a virtual “fireside chat” to discuss the
development of COVAXIN. During the fireside chat, Ocugen theorized that inactivated virus

11 The Biomedical Advanced Research and Development Authority (“BARDA”) is an office
of the U.S. Department of Health and Human Services that worked with the FDA in the COVID-
19 vaccine development and approval process.
vaccines might be more likely to provide coverage against COVID-19 than other alternatives. ECF
No. 41-1 at 4. Dr. Forrest spoke about the international standards informing COVAXIN’s clinical
trials and the diversity of Phase III trial participants. ECF No. 28 at 76. He noted that the
participants included a diverse subset of the Indian population with respect to age, weight, body

mass index, underlying conditions, and social and economic circumstances. Id. Mr. Musunuri
added that he thought the data would be translatable at this stage “in the middle of the pandemic.”
Id. at 77. He further explained that the first step towards EUA was filing a Master File, which
Ocugen did on March 26, 2021, and that Ocugen was working towards the second step of “filing
the EUA when [the Company had] sufficient efficacy from the clinical trial . . . and also the safety
data” required. Id. at 77, 87.
On May 7, 2021, Mr. Musunuri again represented the Company on an investor call. Mr.

Musunuri reiterated that Ocugen had submitted a Master File to the FDA and was finalizing the
EUA application, though it was “taking longer than anticipated.” ECF No. 41-23 at 4. During the
question-and-answer portion of the call, Mr. Musunuri was asked what, if anything, the FDA had
said “about wanting to see vaccine data for U.S. patients before allowing [the EUA application] to
move forward.” Id. at 7. Mr. Musunuri replied that the FDA had not said anything to date. Id.
Additionally, with respect to the process of submitting an EUA application, Mr. Musunuri
indicated that Defendants were “following FDA guidance.” Id. at 8 (describing the process of
submitting a Master File and incorporating feedback from the FDA prior to EUA submission).
Also on May 7, Ocugen issued a press release providing that the Company “continue[d] to make

progress toward [EUA] for COVAXIN” and had “submitted key information and data to date as a
Master File for FDA review prior to a planned EUA application” pending additional data from the
Phase III trial. Id. at 82.
Following the FDA’s May guidance indicating that it would prioritize EUAs for those
developers that had been engaged in an ongoing dialogue with the FDA, on May 26, 2021, Ocugen
issued a press release confirming the Company’s plan to submit an EUA application in June and
stating that the Company did not believe that the guidance raised any concerns for COVAXIN. In

fact, Ocugen “believe[d] that the FDA’s new guidance confirms that Ocugen continues to meet all
criteria for submission of an EUA.” Id. at 87. Moreover, Mr. Musunuri was not concerned by the
updated guidance because Ocugen had “been in discussions with the FDA since [the year prior]”—
precisely what the FDA contemplated as to additional EUAs. Id. at 55. Dr. Forrest also provided
that he read the guidance to “refer[] specifically to vaccines based on the spike protein” rather than
inactivated virus vaccines such as COVAXIN. Id.
In the statements at issue, Ocugen repeatedly projected that 100 million doses of

COVAXIN would be distributed in 2021, leading to significant profitability. Ultimately, however,
Ocugen’s optimism did not bear out. As instructed by the FDA, Ocugen submitted a Master File
to the Agency prior to submitting an EUA application. Id. at 56. Upon review of the Master File,
the FDA recommended (at an unspecified date in June 2021) that Ocugen pursue a BLA
submission rather than an EUA. Id. Accordingly, prior to market open on June 10, 2021, Ocugen
announced that it would pursue a BLA for COVAXIN, which necessarily extended the anticipated
timeline for vaccine approval and distribution. Id. at 56. In response to this news, Ocugen’s stock
price declined from $9.31 per share on June 9, 2021 to $6.69 per share on June 10, 2021.12 Id. at
57. Notably, Mr. Musunuri was somewhat shielded from the full effects of the declined stock

12 According to Plaintiff, this resulted in a loss of market capitalization exceeding $500
million. Id. at 106. Additionally, financial analysts at Cantor Fitzgerald and Chardan Research
reduced their target price for Ocugen by $7 and $3.50 per share, respectively. Id.
because on May 3, June 7, and June 8, he sold thousands of Ocugen shares pursuant to a 10b5-1
trading plan for total proceeds of $3,123,536. Id. at 100; ECF No. 41-1 at 9.

III. PROCEDURAL HISTORY
The initial class action complaint alleging violation of securities laws and premised on the
above-described facts was filed on June 17, 2021 before the Honorable Judge Jones. ECF No. 1
The Private Securities Litigation Reform Act (“PSLRA”), requires the plaintiff who files the initial
action to publish a notice informing the purported class of the pending litigation and class
members’ right to file a motion for appointment as Lead Plaintiff. 15 U.S.C. § 78u-4(a)(3)(A)-(B).

Subsequently, within sixty days of the notice, any member of the purported class may move the
court to serve as Lead Plaintiff. Id. Here, four class members sought appointment of this role. ECF
No. 7–10. Following full briefing on the matter, Judge Jones consolidated the four cases and
appointed Mr. Benayon as Lead Plaintiff on March 31, 2022. ECF No. 22.
Pursuant to a Joint Stipulation, Lead Plaintiff filed an Amended Complaint on June 13,
2022. ECF Nos. 23, 28. Therein, Plaintiff alleged securities fraud under Section 10(b) of the

Exchange Act, 15 U.S.C. § 78(j)(b), and SEC Rule 10b-5, 17 C.F.R. § 240.10b-5, against all
Defendants (Count I); control person liability under Section 20(a) of the Exchange Act, 15 U.S.C.
§ 78(t), against Individual Defendants (Count II); and insider trading under Section 20A of the
Exchange Act, 15 U.S.C. § 78t-1(a), against Mr. Musunuri (Count III). ECF No. 28. On June 21,
2022, the consolidated case was transferred to the Honorable Judge Schiller and then again, on
June 24, 2022, to this Court. ECF Nos. 30–31. Pursuant to a stipulated scheduling agreement,
Defendants filed the instant Motion to Dismiss on August 12, 2022. ECF No. 41. Plaintiff filed a
Response on October 11, 2022 to which Defendants Replied on November 9, 2022. ECF Nos. 43–
44. The Court held oral argument on Defendants’ Motion on January 23, 2023. ECF No. 50.
Having been fully briefed and argued, Defendants’ Motion to Dismiss is now ripe for
consideration.

IV. STANDARD OF REVIEW
To survive a motion to dismiss, the complaint must contain sufficient facts “to state a claim
to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A
complaint is plausible on its face when the plaintiff pleads factual contention that “allows the court
to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009). Courts are required to “accept all factual allegations as true,

construe the complaint in the light most favorable to the plaintiff, and determine whether, under
any reasonable reading of the complaint, the plaintiff may be entitled to relief.” Fowler v. UPMC
Shadyside, 578 F.3d 203, 210 (3d Cir. 2009) (quoting Phillips v. Cnty. of Allegheny, 515 F.3d 224,
233 (3d Cir. 2008)). However, the complaint must provide “more than labels and conclusions, and
a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555.
Because Plaintiff alleges securities fraud, he must also satisfy the heightened pleading

standards set forth in Fed. R. Civ. P. 9(b) and the PSLRA. Under Rule 9(b), Plaintiff must “state
with particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b). Under the
PSLRA, the Complaint must specify each allegedly misleading statement, why the statement was
misleading, and all facts supporting that belief with particularity. Avaya, Inc., 564 F.3d at 252–54
(parties must plead “the who, what, when, where and how” of the alleged fraud); 15 U.S.C. § 78u–
4(b)(1). Additionally, for each act or omission alleged, Plaintiff must “state with particularity facts
giving rise to a strong inference that the defendant acted with the required state of mind [scienter].”
15 U.S.C. § 78u-4(b)(2)(A). Accordingly, “[f]ailure to meet the threshold pleading requirements .
. . justifies dismissal apart from Rule 12(b)(6).” California Public Employees’ Retirement System
v. Chubb Corp. (“CALPERS”), 394 F.3d 126, 145 (3d Cir. 2004).

As is also true generally, “courts must consider the complaint in its entirety, as well as . . .
documents incorporated into the complaint by reference, and matters of which a court may take
judicial notice.” Inst. Inv’rs Grp. v. Avaya, Inc., 564 F.3d 242, 252 (3d Cir. 2009) (quoting Tellabs,
Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007)). The Court may take judicial notice of
matters of public record, such as SEC filings, and documents “integral to or explicitly relied upon
in the complaint.” Schmidt v. Skolas, 770 F.3d 241, 249 (3d Cir. 2014).13

V. DISCUSSION

For the reasons set forth below, the Court finds that Plaintiff fails to state a claim under
Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and will dismiss Count I.
Accordingly, because a viable claim of securities fraud is necessary to support Plaintiff’s other
claims, Counts II and III will be dismissed as well.
a. Section 10(b) of the Exchange Act and Rule 10b-5(b) (Count I)

Section 10(b) forbids the “use or employ, in connection with the purchase or sale of any
security . . . [of] any manipulative or deceptive device or contrivance in contravention of such rules
and regulations as the [SEC] may prescribe as necessary or appropriate in the public interest or for
the protection of investors.” 15 U.S.C. § 78j(b). SEC Rule 10b-5 implements section 10(b) by,
inter alia, declaring it unlawful to make any untrue statement of a material fact or to omit to state
a material fact necessary in order to make the statement made, in the light of the circumstances

13 Defendants attach several exhibits to their motion and reply. The Court deems it
appropriate to take judicial notice of three subsets of those documents: (i) those containing the
statements and omissions Plaintiff alleges as the basis of this action; (ii) public SEC filings; and
(iii) the relevant FDA guidance documents.
under which they were made, not misleading, in connection with the purchase or sale of any
security. 17 C.F.R. § 240.10b-5(b). Accordingly, to state a claim under Section 10(b) and Rule
10b-5(b) thereunder, Plaintiff must adequately allege: (i) a material misrepresentation or omission;
(ii) scienter; (iii) a connection between the misrepresentation or omission and the purchase or sale

of a security; (iv) reliance; (v) economic loss; and (vi) loss causation. In re Aetna, Inc. Sec. Litig.,
617 F.3d 272, 277 (3d Cir. 2010). As previously stated, these allegations must be pleaded with
particularity to satisfy the PSLRA. See 15 U.S.C. § 78u-4.
Defendants argue that Plaintiff fails to state a claim under Section 10(b) and Rule 10b-5(b)
because: (i) the Amended Complaint fails to allege an actionable misrepresentation or omission;
(ii) the Amended Complaint does not plead scienter with particularity; (iii) the Amended
Complaint has failed to plead loss causation; and (iv) the PSLRA’s safe harbor should apply.
Because the Court finds that the Amended Complaint fails as to the first element, material
misrepresentation or omission, it need not address subsequent elements.
i. Legal Standard (Material Misrepresentation or Omission)

Section 10(b) and Rule 10b-5(b) “do not create an affirmative duty to disclose any and all
material information,” however, “[o]nce a company has chosen to speak on an issue—even an
issue it had no independent obligation to address—it cannot omit material facts related to that issue
so as to make its disclosure misleading.” Williams v. Globus Med., Inc., 869 F.3d 235, 241 (3d Cir.
2017). Accordingly, “a plaintiff must show that the defendant made a statement that was
‘misleading as to a material fact.’” Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27, 44 (2011)
(emphasis original). The Court determines materiality as of the date of the alleged misstatement
or omission, not with the benefit of hindsight. See In re NAHC, Inc. Sec. Litig., 306 F.3d 1314,
1330 (3d Cir. 2002). Because of the heightened pleading requirements, Plaintiff must “specify
each allegedly misleading statement and the reasons why the statement is misleading.” Avaya, Inc.,
564 F.3d at 252 (3d Cir. 2009) (citation omitted); 15 U.S.C. § 78u–4(b)(1). In other words, Plaintiff
must both “identify Defendants’ allegedly false and misleading statements with particularity” and
specify with particularity the “true facts” that demonstrate how each statement or omission was

indeed false or misleading at the time the statement was made. See CALPERS, 394 F.3d at 145;
Williams, 869 F.3d at 244.
Pleading “true facts” generally requires that the plaintiff “cit[e] contemporaneous sources”
rather than rely on “conjecture based on subsequent events.” Williams, 869 F.3d at 244; CALPERS,
394 F.3d at 155 (allegations based on conjecture are “undisputedly insufficient”); In re Discovery
Labs. Sec. Litig., No. 06-cv-1820, 2006 WL 3227767, at *9 (E.D. Pa. Nov. 1, 2006) (“An omission
‘that is misleading only in hindsight’ cannot form the basis for a securities fraud claim.” (citation
omitted) (emphasis original)). This is traditionally done by relying on confidential witnesses or
documentary evidence such as internal memoranda to establish the reason(s) why the statement or
omission was false or misleading at the time it was made. Adequately pleading true facts is not

just a formality; indeed, whether “true facts” are pled with particularity is of “paramount
importance.” See CALPERS, 394 F.3d at 145.
Moreover, Plaintiff must show not only a false or misleading statement or omission, but
also “that the alleged misstatement or omission is material.” Fan v. StoneMor Partners LP, 927
F.3d 710, 716 (3d Cir. 2019); Basic Inc. v. Levinson, 485 U.S. 224, 238 (“It is not enough that a
statement is false or incomplete, if the misrepresented fact is otherwise insignificant.”). An omitted
fact is material if “there [is] a substantial likelihood that the disclosure of the omitted fact would
have been viewed by the reasonable investor as having significantly altered the ‘total mix’ of
information made available.” Basic Inc., 485 U.S. at 231–32 (citation omitted). The question of
materiality “typically presents a mixed question of law and fact,” which is traditionally viewed as
appropriate for the trier of fact. Semerenko v. Cendant Corp., 223 F.3d 165, 178 (3d Cir. 2000).
However, “complaints alleging securities fraud often contain claims of omissions or misstatements
that are obviously so unimportant that courts can rule them immaterial as a matter of law at the

pleading stage.” In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997).
In deciding materiality, courts look to whether the defendants “sufficiently disclosed facts
and information that would render the alleged misrepresentations not misleading.” Fan, 927 F.3d
at 716–17 (holding statements identified as fraudulently misleading were “rendered immaterial
given the pertinent disclosures”). Importantly, corporate puffery does not qualify as material
because reasonable investors do not rely upon such platitudes or “consider [them] important in
deciding how to [act].” In re Aetna, 617 F.3d at 283. Indeed, it is well settled that “‘statements of
subjective analysis or extrapolations, such as opinions, motives and intentions, or general
statements of optimism’ . . . ‘constitute no more than puffery and are understood by reasonable
investors as such.’” Id. (quoting EP Medsystems, Inc. v. Echocath. Inc., 235 F.3d 865, 872 (3d Cir.

1999); In re Burlington Coat Factory Sec. Litig., 114 F.3d at 1427 (holding “vague expressions of
hope by corporate managers” relating to future earnings or “optimism . . . that a trend will
continue” are not actionable). Accordingly, “[s]uch statements, even if arguably misleading, do
not give rise to a federal securities claim because they are not material.” In re Advanta Corp. Sec.
Litig., 180 F.3d 525, 538 (3d Cir. 1999), abrogated on other grounds by Tellabs, Inc., 551 U.S.
308 (2007). Therefore, where a representation “is so obviously unimportant to an investor that
reasonable minds could not differ on the question of materiality, the representation or omission
will be immaterial as a matter of law.” EP Medsystems, Inc., 235 F. 3d at 875.
ii. The Statements Alleged
As described above, Plaintiff identifies fifteen statements as allegedly false and misleading.
The Amended Complaint systematically marches through the fifteen statements and describes who
made each statement, when and where each was made, and the substance of each. See Avaya, Inc.,

564 F.3d at 253 (parties must plead “the who, what, when, where and how” of the alleged fraud).
Undoubtedly, Plaintiff has identified the allegedly false and misleading statements with
particularity. However, Plaintiff fails to adequately allege that each was misleading or false as to
a material fact at the time the statements were made.
1. Plaintiff’s “Overarching Omission” Theory
Plaintiff’s case does not rely upon internal documents or confidential witnesses to establish
true facts that conflict with Defendants’ statements at issue. Instead, Plaintiff alleges that the EUA
pathway was never meaningfully available to COVAXIN because Ocugen was not following the
(non-binding) FDA guidance in every respect. See ECF No. 28; Jan. 26, 2023 Hr’g. 18:1-6 (“the
overarching omission that makes all statements misleading . . . is the fact that there [was] always

a duty to disclose [that] the fast-track EUA pathway . . . was not realistically available to Ocugen”);
Jan. 26, 2023 Hr’g. 18:12-13 (“This omission is enough to sustain Plaintiff’s entire complaint”);
Jan. 26, 2023 Hr’g. 28:16-23 (“The overarching omission that makes all these statements identified
in the amended complaint misleading is that Defendants failed to disclose to investors that they
were banking on the FDA making an exception to key aspects of its own guidance and
precedent.”). Put differently, Plaintiff alleges that all fifteen statements were misleading because
Ocugen failed to disclose that EUA was not possible unless the FDA made exceptions to its
otherwise non-binding guidance. Yet there is no indication that the FDA’s purported flexibility
was required because, importantly, there is no credible allegation that, at the time Defendants’
statements were made, the FDA intended to exclusively extend EUA only to those vaccines that
strictly adhered to every single parameter delineated in each and every non-binding guidance.
Indeed, Plaintiff’s theory requires a carve out of exceptions from binding requirements that did not
exist.

In reality, the FDA included a disclaimer on each guidance document explaining that
vaccine developers could pursue “alternative approach[es]” provided that they complied with the
“applicable statutes and regulations.” ECF No. 41-1 at 6. Additionally, the guidance documents
included a header on every page noting that the document “[c]ontain[ed] [n]onbinding
[r]ecommendations.” See, e.g., ECF No. 41-20. Further still, the guidance provided that the
recommendations did “not have the force and effect of the law” and “should be viewed only as
recommendations.” Id. at 5–6. Indeed “[t]he use of the word should in FDA guidances means that

something is suggested or recommended, but not required.” Id. (emphasis added). Similar
sentiments are reiterated throughout the guidances. For example, the FDA’s position that it
“encourage[d]” diverse clinical trials cannot be read as a mandate. ECF No. 41-15 at 15.
This situation differs from Matrixx, in which the Supreme Court held that a company’s
projection that revenue would increase was misleading because, at the time of such statements, the
company had information indicating a significant risk to its leading revenue-generating product in

the form of actual consumer complaints (i.e. the true facts) which it omitted. 563 U.S. at 47. Here,
Plaintiff asks the Court to rely on hindsight to establish an overarching “fact” where one did not
exist: that EUA was always effectively foreclosed to COVAXIN unless an “exception” was made.
This argument fails from the start because the “overarching omission” turns upon transforming the
FDA’s non-binding guidelines into strict requirements based only on hindsight.14 The Court
declines to make such a holding. See In re Discovery Labs., 2006 WL 3227767, at *12 (failure to
reveal that clinical protocols did not meet non-binding regulatory standards did not support a

14 Even if the Court was persuaded by Plaintiff’s theory of an “overarching omission” and
that EUA was foreclosed to COVAXIN because of failure to follow every aspect of FDA guidance
(unless an exception was made), the Amended Complaint fails in other respects. Plaintiff alleges
three flaws with the development of COVAXIN: (i) that COVAXIN was an inactivated virus
vaccine; (ii) that Defendants did not communicate with the FDA at every stage of the vaccine
development process; (iii) lack of racial diversity in clinical trials.

First, at no point did the FDA affirmatively express a blanket prohibition on EUAs for
inactivated virus vaccines like COVAXIN. At most, Plaintiff asserts that Operation Warp Speed
did not include inactivated virus vaccines in its initial portfolio of vaccine candidates. ECF No. 28
at 11. However, Operation Warp Speed was a collective effort of several agencies and
organizations and, at most, reflects the combined priorities of such organizations. Id. at 10. Thus,
even if strict compliance with FDA guidelines was required (which it was not), Plaintiff has not
alleged that inactivated virus vaccines fell outside of FDA guidance such that an “exception” was
required.

Second, as to communications with the FDA, Plaintiff does not describe with any level of
particularity the points in the vaccine-development process at which Defendants failed to
adequately communicate with the FDA. See, e.g., ECF No. 28 at 62. Indeed, the Amended
Complaint elsewhere suggests that Defendants were engaged in at least some discussions with the
FDA. See, e.g., id. at 71, 87. Though “the normally rigorous particularity rule has been relaxed
somewhat where the factual information is peculiarly within the defendant’s knowledge or
control,” it is still true that “boilerplate and conclusory allegations will not suffice.” In re
Burlington Coat Factory Sec. Litig., 114 F.3d at 1418 (citations omitted). Here, Plaintiff’s
allegations that Defendants failed to communicate with the FDA are nothing more than boilerplate
conclusory statements. Therefore, even if Plaintiff’s theory as to an “overarching” omission of true
facts was viable, Plaintiff has not alleged that Defendants required an exception to the FDA’s
guidance in this respect.

Third, as discussed infra, even if racial diversity was a necessary requirement for EUA,
reasonable shareholders were empowered with all material facts: the nature of the FDA guidance
and that COVAXIN trials were taking place in India and using Indian participants. Accordingly,
disclosure of any “omitted” information would not have altered the total mix of information
already available. See Basic Inc., 485 U.S. at 231–32; In re Sanofi Sec. Litig., 87 F. Supp. 3d 510,
543 (S.D.N.Y. 2015) (recognized by Lungu v. Antares Pharma. Inc., No. 21-cv-1624, 2022 WL
212309 (3d Cir. Jan. 25, 2022) and In re Amarin Corp. PLC Sec. Litig., 689 Fed. App’x 124 (3d
Cir. 2017)).
securities fraud claim because plaintiff could not allege that “defendants knew for certain that the
[agency] would not approve [drug]”).

Further, because an affirmative duty to disclose all information exists only where the
omitted information is necessary to make statements made not misleading, it necessarily follows
that the alleged omission must be rooted in a material and discernable fact. See In re Discovery
Labs., 2006 WL 3227767, at *9 (“Failure to disclose a fact . . . can lead to liability under Rule 10b-
5 . . .” (emphasis added)); Basic Inc., 485 U.S. 231–32 (an omitted fact is material if there is
“substantial likelihood that the disclosure of the omitted fact would have been viewed by the
reasonable investor as having significantly altered the ‘total mix’ of information made available.”
(emphasis added)); 17 C.F.R. 240.10b-5(b) (it is unlawful to “omit to state a material fact . . .”
(emphasis added)). That is not the case here, where the omission alleged—failure to adhere to

every aspect of non-binding guidance guaranteed denial of EUA for COVAXIN—is speculative
and rooted in conjecture rather than in fact. See Williams, 869 F.3d at 244 (no duty to disclose a
terminated relationship with a distributor when, at the time a statement was made that loss of a
distributor could negatively impact sales, no negative impact had yet occurred). Accordingly,
Plaintiff’s claim cannot be sustained based on the “overarching omission” alleged. 15

15 The Court’s finding is bolstered by the fact that Defendants frequently and repeatedly
disclosed facts and information that would render any alleged omissions not misleading.
Importantly, disclosures present in SEC filings are sufficient to alert reasonable investors to
relevant risks and render purported “omissions” immaterial. Fan, 927 F.3d at 716–17 (disclosures
in 10-K filings were sufficient to counter information omitted in press releases); Ieradi v. Mylan
Laboratories, Inc., 230 F.3d 594, 599–600 (3d Cir. 2000) (disclosures in a company’s 10-Q filings
were “more than sufficient” to put potential investors on notice of allegedly omitted material
information).

Specifically, Ocugen’s public filings provided that Ocugen “may be unable to successfully
produce and commercialize a vaccine that effectively and safely treats [COVID-19] in a timely
manner, if at all, and ultimately be unable to obtain EUA or BLA approval in the United States”
2. Material Misrepresentations

Because Plaintiff’s “overarching omission” theory fails, the Court examines the fifteen
statements alleged to determine whether any independently rise to the level of material
misrepresentations. To begin, Plaintiff repeatedly takes issue with the projection that Ocugen
would submit an EUA application in the first six months of 2021 and was generally progressing
towards the goal of EUA approval. See generally, ECF No. 28; ECF No. 41-3 (statements 1, 4–
11). However, it is only in hindsight that Defendants’ projection for EUA submission in the first
half of 2021, or indication that Ocugen was moving “full speed ahead” and “continu[ing] to make
progress” towards submission, might be misleading. Though Defendants did not ultimately submit
an EUA application in the first half of 2021, the Amended Complaint suggests that they took the
steps necessary to do so (i.e. submitting a Master File in March 2021). ECF No. 28 at 82. On the

facts pled, there is no basis to conclude that Defendants were not genuinely working towards this
goal. Indeed, Plaintiff offers nothing to suggest that Defendants did not intend to submit an EUA

in part because “[t]he regulatory pathway for COVAXIN is continually evolving” and because the
“FDA may not accept data from the studies conducted with COVAXIN at clinical trial sites in
India and may require us to conduct clinical studies in the United States.” See, e.g., ECF No. 41-
36 (“Risk Factors” contained in Ocugen’s March 2021 Form 10-K).

Similar disclosures were made at the beginning of investor calls: “Risks and uncertainties
include . . . the uncertainties inherent in research and development, including the ability to meet
anticipated clinical endpoints, commencement and/or completion dates for clinical trials,
regulatory submission dates, regulatory approval dates and/or launch dates, as well as risks
associated with preliminary and the interim data,” “unfavorable new clinical data,” or data “subject
to differing interpretations” by the scientific community[;]” whether “the FDA[] will be satisfied
with the design and results from [clinical studies] of COVAXIN, which have been conducted by
Bharat Biotech in India, whether and when any biologics license and/or emergency use
authorization applications may be filed in the United States for COVAXIN; whether and when any
such applications may be approved by the FDA; decisions by the FDA impacting labeling,
manufacturing processes, safety, and/or other matters that could affect the availability or
commercial potential of COVAXIN in the United States, including development of products or
therapies by other companies.” See, e.g., ECF No. 41-23 at 3.
in the first half of 2021 at the time such statements were made, or that the FDA had communicated
that Ocugen should not proceed towards an EUA submission. These statements, which rely upon
hindsight, cannot support Plaintiff’s claim. Williams, 869 F.3d at 244.
Additionally, vague statements indicating that Ocugen was making progress towards EUA

submission, with the goal of EUA approval, were nothing more than immaterial puffery that any
reasonable investor would understand as such. ECF No. 41-3 (statements 5, 6, 8, 10, 14); In re
Artana Therapeutics Inc. Sec. Litig., 315 F. Supp. 3d 737, 757–58 (S.D.N.Y. 2018) (claims of
“remarkable progress” in advancing product toward “commercialization” and that company was
“confident” about timeline for commercialization constitute puffery); See In re EDAP TMS S.A.
Sec. Litig., No. 14-cv-6096, 2015 WL 5326166, at *10 (Sept. 14, 2015) (“[S]tatements plac[ing] a
positive spin on developments in the [FDA] process . . . constitute inactionable puffery and
corporate optimism.”). Accordingly, any projections as to the timing of EUA submission or
statements regarding progress towards that goal do not support Plaintiff’s claim.
Plaintiff also takes issue with Defendants’ projection that they would distribute 100 million

doses of COVAXIN in 2021 following EUA approval, but such statements were not material. ECF
No. 41-3 (statements 2–6, 8). A reasonable investor would recognize the statements as puffery or
corporate optimism, especially in the context of the COVID-19 pandemic and novel regulatory
path towards EUA approval. See Lungu v. Antares Pharma Inc., 2022 WL 212309, at *6 (Courts
“must distinguish material representations [and objectively verifiable facts] from statements of
opinion . . . or statements that ‘constitute no more than puffery and are understood by reasonable
investors as such.’” (quoting EP Medsystems, Inc., 235 F.3d at 872)). Indeed, vaccine distribution
hinged upon several matters outside of Defendants’ control16 to which the American public was
acutely attuned during the height of the pandemic. Indeed, Defendants’ projections were purely
speculative and dependent upon EUA approval in the first instance.17 As articulated in the context
of possible mergers that may or may not ultimately occur, the Supreme Court observed that Federal

Securities law is not based on a “paternalistic” view of investors which assumes that investors are
unable to appreciate “that mergers are risky propositions up until the closing.” Basic Inc., 485 U.S.
at 234 (rejecting the bright line rule that possible mergers need not be disclosed until there is an
agreement-in-principle). Similarly, in the height of an unprecedented global pandemic, reasonable
investors would certainly appreciate that FDA approval and vaccine distribution was a “risky
endeavor” even if Defendants omitted a caveat to this effect. Accordingly, any reasonable investor
would be able to discern Defendants’ projections related to vaccine distribution as immaterial
puffery which cannot support Plaintiff’s claim. In re Aetna, 617 F.3d at 283; EP Medsystems, Inc.,
235 F.3d at 875 (statements that are “obviously unimportant” may be immaterial as a matter of
law). Moreover, such statements are classically forward-looking and, to the extent they were
predated by adequate cautionary language, are covered by the PSLRA safe harbor.18

16 To name a few such factors: EUA approval, the speed at which manufacturers or third-
party distributors could produce and deliver vaccines, and the availability and efficacy of other
vaccines.
17 Moreover, there is no indication that Defendants were not prepared to move forward and
distribute 100 million doses of COVAXIN if the predicate and speculative step of EUA approval
occurred.
18 The PSLRA safe harbor applies, inter alia, to forward-looking statements that are
identified as such and accompanied by meaningful cautionary statements. In re Aetna, Inc. Sec.
Litig., 617 F.3d at 278. Inactionable forward-looking statements typically include “projections of
future performance [and] plans and objectives for future operations.” Id. The projection that
Defendants aimed to distribute a specific number of vaccine doses in 2021 falls squarely within
this definition. Additionally, cautionary statements disclosed in SEC filings may be incorporated
by reference and do not have to be in the same document as the forward-looking statements,
provided that the cautionary language is “extensive, specific, and directly related to the alleged
misrepresentation.” Id. at 282. Here, Ocugen’s public filings cautioned that Ocugen may be
Additionally, Plaintiff alleges that Defendants’ projection that the vaccine had potential for
significant revenues was materially false and misleading. See, e.g, ECF No. 28 at 53; ECF No. 41-
3 (statement 4). Yet courts have uniformly held that vague predictions related to revenue constitute
immaterial puffery. See, e.g., In re Burlington Coat Factory Sec. Litig., 114 F.3d at 1427–28

(collecting cases). Therefore, Defendants’ general projection of increased revenue is insufficient
to maintain Plaintiff’s claim as it would be understood as “obviously unimportant” puffery to a
reasonable investor. EP Medsystems, Inc., 235 F.3d at 875.
The lion’s share of statements at issue—projections related to EUA submission, vaccine
distribution, and potential profit—are insufficient to support Plaintiff’s claim as described supra.
ECF No. 41-3 (statements 1–6, 8, 10–11, 14). The five remaining statements require individualized
discussion. Id. (statements 7, 9, 12, 13, 15). Each of these statements might arguably imply that
Defendants received positive feedback or other non-public information from the FDA or represent
Defendants’ reading of FDA guidance. However, upon close review the Court finds that none of
the remaining statements support Plaintiff’s claim.
First, according to a Reuters article19 published March 15, 2021, when asked about the

FDA, Mr. Musunuri stated that “they’re fine with the way the interim analysis is being done.”20

“unable to successfully produce and commercialize” COVAXIN “in a timely manner, if at all,”
based on uncertainties related to FDA approval. See, e.g., ECF No. 41-36 at 6, 16 (“Risk Factors”
contained in Ocugen’s March 2021 Form 10-K).
19 Plaintiff’s reliance on the Reuters article suffers from an additional flaw because Mr.
Musunuri’s quoted statement does not explicitly reference the FDA; rather, it is the author who
provides the necessary context for Mr. Musunuri’s statement. Defendants cannot be held liable for
statements they did not make and there is nothing in the Complaint to suggest that Defendants
controlled the content of the report or affirmed that Mr. Musunuri’s quote was not taken out of
context. See City of Edinburgh Council v. Pfizer, Inc., 754 F.3d 159, 172 (3d Cir. 2014)
(“Defendants cannot be held responsible for statements they did not make”).
20 Defendants argue that this statement was made in reference to pediatric trials, which do not
form the basis of this suit. Jan. 26, 2023 Hr’g. 40:14-41:25. The Court declines to take a position
ECF No. 28 at 69; ECF No. 41-3 (statement 7). However, there is nothing to suggest—or any true
facts to establish—that the FDA was not “fine with” the interim analysis as of March 2021 because
Plaintiff does not allege what the FDA actually communicated to Defendants. Compare Reid v.
Hemispherx Biopharma, Inc., No. 09-cv-5262, 2010 WL 11710594, *2 (E.D. Pa. Apr. 20, 2010)

(plaintiffs sufficiently alleged that defendants affirmatively misrepresented the content of feedback
received from the FDA), and In re Viropharma Inc. Sec. Litig., 21 F. Supp. 3d 458, 471 (E.D. Pa.
2014) (failure to disclose the FDA’s ultimate “conclusions” regarding the deficiencies in a clinical
study was actionable), with In re Sona Nanotech, Inc. Sec. Litig., 562 F. Supp. 3d 715, 725 –26
(C.D. Cal. 2021) (allegation that defendant misrepresented feedback on EUA application was not
actionable because plaintiff “fail[ed] to allege what the FDA actually communicated” to
defendant). In the absence of any allegations to the contrary, the Court cannot find that Plaintiff
adequately alleged that Mr. Musunuri’s assertion was indeed a misrepresentation at the time it was
made.21 Williams, 869 F.3d at 244; CALPERS, 394 F.3d at 145 (explaining that “unless plaintiffs
in securities fraud actions allege facts supporting their contentions of fraud with the requisite

particularity . . . they may not benefit from inferences flowing from vague or unspecific
allegations—inferences that may arguably have been justified under a traditional Rule 12(b)(6)
analysis.” (citations omitted)).

on this matter because the article was not provided by either party and, even if it were incorporated
by reference, the article is ambiguous on this point.
21 Even if allegations specifying the FDA’s direct feedback to Defendants had been made,
other courts in this circuit have found that “interim FDA feedback is not material because it does
not express a binding agency decision and is subject to change.” See Paxton v. Provention Bio,
Inc., No. 21-cv-11613, 2022 WL 3098236, at *13 (D.N.J. Aug. 4, 2022) (quoting In re Sanofi Sec.
Litig., 87 F. Supp. 3d at 542); see also In re Discovery Labs. Sec. Litig., 2006 WL 3227767, at *12
(“Given the complexity of these negotiations . . . the law does not require blow-by-blow disclosures
of conversations with regulatory agencies.”).
Second, Defendants’ discussion of clinical trial diversity and Dr. Forrest’s speculation that
the data would be translatable to the EUA process during the March 31, 2021 fireside chat was
immaterial. ECF No. 41-3 (statement 9). During the fireside chat, Defendants described the
diversity of the Phase III participants who, though all were Indian, included a cross-section of

participants with respect to age, weight, body mass index, underlying conditions, and social and
economic circumstances. ECF No. 28 at 76. Indeed, the trial generally accounted for diversity
metrics identified by the FDA other than race. Id. at 23 (the November 2020 guidance highlighted
diversity of age, sex, race, and ethnicity). However, that the FDA placed importance on racial
diversity was publicly available. 21 C.F.R. § 10.115(n). So too was the fact that COVAXIN trials
were being conducted in India (and using Indian participants). ECF No. 28 at 54. Accordingly,
Defendants’ failure to expressly connect the dots between the guidance and the Company’s
practices does not give rise to a material omission. See Sanofi, 87 F. Supp. 3d at 543 (an omission,
“considered in light of what was undisputedly publicly known” is not material if the omitted
information is already available to the public (citations omitted)); See Nobel Asset Mgmt. v. Allo

Therapeutics, Inc., No. 04-cv-1030, 2005 WL 4161977, at *7 (D. Colo. Oct. 20, 2005) (that
defendants did not “tell investors about the FDA’s published regulatory guidelines and how they
might affect the FDA’s view of [defendants’] application” was not material because “[s]uch
information was available to investors”). Moreover, that Defendants believed the data would be
acceptable to the FDA was a statement of optimism and opinion,22 particularly in context of the

22 “Interpretations of clinical trial data are considered opinions” which are “only actionable
under the securities laws if they are not honestly believed and lack a reasonable basis.” City of
Edinburgh Council, 754 F.3d at 170; In re Amarin Corporation PLC Sec. Litig., 2022 WL 2128560
at *132 (applying City of Edinburgh Council rather than Omnicare, Inc. v. Laborers Dist. Council
Const. Indus. Pension Fund, 575 U.S. 175 (2015)). Here, Plaintiff does not allege that Defendants
did not honestly believe that the Phase III trial data would be acceptable to the FDA. Instead,
Plaintiff asks the Court to infer that Defendants’ statements were not honestly believed. ECF No.
pandemic and the non-binding nature of the FDA’s guidance, further indicating that this statement
was immaterial. In re Aetna, 617 F.3d at 283.
Third, Plaintiff fails to establish that Mr. Musunuri’s statement on the May 7, 2021 investor
call that the FDA had not said anything “about wanting to see vaccine data for U.S. patients” before

moving forward with the EUA application was a material misrepresentation as of that date. ECF
No. 41-3 (statement 12). Specifically, the Amended Complaint does not contain factual allegations
suggesting that the FDA had communicated otherwise to Defendants as of May 7, 2021. Plaintiff

43 at 16–17. However, in light of the novel EUA process and unprecedented pandemic, the Court
cannot find that such an inference is appropriate.

For similar reasons, even under the more rigorous Omnicare test, Plaintiff’s claim is still
unavailing. In Omnicare, the Supreme Court provided an instructive analogy: “In the context of
the securities market, an investor, though recognizing that legal opinions can prove wrong in the
end, still likely expects [the assertion “we believe our conduct is lawful”] to rest on some
meaningful legal inquiry—rather than, say, on mere intuition, however sincere.” Omnicare, Inc.,
575 U.S. at 189. However, “[r]easonable investors understand that opinions sometimes rest on
weighing of competing facts.” Id. at 189–90. For example, if one “did not disclose that a single
junior attorney expressed doubts about a practice’s legality, when six of his more senior colleagues
gave a stamp of approval[,] [t]hat omission would not make the statement of opinion misleading,
even if the minority position ultimately proved correct.” Id. at 190. This is so because “[a]
reasonable investor does not expect that every fact known to an issuer supports its opinion
statement.” Id. (emphasis original).

This analogy is instructive. Plaintiff does not allege any facts to indicate that Defendants
entirely shirked due diligence in forming their opinion that the data would be acceptable to the
FDA. Rather, even viewing the facts alleged in the light most favorable to Plaintiff, the only
reasonable inference the Court can draw is that Defendants attempted to satisfy many of the non-
binding guidelines on an accelerated timeline and incorrectly (though not unjustifiably) believed
this would result in an EUA. Though statements of opinion by corporate officials “can be
materially significant to investors because investors know that these top officials have knowledge
and expertise far exceeding that of an ordinary investor,” In re Burlington Sec. Litig., 114 F.3d at
1428, this rationale is significantly dampened by the context of the pandemic. Indeed, confronted
with a global pandemic and the seldom used EUA approval process, a reasonable investor would
appreciate that Defendants’ position was nuanced. See Omnicare, 575 U.S. at 190. This is
buttressed by the fact that, in the context of EUA applications, clinical trial data was only
considered “if available” and the demographic representation required of each trial was not
required by statute. 21 U.S.C. § 360bbb–3(c)(3). Indeed, FDA guidance only “encourage[d]”
diversity but in no way was it mandated. See ECF No. 41-15 at 15.
relies on hindsight to color this statement as misrepresentative or false, but such allegations are
not enough to support Plaintiff’s claim. Williams, 869 F.3d at 244; CALPERS, 394 F.3d at 145.
Fourth, Mr. Musunuri’s statement on the same investor call that Defendants were
“following FDA guidance on EUA[s]” was not misleading when read in context. ECF No. 41-3

(statement 13). Plaintiff’s selective quote ignores the context of the conversation: Mr. Musunuri
was asked to describe the difference between submitting a Master File and EUA application. ECF
No. 41-23 at 8. Accordingly, he provided that “based on the guidance,” the Master File included
“all preclinical manufacturing and any other data” prior to Phase III which “gives an opportunity
for [the] FDA to review and provide additional comments prior to [Defendants] filing an EUA.”
Id. Then, “the second step is filing the [EUA] application.” Id. Read in context, it is evident that
Mr. Musunuri’s statement that Defendants were “following FDA guidance” was narrowly
describing the procedure required and was not in reference to every minute component of all (non-
binding) FDA guidance provisions. Plaintiff’s “selective reading” of this statement cannot support
his claim. See City of Edinburgh Council, 754 F.3d at 168 (citing Tellabs, Inc., 551 U.S. at 322).

Finally, Dr. Forrest’s statement in the May 26, 2021 press release was not material. In the
press release, Dr. Forrest provided that he read the guidance to “refer[] specifically to vaccines
based on the spike protein” rather than inactivated virus vaccines such as COVAXIN. ECF No. 43
at 25; ECF No. 41-3 (statement 15). Though the bulk of the May 25, 2021 guidance did not
differentiate between vaccine types, an appendix attached to the guidance did make such a
distinction. ECF No. 41-20 at 22. Specifically, the appendix addressed concerns about reduced
efficacy against variants as to previously authorized spike protein vaccines. Id. at 22. Read in
context, Dr. Forrest’s statement clearly addresses the appendix rather than the full guidance.
Indeed, he provides that COVAXIN “provides a broadly protective immune response beyond the
spike protein, offering potential effectiveness against multiple existing and emerging variants and
reducing the possibility of mutant virus escape.” ECF No. 44-7 (emphasis added). A “selective
reading” of this statement does not support Plaintiff’s claim. See City of Edinburgh Council, 754
F.3d at 168 (citing Tellabs, Inc., 551 U.S. at 322). Additionally, Plaintiff does not allege that Mr.

Musunuri’s statement in the same press release that Defendants had “been in discussions with the
FDA since [the year prior]” was incorrect or misleading when made. 23 ECF No. 28 at 87.
Accordingly, because Plaintiff fails to allege any statements or omissions which are both material
and misleading, Count I must be dismissed as to Plaintiff’s 10b5-(b) claim.
b. Section 10(b) of the Exchange Act and Rule 10b-5(a) & (c) Claims (Count I)
Plaintiff also alleges liability under Rule 10b-5(a) and (c). ECF No. 28 at 112. Under Rule
10b-5(a) it is unlawful to “employ any device, scheme, or artifice to defraud” in connection with
the purchase or sale of any security. 17 C.F.R. § 240.10b-5(a). Pursuant to Rule 10b-5(c), it is
unlawful 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(c). Though liability under Rules 10b-5(a) and (c) may attach despite
dismissing a 10b-5(b) claim, as a baseline the conduct supporting 10b-5(a) or (c) claims must
involve statements that qualify as false or misleading or must involve entirely separate conduct
apart from the statements supporting a 10b-5(b) claim. See Lorenzo v. SEC, 139 S.Ct. 1094, 1102–
03 (2019) (holding that those who do not “make” the false statements, but instead disseminate the
same false statements, can be found to have violated Rule 10b-5(a) and (c) even when the 10b-
5(b) claim was dismissed). Here, however, Plaintiff’s 10b-5(a) and (c) claims rest entirely on the

23 As discussed supra, Plaintiff does not allege when and to what extent Defendants’
communication with the FDA was insufficient.
same statements alleged as to Rule 10b-5(b). Indeed, Plaintiff does not allege any deceptive or
fraudulent acts, scheme, or practices separate from the fifteen statements alleged. Accordingly,
because Plaintiff fails to allege any material misstatements or omissions as described supra and
also fails to allege any other conduct giving rise to liability beyond the alleged statements, his

claims pursuant to Rule 10b-5(a) and (c) must also be dismissed and Count I will be dismissed in
its entirety.
c. Section 20(a) of the Exchange Act and Rule 20A Claims (Counts II and III)
In Counts II and III, Plaintiff alleges control person liability against Individual Defendants
and insider trading against Mr. Musunuri, respectively. ECF No. 28 at 113–14. Section 20(a) of
the Securities Exchange Act of 1934 creates a cause of action against individuals who exercise
control over a “controlled person,” including a corporation, that has committed a violation of
Section 10(b). 15 U.S.C. § 78t(a). Accordingly, “liability under Section 20(a) is derivative of an
underlying violation of Section 10(b) by the controlled person.” Avaya, Inc., 564 F.3d at 252. Thus,
if the underlying primary violation of federal securities law is insufficiently alleged, the Section

20(a) claim fails as well. See id. at 280. Likewise, Section 20A provides a private right of action
for insider trading violations and requires pleading a predicate violation of the Exchange Act. City
of Edinburgh Council, 754 F.3d at 175. Again, a Section 20A claim is viable only insofar as a
primary violation of the Exchange Act has been alleged. Id. Here, because the Court finds dismissal
of Count I appropriate, Counts II and III must also be dismissed.
VI. CONCLUSION
For the reasons set forth above, Defendants’ Motion to Dismiss (ECF No. 41) will be
granted and this case will be dismissed with prejudice.24

BY THE COURT:

/s/ Chad F. Kenney

CHAD F. KENNEY, JUDGE

24 The PSLRA narrows the impact of Rule 15(a)’s directive to freely allow leave to amend.
CALPERS, 394 F.3d at 165. Indeed, “[a]llowing leave to amend where there is a stark absence of
any suggestion by the plaintiffs that they have developed any facts since the action was
commenced, which would, if true, cure the defects in the pleadings under the heightened
requirements of the PSLRA would frustrate Congress’s objective in enacting this statute of
providing a filter at the earliest stage (the pleading stage) to screen out lawsuits that have no factual
basis.” Id. (citations omitted).

This case was commenced in June 2021 and an Amended Complaint was filed one year
later in June 2022. ECF Nos. 1, 28. This Motion was briefed throughout Summer and Fall 2022
and argued in January 2023. ECF Nos. 41, 43, 44, 50. However, throughout the pendency of this
case Plaintiff has not suggested any factual development that might cure the deficiencies outlined
above. Importantly, Plaintiff’s claims largely fail as a matter of law rather than because of
insufficient pleadings. While the Court has identified two categories of allegations which might
benefit from additional pleadings—the extent and content of communication with the FDA and
whether Defendants indeed intended to submit an EUA application—there is nothing to suggest
that Plaintiff has developed any facts on these limited issues since the commencement of this action
that might save his claims. The Court therefore denies Plaintiff’s request to file a second amended
complaint.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10404889. Public record. Not legal advice.