CUTSHALL

IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

JAMES A. CUTSHALL, )

individually and on behalf )

of all others similarly )

situated, et al., )

)

Plaintiffs, )

)

v. ) 1:24CV954

)

HUMACYTE, INC., et al., )

)

Defendants. )

MEMORANDUM OPINION AND ORDER

THOMAS D. SCHROEDER, District Judge.

This is a putative federal securities class action on behalf

of all persons who owned common stock or warrants, sold put

options, or bought call options of the biopharmaceutical company

Humacyte, Inc. (“Humacyte”), between August 14, 2023, and March

25, 2025 (the “class period”).1 In their corrected first amended

complaint (the “complaint”), Plaintiffs seek recovery for stock

losses pursuant to Sections 10(b) and 20(a) of the Securities

Exchange Act of 1934 (“Exchange Act”), as amended by the Private

Securities Litigation Reform Act of 1995 (“PSLRA”) and Rule 10-b5

promulgated thereunder, 17 C.F.R. § 240.10b-5. (Doc. 37.) The

Defendants are: Humacyte; Laura E. Niklason, M.D., Ph.D.,

1 The lead Plaintiffs are Frederick Foote, Mathew Cognetti, and Damion

Hopwood. (Doc. 37.) However, the entire putative Plaintiff class

(including the lead Plaintiffs) will be referred to simply as

“Plaintiffs.”

Humacyte’s co-founder, president, chief executive officer (“CEO”)

during the class period, and member of the board of directors since

2004 (id. ¶ 17); Dale A. Sander, Humacyte’s chief financial officer

(“CFO”) during the class period and member of the board of

directors since 2015 (id. ¶ 18); and Heather Prichard, Humacyte’s

chief operating officer (“COO”) during the class period (id. ¶ 19)

(together, “Defendants”). Before the court is Defendants’ motion

to dismiss the complaint for failure to state a claim pursuant to

Federal Rule of Civil Procedure 12(b)(6). (Docs. 40, 41.)

Plaintiffs filed a response in opposition (Doc. 42), and Defendants

replied (Doc. 43). The court heard argument on the motion on March

17, 2026. For the reasons set forth below, Defendants’ motion to

dismiss will be granted in part and denied in part.

I. BACKGROUND

The facts alleged in the complaint, which are accepted as

true and viewed in the light most favorable to Plaintiffs for

purposes of the present motion, and the contents of other documents

which the court may consider in deciding the motion to dismiss,

show the following:

Humacyte is a biopharmaceutical company that develops and

manufactures off-the-shelf, implantable, and bioengineered human

tissues. (Doc. 37 ¶ 3.) Humacyte’s lead product, a human

acellular vessel (“HAV”) known as either the Acellular Tissue

Engineered Vessel (“ATEV”) or Symvess, is a lab-grown blood vessel

implant that can act as a replacement for an injured or damaged

blood vessel. (Id.) During the class period, Humacyte had one

facility in Durham, North Carolina, that housed its corporate

headquarters, manufacturing capability, and research and

development, along with approximately 180 to 220 employees. (Id.

¶ 35.)

On December 12, 2023, Humacyte submitted its Biologics

License Application (“BLA”) for Symvess to the Food and Drug

Administration (“FDA”). (Id. ¶ 32.) That same day, Dr. Niklason

noted in a press release that the BLA sought approval for Symvess

“in urgent arterial repair following extremity vascular trauma

when a synthetic graft is not indicated and when autologous vein

use is not feasible.” (Id. ¶ 33(a) (emphasis omitted).) The FDA

accepted the BLA on February 9, 2024, and provided Humacyte with

a Prescription Drug User Fee Act (“PDUFA”) date of August 10, 2024.

(Id. ¶ 32.) This PDUFA date was the date by which the FDA had to

respond to Humacyte’s BLA. (Id.) Immediately after the FDA’s

acceptance of its BLA, Humacyte issued another press release where

Dr. Niklason announced the PDUFA date of August 10, 2024. (Id.

¶ 34.)

On August 9, 2024, Humacyte issued a press release announcing

that the FDA would require additional time to complete its review

of the BLA. (Id. ¶ 7.) On the next trading day, August 12,

Humacyte’s stock price dropped from $7.91 to $6.62 per share, a

decline of 16.37%, on high trading volume. (Id. ¶¶ 7, 149.)

Ultimately, the FDA issued a BLA approval letter to Humacyte

for Symvess on December 19, 2024. (Id. ¶ 47.) This approval,

however, was limited to “use in adults as a vascular conduit for

extremity arterial injury when urgent revascularization is needed

to avoid imminent limb loss, and autologous vein graft is not

feasible.” (Id.; see Doc. 41-1 at 21.) Moreover, the BLA approval

letter noted the FDA’s imposition of a black-box warning to

highlight Symvess’s risk of rupture, stating, “Given the serious

risk of arterial bleeding from mid-graft rupture or anastomotic

failure (9.9%) following implantation of SYMVESS in this small

cohort, the clinical team included this information as a boxed

warning in SYMVESS prescribing information.”2 (Doc. 37 ¶ 125(a);

see Doc. 41-1 at 19.)

A. Material Misrepresentations and Omissions

During the class period, Defendants made public statements

regarding the safety and efficacy of Symvess, the state of

Humacyte’s manufacturing facility, and the adequacy of Humacyte’s

cash and cash equivalents. In their complaint, Plaintiffs

challenge several of these statements, as set forth below, as

material misrepresentations and omissions.

2 According to the FDA’s Clinical Review Memorandum for Symvess, “[t]he

term rupture is used to include instances of mid-graft loss of ATEV

integrity as well as anastomotic failure consistent with the term used

in [Humacyte’s] case summaries.” (Doc. 41-1 at 147.) Thus, an

“[a]nastomotic failure is a type of rupture.” (Doc. 43 at 10.)

1. Product safety fraud

Humacyte’s BLA relied on results from two trials. (Doc. 37

¶ 33(a).) The first trial, known as the V005 trial, evaluated

Symvess for vascular replacement or reconstruction in 71 patients

with life- or limb-threatening vascular trauma. (Doc. 41-1 at 7.)

Thus, the patients in the V005 trial received Symvess for either

an extremity or a torso/iatrogenic indication. (Id. at 7-8.) The

V005 trial measured primary efficacy via the rate of primary

vascular graft patency (i.e., blood flow without intervention) and

secondary vascular graft patency (blood flow with intervention) 30

days after treatment. (Id. at 8.) To determine Symvess’s primary

efficacy, however, the V005 trial evaluated only the 54 patients

who received Symvess for an extremity indication. (Id.) The 30-

day rates of infection and amputation comprised the trial’s

secondary endpoints. (Id. at 195.)

The second trial, known as the V017 trial, reviewed results

from 16 wartime Ukrainian patients treated with Symvess through

Humacyte’s Humanitarian Aid Program. (Id. at 8.) Like the V005

trial, the V017 trial focused on an endpoint of Symvess’s primary

efficacy after 30 days. (Id. at 161.) Plaintiffs allege that

several of Defendants’ statements and filings related to the

results of the V005 and V017 trials constitute material

misrepresentations or omissions. (Doc. 37 ¶ 103.)

On August 14, 2023, Humacyte issued a press release announcing

the results of the V017 trial, stating:

Clinicians reported that the rate of success in treating

patients with the HAV was high, with an observed 30-day

HAV patency (presence of blood flow) of 95%, 30-day limb

salvage of 100%, 30-day survival of 100%, and zero cases

of infection of the HAV.

(Id. ¶ 104(a) (emphasis omitted).) The same day, Humacyte held an

earnings call where Dr. Niklason touted these results while noting

Symvess’s “very high success rate.” (Id. ¶ 104(b) (emphasis

omitted).) She also favorably compared the V017 trial to the V005

trial, stating that “[t]he patency results in Ukraine have been

outstanding. They’re actually not that different from some of the

early patency results that we’ve talked about for V005.” (Id.

(emphasis omitted).) Moreover, in response to a question about

the control benchmark used by Humacyte for its V005 trial, she

stated:

[T]he historical control benchmark for the V005 trial is

based on a comprehensive literature review. And the

structure of the literature review and the meta-analysis

was actually something that we agreed upon with the FDA

before undertaking this. So, this is really a

comprehensive review of the world’s literature over the

last 20 years using any type of synthetic graft. . . .

But this is also high-quality studies [sic].

So . . . the surgical literature is sometimes messy, and

there’s a lot of single-arm studies that are of low

quality. Those studies were excluded with agreement

from the FDA. So, we’re focusing on high-quality

studies. And because of that, the benchmark that we’ve

obtained, we feel is robust and we feel will provide

excellent support for eventual approval of the HAV and

trauma.

(Id. (second alteration in original).)

On September 12, 2023, Humacyte issued a press release

announcing positive top line results from the V005 trial.

Specifically, Humacyte claimed, “The single arm clinical trial was

a success and showed that the HAV in this study had higher rates

of patency, and lower rates of amputation and infection, compared

to historic synthetic graft benchmarks.” (Id. ¶ 105 (emphasis

omitted).) The press release then described the V005 trial’s

methodology, noting:

[T]he comparators for the HAV results were benchmark

outcomes for treatment with synthetic grafts based on a

systematic literature search. The principal means of

evaluation was comparability of secondary patency (blood

flow) at 30 days, with primary patency (blood flow

without intervention) also evaluated. Secondary

comparisons comprised of improvement in rates of

amputation and rates of infection at 30 days.

(Id. (emphasis omitted).) Further, the press release provided a

detailed statistical breakdown of the results from the V005 trial

compared to the benchmark literature review of synthetic grafts:

The V005 trial was a success, and the principal

comparison of 30-day secondary patency for the HAV in

the clinical trial was 90.2% for the extremity patients

(89.9% for total patients) compared to 81.1%

historically reported for synthetic grafts. Primary

patency for total HAV patients and for extremity

patients was 81.2% and 84.3%, respectively . . . . For

the secondary comparison of amputation rates, the HAV

demonstrated an improvement with a rate of 9.8% for

extremity patients (10.1% for total patients) compared

to 20.6% historically reported for synthetic grafts.

For the secondary comparison of infection rate, the HAV

demonstrated an improvement, with a rate of 2.0% for the

extremity patients (2.9% for the total patients)

compared to 8.9% historically reported for synthetic

grafts. There were no unexpected safety signals for the

HAV in this study.

(Id. (emphasis omitted).) Finally, the press release also provided

a favorable comparative breakdown for the V017 trial:

For this population, 30-day secondary patency for the

HAV was 93.8% compared to 81.1% historically reported

for synthetic grafts. The rate of amputation for the

HAV was 0.0% compared to 20.6% historically reported for

synthetic grafts. The rate of infection for the HAV was

0.0% compared to 8.9% historically reported for

synthetic grafts.

(Id. (emphasis omitted).)

On September 12, 2023, Humacyte held a key opinion leader

webinar with analysts where Humacyte’s chief medical officer

repeated the favorable results of the V005 trial in comparison to

benchmark literature for synthetic grafts, while noting that the

study’s “primary endpoint [was] 30-day patency in patients with

extremity injuries.” (Id. ¶ 106(a) (emphasis omitted).) The chief

medical officer then repeated the detailed, favorable statistical

breakdown of the results of both trials in comparison to the

literature review benchmark. (Id. ¶ 106(b).)

In response to a question about the data comparison, Dr.

Niklason reiterated that Humacyte “actually worked out the

protocol for doing the meta analysis with the [FDA] before

[Humacyte] performed it. . . . So we have a high degree of

confidence, that the [FDA] will accept this benchmark, given that

it was developed in collaboration with folks of the FDA.” (Id.

¶ 106(c) (emphasis omitted).) Further, Dr. Niklason added that

because “[t]he primary factor is saving life and limb at the time

of the acute crisis[,] . . . this is why the FDA has acknowledged

that 30-day patency is actually a salient endpoint.” (Id. ¶ 106(d)

(emphasis omitted).) Finally, in response to a question about the

V017 trial composition, Dr. Niklason asserted that “even though

this was not a clinical trial per se, but the inclusion criteria

for the humanitarian effort, actually mirrored the inclusion

criteria for the V005 trial.” (Id. ¶ 106(e).)

Dr. Niklason repeated the positive results of both the V005

and V017 trials in a live key opinion leader event on September

20, 2023, in an earnings press release and earnings call on

November 9, 2023, and again in a press release on November 17,

2023. (Id. ¶¶ 107-10(d).) Moreover, in the November 17 press

release, Humacyte touted the safety of Symvess:

There were no unexpected safety signals for the HAV in

the V005 and V017 studies. . . . There were four deaths

among the extremity patients in the V005 trial, and zero

deaths in the V017 trial. There were no deaths among

extremity patients in the V005 trial attributed to the

HAV. A meta-analysis combing the V005 and V017 trials

showed a rate of death for extremity patients comparable

to that historically reported for synthetic grafts, with

a 30-day rate for the HAV for 3.5%, and a 30-day rate of

deaths attributed to the HAV of 0.0%. A 30-day rate of

death of 3.4% is reported historically for synthetic

grafts, although deaths attributed to the synthetic

grafts were not reported.

(Id. ¶ 110(e) (emphasis omitted); see Doc. 43-1 at 4.)

Humacyte continued to report these favorable results from

both the V005 and V017 trials in a December 2023 press release, a

February 2024 press release, a March 2024 press release, and a

March 2024 earnings call. (Doc. 37 ¶¶ 111-13.) Then, on March

28, 2024, Humacyte filed a Form 10-K with the Securities and

Exchange Commission (“SEC”) for the 2023 fiscal year. (Id. ¶ 114.)

Most significantly, the 2023 Form 10-K reported only one HAV

rupture among the V005 extremity group.3 (Id. ¶ 114(f); see Doc.

41-1 at 197.) Then, on May 10, 2024, Humacyte issued a press

release and held an earnings call. (Doc. 37 ¶¶ 115-16.) Both

during the earnings call and in the press release, Dr. Niklason

noted that Humacyte “remain[ed] on track with our BLA review and

commercial launch preparations, and we remain confident in the

approvability of the HAV in vascular trauma.” (Id. (emphasis

omitted); see Doc. 43-1 at 10.)

Humacyte met with the FDA at the Late Cycle Meeting on May

20, 2024, after which Dr. Niklason continued to express her

optimism about the results of the trials and the progress toward

FDA approval. (Doc. 37 ¶¶ 99, 117.) But on August 9, 2024,

Humacyte issued the press release announcing the delayed FDA

approval. (Id. ¶ 118.) In this press release, Dr. Niklason

asserted:

FDA leadership noted that Humacyte’s ATEV is a first-

in-class product, and that Priority Review had been

granted, which allows only a six-month review cycle, as

3 Notably, the 2023 Form 10-K included only 51 patients in the V005

extremity group, while the FDA’s BLA approval letter noted 54 patients

in the same group. (Contrast Doc. 41-1 at 8, with id. at 195.) The

parties have not offered any explanation for this discrepancy.

compared to the standard ten-month review cycle for most

products. During the course of the BLA review, the FDA

has conducted inspections of our manufacturing

facilities and clinical sites and has actively engaged

with us in multiple discussions regarding our BLA

filing, including post-marketing and labeling

discussions. Based on these interactions, we are

confident in the approvability of the ATEV in treating

vascular trauma. The FDA leadership expressed an

apology for their inability to complete the review by

the PDUFA date, and currently we do not yet have a

revised action date.

(Id. ¶ 118(a).) The press release again touted the favorable

results obtained by Symvess in the V005 and V017 trials in

comparison to historical synthetic grafts. (Id. ¶ 118(b).)

A few days later, in an August 13, 2024 earnings press

release, Dr. Niklason stated, “We were surprised to be notified by

the FDA that they will require additional time to complete their

review of the BLA for our ATEV (acellular tissue engineered vessel)

in vascular trauma.” (Id. ¶ 119(a).) Moreover, she noted, “During

the course of the BLA review, the FDA has conducted inspections of

our manufacturing facilities and clinical sites and has actively

engaged with us in multiple discussions regarding our BLA filing,

including post-marketing and labeling discussions.” (Id.) And in

an earnings call the same day, in response to an analyst’s question

about a new approval date, Dr. Niklason stated that she could not

provide further clarity and asserted that the FDA “said simply

that they need more time and they did not give us insight into a

new date or how we would be informed.” (Id. ¶ 120.) CFO Sander

reiterated, “[W]e don’t know what the delay will be at this

instance.” (Id. (emphasis omitted).)

Humacyte issued another press release and held an earnings

call on November 8, 2024, where Dr. Niklason reiterated that the

FDA “actively engaged with us in multiple discussions regarding

our BLA filing, including agreement on post-marketing commitments,

as well as labeling discussions.” (Id. ¶ 121-22 (emphasis

omitted).) In response to a question about the delay in approval,

Dr. Niklason answered:

So since the PDUFA date, and when the FDA told us they

needed more time, we’ve since had occasional, what I’m

calling, pinging. We reach out to the CBER leadership

every few weeks and offer them material that may help in

the review, ask them if they have timelines or questions

for us. And we have offered additional material, for

example, some of the webinars that we’ve shown that

they’ve accepted. But they have not given us a new date,

and they have not really engaged in much question asking.

I will say that we’ve gotten a couple requests for sort

of standard documentation on the CMC side just in the

last couple of weeks that our quality team and our CMC

team are responding to timely. But it would be too far

to say that we’re having substantive discussions with

them. That’s . . . we are offering them that material,

and they’ve asked us a couple of paperwork questions.

(Id. ¶ 122.) On November 21, 2024, Humacyte issued another press

release where it repeated the favorable results from the V005 and

V017 trials in comparison to synthetic graft benchmarks and

announced the publishing of Humacyte’s clinical results in the

journal JAMA Surgery. (Id. ¶ 123.) This press release described

longer-term follow-up results, noting:

The ATEV was observed to be mechanically durable and

does not appear to dilate or become stenotic over

time. . . . The average follow-up duration for patients

receiving the ATEV for extremity trauma is 334.4 days,

with a total patient exposure of 61.3 years. These

results showcased the potential of the ATEV to retain

patency over the longer duration of follow up. No ATEV

infections or patient deaths were reported after month

three.

[. . .]

Evaluation of the safety of the ATEV indicated no safety

signals attributable to ATEV mechanical weakness,

contamination, or immune rejection. Overall, Adverse

Events (AEs) and Serious Adverse Events (SAEs) were

consistent with patients suffering from acute injuries.

Adverse Events of Special Interest (AESIs) including

thrombosis, rupture, aneurysm, and pseudoaneurysm,

occurred at rates that were consistent with reports of

other vascular conduits, including autologous vein and

synthetic grafts. The meta-analysis combing the V005

and V017 trials showed a 30-day rate of death in ATEV

patients of 3.5%, comparable to the 3.4% rate

historically reported for synthetic grafts. There were

no deaths attributable to the ATEV.

(Id. ¶ 123(c)-(d).)

Finally, on December 19, 2024, Humacyte issued a press release

announcing the BLA’s approval. (Id. ¶ 124(a)-(b).) The press

release quoted Dr. Niklason in touting the FDA’s “full approval of

SYMVESS.” (Id. (emphasis omitted); see Doc. 41-1 at 393.)

Concerning Symvess’s safety and efficacy, the press release

stated:

SYMVESS . . . is a first-in-class bioengineered human

tissue that is designed to be a universally implantable

vascular conduit for use in arterial replacement and

repair. While harvesting [a] vein from a trauma patient

takes valuable surgical time, SYMVESS is available off-

the-shelf, and does not require further injuring the

patient to obtain vascular repair material. Humacyte’s

BLA included positive results from the V005 pivotal

Phase 2/3 clinical study, as well as real-world evidence

from the treatment of wartime injuries in Ukraine under

a humanitarian aid program. SYMVESS was used to repair

many types of traumatic injuries including car

accidents, gunshot wounds, blast wounds, and industrial

accidents. It was utilized by vascular and trauma

surgeons in Level 1 Trauma centers throughout the U.S.

and Israel to repair severe limb-threatening and life-

threatening injuries, and in front-line hospitals in

Ukraine to treat wartime injuries. Results from these

studies were published in JAMA Surgery on November 20,

2024. In the civil and military clinical studies,

SYMVESS was observed to have high rates of patency, or

blood flow, and low rates of amputation and infection.

(Doc. 37 ¶ 124(c) (emphasis omitted); see Doc. 41-1 at 393.)

2. Facility fraud

The FDA inspected Humacyte’s Durham facility from April 1 to

5, 2024. (Doc. 37 ¶ 45.) On April 5, 2024, the FDA issued a Form

483 to Humacyte, which identified two “inspectional observations”:

(1) a lack of “microbial quality assurance”; and (2) inadequate

quality oversight for four distinct issues. (Id. (emphasis

omitted).) Defendants did not disclose their receipt of the Form

483, but the FDA ultimately released the Form 483 on October 17,

2024. (Id. ¶ 44.) Plaintiffs allege that several of Defendants’

statements and filings related to Humacyte’s readiness to safely

manufacture Symvess, the sufficiency of the quality assurance and

oversight, and the results of the FDA’s inspection constitute

material misrepresentations or omissions. (Id. ¶ 126.)

Before the FDA’s inspection of Humacyte’s facility, at the

key opinion leader webinar in September 2023, Dr. Niklason

responded to a question about Humacyte’s quick work in preparing

the BLA:

[O]ur manufacturing system, called the Luna200 system,

which allows us to make HAVs at commercial scale, has

already been in use. We’ve been using this system to

produce vessels for our ongoing clinical trials since

the middle of 2021.

As part of transitioning to that commercial scale

system, we did a very detailed filing to our IND with

the FDA back in 2020. And they reviewed that filing and

have given us a sign-off to use our current commercial

system in our clinical studies.

(Id. ¶ 127 (alteration in original).) In her closing remarks, she

added, “[W]e’re currently using systems that allow us to perform

commercial scale manufacturing. And the total capacity in the

building in which we now occupy, will allow us to produce

approximately $1 billion worth of product, when we’re fully built

out.” (Id. (alteration in original).) Later, Humacyte’s November

2023 press release asserted that “[t]he HAV can be produced at

commercial scale in Humacyte’s existing manufacturing facilities,

which are expected to have the capacity to provide thousands of

vessels for treating patients in need.” (Id. ¶ 128 (emphasis

omitted).) Dr. Niklason reiterated this ability to manufacture at

commercial scale in Humacyte’s February 2024 press release. (Id.

¶ 129.)

During the March 2024 earnings call, in response to a question

about Humacyte’s manufacturing readiness, Dr. Niklason stated:

So, yes, certainly, after the BLA file was accepted and

we got our PDUFA date in August, the FDA moved rapidly

to begin scheduling interim meetings and also our

inspection, which is upcoming in the near future. As

far as what we’ve been doing to prepare for this, we’ve

actually run two mock inspections, one last summer and

one just last month in February, where we brought

consultants in to Humacyte who were all ex-FDA

inspectors. And they really did a deep dive on two

separate occasions, really helping us be as prepared as

possible for this upcoming inspection. I would say that

since we began preparing for this last summer, we’ve

really been able to execute on all of the remediations

that were picked out, certainly from 2023. And we’re

feeling very confident about how this inspection is

going to go. We believe that the facility is in great

shape. Our manufacturing processes are well

characterized and well understood. Obviously, with the

Center for Biologics, you’re right, a big focus is always

on manufacturing and the facility and the robustness of

the process. But we believe we’re in good shape.

(Id. ¶ 130.) In response to a question about Humacyte’s work on

additional HAV platforms, Dr. Niklason answered, “One of the

beauties of the platform, and this was designed with intention, is

that our LUNA manufacturing machines, each of which right now can

make up to about 1,000 40-centimeter HAV[]s per year.” (Id.) And

in response to a question about potential margin improvements, Dr.

Niklason stated, “Right now, we have built out only a fraction of

our manufacturing floor because we have eight LUNA[]s installed,

although we have room for 40.” (Id.)

Next, in the 2023 Form 10-K, Humacyte discussed the ability

to manufacture Symvess at commercial scale at the Durham facility,

noting, “We believe our established, controlled manufacturing

process demonstrates a significant competitive advantage in the

regenerative medicine market.” (Id. ¶ 131(a) (emphasis omitted).)

Moreover, the 2023 Form 10-K described Humacyte’s modular approach

to the manufacturing process, which allowed it “to produce HAVs in

smaller batches for clinical trials and scale out to larger batches

for commercial manufacturing.” (Id. ¶ 131(b) (emphasis omitted).)

The 2023 Form 10-K touted the Durham facility’s then-current

manufacturing capacity, stating, “We currently have eight LUNA200

systems installed, commissioned and qualified in our manufacturing

facility, creating an annual gross HAV capacity of approximately

7,200 HAVs.” (Id. ¶ 131(d) (emphasis omitted).) According to

Humacyte, “[u]sing our existing LUNA manufacturing equipment, we

can generate 400 13cm HAVs per batch. Our modular manufacturing

platform can be scaled without impacting the operating parameters

that support the HAV growth process.” (Id. ¶ 131(f) (emphasis

omitted).)

After the FDA’s inspection of the Durham facility and as

previously noted, Humacyte issued its May 2024 earnings report, in

which Dr. Niklason asserted, “[T]he FDA completed its Pre-

Licensing Inspection of our manufacturing facilities in Durham,

North Carolina as part of the BLA review process. We remain on

track with our BLA review and commercial launch preparations and

remain confident in the approvability of the HAV in vascular

trauma.” (Id. ¶ 132 (emphasis omitted).) Dr. Niklason repeated

this assurance during an earnings call the same day. (Id.

¶ 133(a).) During the earnings call, an analyst asked Dr.

Niklason, “[C]an you talk about the facility inspection with FDA?

Any observations? Anything that you guys had to correct? How

clean was that? And just help us know that we’re kind of checking

those boxes before PDUFA.” (Id. ¶ 133(b) (alteration in

original).) She responded,

[W]e completed our pre-license inspection of our

manufacturing facility and had a very successful

outcome. And based on the outcome of inspection and all

of the other FDA interactions as a whole, we remain very

confident in approval of the HAV in vascular trauma.

And we won’t necessarily comment on any single

interaction or the details, but we do feel very

confident. And it was a very successful interaction

that we have with the FDA, and we feel like it concluded

very successfully.

(Id. (alteration in original).) And in response to a question

about manufacturing capacity and steps required to reach

commercial scale, COO Prichard said,

[A]s our manufacturing capacity stands now, as you know,

at about 8,000 HAVs growth per year. And as far as

scaling that out with the LUNA system that we have that

manufactures our product, that is just a case of putting

in more LUNA lines. Our facility is already ready in a

shelled out space that’s already plumbed for electrical

and gases and utilities for us to add additional units

LUNAs up to about 40,000 HAVs per year annual gross

yield.

So we’re prepared, and we’re prepared for a launch to be

able to produce enough vessels in the first few years.

And then we’re also prepared and have begun planning for

that expansion within the space. So as demand grows, we

can produce enough HAVs for the market.

(Id. ¶ 133(c) (alteration in original).) Finally, in response to

a question about FDA interactions, Dr. Niklason said,

[A]s we mentioned, we’ve already completed the

inspection of our facility. So things are tracking along

exactly as we would have expected, given the timelines

for a Priority Review. So again, we see no reason that

the PDUFA date will shift. Of course, what – exactly

what the FDA does is always out of our control, but we

have no indication that we’re not on track. Everything

just seems to be progressing along as we would have

expected.

(Id. ¶ 133(d) (alteration in original).)

On June 17, 2024, Humacyte issued a press release stating,

“The company’s manufacturing facilities are capable of producing

ATEVs at commercial scale to meet the potential needs of thousands

of patients.” (Id. ¶ 134 (emphasis omitted).) Then, in the press

release announcing the delayed BLA approval on August 9, 2024, Dr.

Niklason stated,

During the course of the BLA review, the FDA has

conducted inspections of our manufacturing facilities

and clinical sites and has actively engaged with us in

multiple discussions regarding our BLA filing, including

post-marketing and labeling discussions. Based on these

interactions, we are confident in the approvability of

the ATEV in treating vascular trauma.

(Id. ¶ 135.) She essentially repeated this same statement in both

the August 13, 2024 earnings release and earnings call. (Id.

¶ 136(a)-(b).) Moreover, in response to a question about the FDA’s

inspection and follow-ups, Dr. Niklason stated,

So we had a total of five inspections. I would say all

of those inspections went very well. In terms of follow-

up items, there are – there’s a small number of standard

follow-up items on assays and CMC having to do with

validation of certain methods. But these are sort of

standard things that we’ve worked out with the [FDA].

Some of those were completed pre-PDUFA. Some of those

were slated for post-PDUFA. For example, one study is

shipping the product during winter, and we couldn’t do

that until winter, so we agreed to do that in winter.

So but these are sort of standard, I don’t want to say

cookie cutter, but these are standard validation and

test procedures that we do not believe are impacting the

timing of the file.

(Id. ¶ 136(b).)

3. Liquidity fraud

According to Plaintiffs, Humacyte’s liquidity posed a serious

concern to investors and analysts. (Id. ¶ 138.) These investors

and analysts therefore closely tracked Humacyte’s cash and cash

equivalents. (Id.) Humacyte’s Form 10-Ks defined cash equivalents

as “all short-term, highly liquid investments, including

certificates of deposit (‘CDs’) purchased with an original

maturity of three months or less at the date of purchase.” (Id.)

Humacyte also received funding through an agreement with Oberland

Capital Management LLC, which provided discrete tranches of

funding “dependent on the satisfaction of the conditions and

receipt of funds from the previous tranche.” (See Doc. 41-1 at

320.) Plaintiffs allege that several of Defendants’ statements

and filings related to whether Humacyte had sufficient cash and

cash equivalents to fund its operations constitute material

misrepresentations or omissions. (Doc. 37 ¶ 138.)

In both the August 2023 earnings release and earnings call,

Humacyte and CFO Sander stated, “We believe our cash and cash

equivalents and planned funding from the Oberland funding

agreement are adequate to fund operations past the anticipated

timelines for approval and commercialization of the HAV in vascular

trauma.” (Id. ¶ 139(a)-(b) (emphasis omitted).) And in response

to a question about Humacyte’s cash burn, CFO Sander noted,

I would not expect more than $40 million burn for the

remainder of the year. And we’ve given a sense that the

Oberland transaction, combined with how we expect to

operate, and also the cash on hand we expect takes us

well past the approval and commercialization in vascular

trauma. But from a calendar point of view, that means

going to the end of 2025 at a minimum in terms of how we

expect to operate.

(Id. ¶ 139(b).) Humacyte also filed a Form 10-Q with the SEC in

August 2023, which stated multiple times with slight variation:

As of June 30, 2023, the Company had cash and cash

equivalents of $114.6 million. The Company believes its

cash and cash equivalents will be sufficient to fund

operations, including clinical trial expenses and

capital expenditure requirements, for at least 12 months

from the issuance date of these interim financial

statements.

(Id. ¶ 139(c) (emphasis omitted).)

In November 2023, Humacyte again referenced the Oberland

funding agreement in its earnings release and earnings call,

stating a belief that its “cash and cash equivalents and expected

funding from the Oberland arrangement are adequate to finance

operations past the currently anticipated timelines for potential

FDA approval and commercialization of the HAV in the vascular

trauma indication.” (Id. ¶ 140(a)-(b) (emphasis omitted).) In

the 12-month projection contained within its November 2023 Form

10-Q, however, Humacyte omitted reference to the Oberland funding

agreement and expressed a belief that “its cash and cash

equivalents on hand will be sufficient to fund operations,

including clinical trial expenses and capital expenditure, for at

least 12 months.” (Id. ¶ 140(c) (emphasis omitted).)

In March 2024, Humacyte issued an earnings release that

stated:

Humacyte believes that its cash and cash equivalents,

including net proceeds from the March offering and

additional draw under the Oberland funding arrangement,

will be adequate to finance operations for at least 12

months from the date of this financial report, well past

the currently anticipated timelines for FDA approval of

commercialization of the HAV in the vascular trauma

indication.

(Id. ¶ 141(a) (emphasis omitted).) The same day, on an earnings

call, CFO Sander said, “We believe that our cash and cash

equivalents are adequate to finance operations past the currently

anticipated timelines for FDA approval and commercialization of

the HAV in the vascular trauma indication.” (Id. ¶ 141(b)

(emphasis omitted).) And in response to a question about

Humacyte’s cash burn, CFO Sander answered,

The way we look at it is we ended December 31 with a

little more than – well, right around $81 million in

cash. And when we add on the $63-plus million that we

achieved through the equity financing as well as the

additional draw into our Oberland facility. That means

we’re entering the year with about $144 million in cash,

which leaves us very well positioned. Our net cash burn

for 2023 rounded to about $69 million. But if you back

out the effect of some net financing transactions from

an operating cash point of view and from a capital

expenditure point of view, we’ve burned about $73.5

million in 2023 in those activities. So suggesting we’re

very well positioned with the cash that we have on hand

right now.

In terms of how we’ll proceed in the upcoming year, we

haven’t given super specific guidance, but I’ll share

what we’ve guided in the past is that certainly, we

expect to expand our commercialization activities during

the year, including near the time of launch, bringing on

a relatively small sales force to address this very

concentrated market. So we will have, obviously, higher

commercialization expenses during this year. But we do

also have a wind down of certain clinical costs during

the year with the V005 study just in long-term follow-

up and not as intensive activities as we had during 2023

as we prepared for the close out of that study and for

filing of the BLA. And then also our dialysis trial

[V017] will be winding down in the second half of the

year, too. So we expect somewhat of an increase in

overall cash burn for the upcoming year, but not to a

great extent on a net basis. And we believe that the

cash on hand is certainly adequate to take us well past

the commercial launches in trauma and AV access and well

pas[t] or certainly through 2026. So we certainly don’t

have any cash concerns at this point in time.

(Id. ¶ 141(b).) And finally, in the 2023 Form 10-K filed on March

28, 2024, Humacyte noted its belief that the “cash and cash

equivalents will be sufficient to fund [Humacyte’s] operations,

including clinical trial expenses and capital expenditure

requirements, for at least 12 months from the date of this Annual

Report on Form 10-K.” (Id. ¶ 141(c) (emphasis omitted).) Thus,

in March 2024, Humacyte never mentioned any reliance on the

Oberland funding agreement.

In May 2024, Humacyte’s earnings release and earnings call

again omitted reference to the Oberland funding agreement in

asserting Humacyte’s belief that its cash and cash equivalents

would adequately finance the next 12 months of operations, “well

past the currently anticipated timelines for FDA approval of

commercialization of the HAV in the vascular trauma indication.”

(Id. ¶ 142(a)-(b) (emphasis omitted).) Similarly, the May 2024

Form 10-Q made no mention of Humacyte’s reliance on the Oberland

funding agreement to fund the next 12 months of operations. (Id.

¶ 142(c).)

B. Humacyte’s Public Offerings and the Post-Approval

Articles

After the markets closed on February 29, 2024, Humacyte

published two press releases announcing an underwritten public

offering for 13.4 million shares of Humacyte common stock at the

price of $3.00 per share. (Id. ¶ 145(a)-(b).) This price

represented a 31 percent discount from the February 29 closing

market price of $4.35 per share. (Id. ¶ 145(b).) On this news,

Humacyte’s stock price dropped from $4.35 to $3.24 per share, a

decline of 25.52%, on high trading volume. (Id. ¶ 146.)

Next, four days after announcing the delay in BLA approval,

on August 13, 2024, Humacyte filed a Form 10-Q with the SEC

revealing a believed inability to fund operations for the next 12

months:

As of June 30, 2024, we had cash and cash equivalents of

$93.6 million. The extension of time required by the

FDA to review our vascular trauma BLA, and the delay in

potential approval, has delayed, among other items, our

ability to draw an additional $40.0 million in [Oberland

funding agreement] proceeds. Accordingly, we do not

believe our available cash and cash equivalents on hand

will be sufficient to fund operations, including

clinical trial expenses and capital expenditure

requirements, for at least one year from the date of

this Quarterly Report without achieving approval of the

ATEV for vascular trauma and generating sufficient cash

flows from commercial sales on a timely basis and/or

obtaining additional capital.

(Id. ¶ 150; see Doc. 43-1 at 62.) For the first time, this Form

10-Q also included a going concern warning: “These factors raise

substantial doubt about the Company’s ability to continue as a

going concern. Accordingly, the Company will, over the course of

the next year, require additional financing to continue its

operations.” (Doc. 37 ¶ 150 (emphasis omitted); see Doc. 43-1 at

62.) Humacyte’s stock price dropped from $6.65 to $6.01 per share,

a decline of 9.62%, on high trading volume. (Doc. 37 ¶ 151.)

On September 24, 2024, after the markets closed, Humacyte

announced two new agreements with Lincoln Park Capital Fund, LLC,

granting Humacyte the right “to sell to Lincoln Park shares of the

Company’s common stock . . . having an aggregate value of up to

$50,000,000” at a discount. (Id. ¶ 152 (emphasis omitted).) Once

again, Humacyte’s stock price dropped - this time from $6.12 to

$5.46 per share, a decline of 10.87%, on high trading volume. (Id.

¶ 153.)

During market hours on October 17, 2024, the FDA released the

Form 483 from its April 2024 inspection of the Durham facility.

As previously noted, the Form 483 included two observations: (1)

a lack of “microbial quality assurance”; and (2) insufficient

quality oversight for four distinct issues. (Id. ¶ 154 (emphasis

omitted).) On this news, Humacyte’s stock price dropped from $5.81

to $4.86 per share, a decline of 16.35%, on high trading volume.

(Id. ¶ 155.)

Before the markets opened on November 14, 2024, Humacyte

disclosed another offering of stock via a securities purchase

agreement. (Id. ¶ 156.) The press release indicated a $15 million

registered direct offering of Humacyte stock via an agreement to

sell 2,808,988 shares of common stock in addition to warrants to

purchase up to 2,808,988 shares of common stock. (Id.) Humacyte

also filed a prospectus supplement, which stated that Humacyte

“intend[ed] to use the net proceeds from this offering to fund the

development of the product candidates in our pipeline, the planned

commercial launch of the ATEV in the vascular trauma indication,

if approved, and for working capital and general corporate

purposes.” (Id. (alteration in original).) The same day,

Humacyte’s stock price dropped from $5.34 to $4.84 per share, a

decline of 9.36%, on high trading volume. (Id. ¶ 157.)

After the markets closed on March 24, 2025, the New York Times

published an article describing disagreements between Humacyte and

the FDA regarding trial participants who did not reach the 30-day

endpoint, either because of death, limb amputation, or simple

failure to follow up. (Id. ¶ 158(a).) These disagreements,

according to the article, ultimately resulted in a significant

overcount of successes in Humacyte’s public disclosures. (Id.)

Moreover, one FDA reviewer pointed out that 37 of the 54 extremity

patients were not assessed in a safety check four months after

treatment, with many either dead or lost to follow-up. (Id.) The

New York Times article also noted the strong opposition to Symvess

approval registered by another FDA reviewer, Dr. Robert E. Lee.

(Id. ¶ 158(b).) Dr. Lee, a vascular surgeon, apparently resigned

from his FDA position in protest over the FDA’s decision to approve

Humacyte’s BLA. (Id.) And in his review of the BLA, Dr. Lee made

note of Symvess’s “unacceptable risk for whatever slim benefit, if

any, th[e] product provide[d] above the current standard

treatments,” given the risk of “unpredictable, catastrophic, and

life-threatening” rupture. (Id. (emphasis omitted).)

The New York Times article further discussed the FDA’s

conclusion that the V005 study demonstrated a 67 percent success

rate, rather than Humacyte’s reported 84 percent rate – and

significantly lower than the 82 percent success rate of existing

synthetic grafts. (Id. ¶ 158(d).) Moreover, the article quoted

the FDA’s Statistical Review Memorandum to note that, according to

the memorandum’s preparer, neither the V005 nor the V017 trial

“met the usual criteria for an adequate and well-controlled trial.”

(Id. ¶ 158(e) (emphasis omitted).) Finally, the article quoted

the director of the Amy J. Reed Medical Device Safety Collaborative

at Northwestern School of Law, who noted, “If the graft falls

apart, . . . it is basically akin to the patient getting shot.”

(Id. ¶ 158(f) (emphasis omitted).)

One day later, during the market hours on March 25, 2025,

Bloomberg published an article online in which Dr. Lee described

“pressure [on the FDA reviewers] to get the device approved ‘one

way or another,’” presumably in part because Symvess “was highly

sought after by military officials.” (Id. ¶ 159(a) (emphasis

omitted).) The Bloomberg article further quoted Dr. Lee, who said,

“This thing [the HAV] has grave safety concerns and they buried

it.” (Id. ¶ 159(b) (alteration in original) (emphasis omitted).)

He expressed concern over Symvess’s “potential to kill soldiers

and citizens.” (Id. (emphasis omitted).) Moreover, the Bloomberg

article detailed a three-year back-and-forth between the FDA and

Humacyte, during which “Humacyte repeatedly asked to change

aspects of the study, varying from the type and number of patients

it was studying to how success was measured, all while the trial

was ongoing.” (Id. ¶ 159(c) (emphasis omitted).) Finally, the

Bloomberg article reported additional concerns from one FDA

reviewer who claimed that the V005 and V017 trial results could

not be combined because the V017 patients had less severe injuries,

while Dr. Lee continued to warn of unacceptable risks and three

outside experts noted that Symvess “did not demonstrate

superiority to existing treatment options.” (Id. ¶ 159(d)-(e)

(emphasis omitted).) From March 24 to March 25, 2025, Humacyte’s

stock price dropped from $3.32 to $2.88 per share, a decline of

13.40%, on high trading volume. (Id. ¶ 160.)

After the markets closed on March 25, 2025, Humacyte published

a press release announcing an underwritten public offering of

common stock, with an option for a 30-day period to purchase up to

an additional 15 percent of the number of shares sold in the

offering. (Id. ¶ 161(a).) And later that night, Humacyte

published a second press release announcing that this underwritten

public offering would be for 25 million shares at a price of $2.00

per share – a discount of more than 30 percent from the March 25,

2025 closing market price of $2.88 per share. (Id. ¶ 161(b).) On

this news, Humacyte’s stock price dropped from $2.88 to $2.00 per

share, a decline of 30.43%, on extremely high trading volume. (Id.

¶ 162.)

C. Additional Facts Related to Scienter

Plaintiffs allege additional facts to demonstrate that

Defendants knew, or at least recklessly disregarded, that their

public statements and omissions were materially false or

misleading.

First, in a March 27, 2025 press release issued in response

to the New York Times article, Dr. Niklason stated that the FDA

had informed Humacyte before the PDUFA date that it was considering

“convening an Advisory Committee of outside experts.” (Id. ¶ 165.)

Humacyte “did not object to this.” (Id. (emphasis omitted).)

Plaintiffs allege that this admission establishes Humacyte’s

advance knowledge of the reason for the FDA’s delay. (Id.) The

press release also described discussions between the FDA and

Humacyte in the period between the PDUFA date and the eventual BLA

approval:

It took time to complete the internal discussions at the

FDA regarding Dr. Lee’s objections, and to compile

responses from outside experts. Although our original

PDUFA date was August 10, 2024, the FDA took an

additional 19 weeks to complete its review of the risks

and benefits of Symvess. After taking all views into

account, the FDA agreed that our product was safe and

effective for use in repair of vascular trauma of the

extremities in situations where there is an urgent need

for revascularization and where autologous vein grafting

is not feasible. The agency issued its approval of

Symvess on December 19, 2024.

The FDA’s review process was conservative and time

consuming, but that’s how it should work. We all want

federal agencies to take their responsibilities

seriously, and I appreciate that the FDA took the time

it needed to evaluate our product. Furthermore, as part

of the FDA’s review of Symvess, we are committed to

conducting a post-approval study to continue to assess

the rate and severity of adverse events in trauma

patients treated with Symvess.

(Id. ¶ 166.)

Next, Plaintiffs allege that the FDA made Defendants aware of

several issues that could delay BLA approval or lead to a

substantially narrower indication no later than the Late Cycle

Meeting on May 20, 2024. (Id. ¶¶ 167-70.) According to

Plaintiffs, now-released FDA documents demonstrate that the FDA

expressed concerns and made recommendations for Humacyte’s

clinical trials, and the two sides engaged in repeated discussions

regarding Symvess’s development. (Id. ¶¶ 173-74.) Moreover, via

confidential witnesses who worked as Humacyte employees during the

class period, Plaintiffs allege that COO Prichard and Dr. Niklason

had personal knowledge of ongoing manufacturing and quality

issues, critical equipment failures, and Humacyte’s non-compliance

with current good manufacturing practices. (Id. ¶¶ 179-84.)

To provide evidence of motive and opportunity, Plaintiffs

also point to the individual Defendants’ insider transactions

during the class period. (Id. ¶ 185.) Dr. Niklason transferred

almost all her directly held Humacyte stock to the Niklason Living

Trust, a non-reporting entity, in April 2024. (Id. ¶ 186.) She

also sold most of the shares held by the LLC co-owned by her and

her husband during the class period, netting $38,804,277.82 –

29.81% more than her net proceeds during the preceding 17.5 months.

(Id. ¶ 187(a).) These proceeds were 33.5 times greater than her

total 2023 and 2024 compensation. (Id.)

COO Prichard, meanwhile, “completely sold out of her Humacyte

position” on May 31, 2024, less than two weeks after the Late Cycle

Meeting. (Id. ¶ 186.) She netted $1,212,061.31, whereas her

transactions during the 17.5 months preceding the class period

resulted in a net loss. (Id. ¶ 187(b).) These proceeds were more

than 2.5 times her salary and almost double her total compensation

in 2023 and 2024. (Id.) CFO Sander also netted $162,282.68

through a single transaction on Humacyte stock during the class

period, in comparison to his purchasing 2,000 shares at a cost of

$9,060 during the preceding 17.5 months. (Id. ¶ 187(c).)

Finally, Plaintiffs allege scienter through Humacyte’s

repeated raising of funds at artificially inflated prices during

the class period. (Id. ¶¶ 188-89.) They point to the fact that

the alleged fraud implicated Humacyte’s core operations,

suggesting knowledge on the part of the individual Defendants and

other Humacyte executives. (Id. ¶¶ 190-92.) Plaintiffs also

allege the individual Defendants’ roles in preparing the false and

misleading SOX-certified SEC filings, the individual Defendants’

violations of Humacyte’s internal Code of Conduct regarding

insider trading, and the departure of high-level Humacyte

directors as well as the chief quality officer. (Id. ¶¶ 193-200.)

D. Procedural History

Plaintiff Foote filed a motion seeking appointment as lead

plaintiff pursuant to the PSLRA by members of the putative class.

(Doc. 11.) Plaintiffs Cognetti and Hopwood then filed a motion

seeking appointment as co-lead plaintiffs. (Doc. 14.) They all

later stipulated to serve as co-lead plaintiffs (Doc. 17 at 4-5),

and the court granted their joint stipulation and thereby appointed

Plaintiffs as co-lead plaintiffs (Doc. 21 at 7). Plaintiffs then

filed a complaint alleging violations of Section 10(b) of the

Exchange Act against all Defendants and violations of Section 20(a)

of the Exchange Act against the individual Defendants. (Doc. 37.)

In their complaint, Plaintiffs allege Defendants made false

and misleading statements regarding three general areas of

Humacyte’s operations: the safety and efficacy of Symvess; the

manufacturing capabilities of the Durham facility; and the

liquidity of Humacyte based on cash and cash equivalents.

Defendants moved to dismiss the complaint, contending that

Plaintiffs have failed to allege material false or misleading

statements or allege sufficient facts to give rise to a strong

inference of scienter under the PSLRA’s heightened pleading

standards. (Docs. 40, 41.) Plaintiffs responded in opposition

(Doc. 42), and Defendants replied (Doc. 43). The court held a

hearing on March 17, 2026, and the motion is now ready for

decision.4

II. ANALYSIS

A. Standard of Review

Pursuant to Rule 8 of the Federal Rules of Civil Procedure,

4 Two related and consolidated cases, Silva v. Sebelius, Civil Docket

No. 1:25-cv-00005, and Misko v. Niklason, Civil Docket No. 1:25-cv-

00028, have been stayed pending the court’s issuance of a final decision

and order on Humacyte’s motion to dismiss.

a complaint must contain a “short and plain statement of the claim

showing that the pleader is entitled to relief.” Fed. R. Civ. P.

8(a)(2). The purpose of a 12(b)(6) motion to dismiss is to “test[]

the sufficiency of a complaint” and not to “resolve contests

surrounding the facts, the merits of a claim, or the applicability

of defenses.” Republican Party of N.C. v. Martin, 980 F.2d 943,

952 (4th Cir. 1992). In considering a Rule 12(b)(6) motion, a

court “must accept as true all of the factual allegations contained

in the complaint,” Erickson v. Pardus, 551 U.S. 89, 94 (2007) (per

curiam), and all reasonable inferences must be drawn in the non-

movant’s favor, Ibarra v. United States, 120 F.3d 472, 474 (4th

Cir. 1997). To be facially plausible, a claim must “plead[]

factual content that allows the court to draw the reasonable

inference that the defendant is liable” and must demonstrate “more

than a sheer possibility that a defendant has acted unlawfully.”

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp.

v. Twombly, 550 U.S. 544, 556-57 (2007)).

While these standards govern the consideration of a Rule

12(b)(6) motion generally, claims of securities fraud are subject

to “strict pleading standards” pursuant to Federal Rule of Civil

Procedure 9(b) and the PSLRA. Singer v. Reali, 883 F.3d 425, 439

(4th Cir. 2018). In addition to the requirement that “a party

must state with particularity the circumstances constituting

fraud” under Rule 9(b), the PSLRA “imposes additional pleading

requirements to prevent Securities Exchange Act claims from being

‘employed abusively to impose substantial costs on companies and

individuals whose conduct conforms to the law.’” Id. (first

quoting Fed. R. Civ. P. 9(b); and then quoting Tellabs, Inc. v.

Makor Issues & Rts., Ltd., 551 U.S. 308, 313 (2007)). In

particular, the PSLRA establishes heightened pleading standards

with respect to allegations of falsity and scienter. Zak v.

Chelsea Therapeutics Int’l, Ltd., 780 F.3d 597, 606 (4th Cir.

2015). If a plaintiff alleges that a defendant made false or

misleading statements, the PSLRA requires that the plaintiff

“specify each statement alleged to have been misleading, the reason

or reasons why the statement is misleading, and, if an allegation

regarding the statement or omission is made on information and

belief, . . . state with particularity all facts on which that

belief is formed.” 15 U.S.C. § 78u-4(b)(1). In addition, the

complaint must “state with particularity facts giving rise to a

strong inference that the defendant acted with the required state

of mind.” Id. § 78u-4(b)(2)(A). “If those exacting pleading

requirements are not satisfied, the complaint must be dismissed.”

Singer, 883 F.3d at 439.

The court notes at the outset that Plaintiffs do not challenge

the exhibits attached to either Defendants’ brief in support of

the motion to dismiss or Defendants’ reply brief. (See Docs. 41-

1, 43-1.) These unchallenged exhibits include documents expressly

relied on or referenced in the complaint. Accordingly, the court

finds that the consideration of the documents is appropriate in

this instance, where neither party challenges their authenticity

and their content is incorporated by reference or otherwise

integral to the complaint. See Plymouth Cnty. Ret. Ass’n v. Primo

Water Corp., 966 F. Supp. 2d 525, 536-37 (M.D.N.C. 2013) (“[I]n a

securities fraud case, the court may consider ‘public documents

quoted by, relied upon, incorporated by reference or otherwise

integral to the complaint.’” (quoting In re Royal Ahold N.V. Sec.

& ERISA Litig., 351 F. Supp. 2d 334, 349 (D. Md. 2004))).

B. Section 10(b) Claims

In their complaint, Plaintiffs allege that Defendants made

false and misleading statements about the safety profile and

efficacy of Symvess, Humacyte’s manufacturing readiness, and

Humacyte’s ability to fund its operations. Plaintiffs identify

challenged statements that generally fall into three categories:

(1) product safety fraud; (2) facility fraud; and (3) liquidity

fraud. (Doc. 37 ¶¶ 4, 103-43.) Defendants contend that the

complaint fails to allege falsity or establish a strong inference

of scienter as required under the PSLRA’s heightened pleading

standards. (Doc. 41 at 10-11.) Defendants further assert that

several of the challenged statements are non-actionable opinions

or forward-looking statements. (Id. at 11.)

Pursuant to Section 10(b) of the Exchange Act and Rule 10b-

5, it is unlawful for a company to make a false or misleading

statement or omission in connection with the sale of a security.

See 17 C.F.R. § 240.10b-5(b); 15 U.S.C. § 78j(b). A plaintiff

bringing a claim under Section 10(b) must establish: “(1) a

material misrepresentation or omission by the defendant; (2)

scienter; (3) a connection between the misrepresentation or

omission and the purchase or sale of a security; (4) reliance upon

the misrepresentation or omission; (5) economic loss; and (6) loss

causation.” City of Southfield Gen. Emps.’ Ret. Sys. v. Advance

Auto Parts, Inc., 167 F.4th 637, 646 (4th Cir. 2026) (quoting

Stoneridge Inv. Partners, LLC v. Sci.-Atlanta, Inc., 552 U.S. 148,

157 (2008)). As noted above, claims of securities fraud are

subject to heightened pleading standards with respect to falsity

and scienter pursuant to Rule 9(b) and the PSLRA.

To establish an actionable false or misleading statement or

omission, “the challenged statement or omission must be factual,

i.e., one that is demonstrable as being true or false; it must be

false, or the omission must render public statements misleading;

and any statement or omission of fact must be material.” Lerner

v. Nw. Biotherapeutics, 273 F. Supp. 3d 573, 586 (D. Md. 2017)

(citation modified); Longman v. Food Lion, Inc., 197 F.3d 675, 682

(4th Cir. 1999). As for materiality:

[T]here must be a “substantial likelihood that a

reasonable purchaser or seller of a security (1) would

consider the fact important in deciding whether to buy

or sell the security or (2) would have viewed the total

mix of information made available to be significantly

altered by disclosure of the fact.”

Emps.’ Ret. Sys. v. MacroGenics, Inc., 61 F.4th 369, 382 (4th Cir.

2023) (quoting U.S. SEC v. Pirate Inv. LLC, 580 F.3d 233, 240 (4th

Cir. 2009)). “Although Rule 10b-5 ‘prohibit[s] any

misrepresentation of a fact deemed material’ it does not ‘prohibit

any misrepresentation – no matter how willful, objectionable, or

flatly false – of immaterial facts, even if it induces reactions

from investors that, in hindsight or otherwise, might make the

misrepresentation appear material.’” Id. (alteration in original)

(quoting Greenhouse v. MCG Cap. Corp., 392 F.3d 650, 656 (4th Cir.

2004)).

Though “section 10(b) and SEC Rule 10b-5 ‘do not create an

affirmative duty to disclose any and all material information,’”

the “disclosure of material information is required ‘when

necessary to make statements made, in the light of the

circumstances under which they were made, not misleading.’”

Singer, 883 F.3d at 440 (quoting Matrixx Initiatives, Inc. v.

Siracusano, 563 U.S. 27, 44 (2011)). Courts have recognized that

“where the duty to disclose arises from a need to avoid false or

misleading statements ‘the inquiries as to duty and materiality

coalesce.’” In re Sanofi-Aventis Sec. Litig., 774 F. Supp. 2d

549, 564 (S.D.N.Y. 2011) (quoting In re Time Warner Inc. Sec.

Litig., 9 F.3d 259, 267 (2d Cir. 1993)). “Ultimately, the inquiry

is whether, read as a whole, the statements or omissions would

have misled a reasonable investor about the nature of the

securities.” Emps.’ Ret. Sys., 61 F.4th at 382-83 (quoting Lerner,

273 F. Supp. 3d at 586-87).

“For scienter, the plaintiff must show that the defendant

acted with ‘a mental state embracing intent to deceive, manipulate,

or defraud.’” City of Southfield Gen. Emps.’ Ret. Sys., 167 F.4th

at 646 (quoting Tellabs, 551 U.S. at 319). The Fourth Circuit has

emphasized that “raising a ‘strong inference’ of scienter is no

small burden.” Cozzarelli v. Inspire Pharms. Inc., 549 F.3d 618,

624 (4th Cir. 2008). If the plaintiff relies on reckless conduct

to establish a strong inference of scienter, such conduct must

either be “severe” or “so highly unreasonable and such an extreme

departure from the standard of ordinary care as to present a danger

of misleading the plaintiff to the extent that the danger was

either known to the defendant or so obvious that the defendant

must have been aware of it.” Lerner, 273 F. Supp. 3d at 594 (first

quoting Ottmann v. Hanger Orthopedic Grp., Inc., 353 F.3d 338, 344

(4th Cir. 2003); and then quoting Matrix Cap. Mgmt. Fund, LP v.

BearingPoint, Inc., 576 F.3d 172, 181 (4th Cir. 2009)).

Standing alone, allegations of motive and opportunity to

raise capital to support ongoing business operations are generally

insufficient to support a strong inference of scienter.

Cozzarelli, 549 F.3d at 627 (“All investments carry risk,

particularly in a field like biopharmaceuticals. If we inferred

scienter from every bullish statement by a pharmaceutical company

that was trying to raise funds, we would choke off the lifeblood

of innovation in medicine by fueling frivolous litigation – exactly

what Congress sought to avoid by enacting the PSLRA.”). However,

the deliberate misreporting of material information may give rise

to a strong inference of scienter in certain cases. See U.S. SEC,

580 F.3d at 243 (holding that district court did not clearly err

in finding plaintiffs established strong inference of scienter,

where the court found individual defendant had actual knowledge

that his statement was false at the time he made it as well as the

“clear financial motive for the misrepresentations”); Medina v.

Clovis Oncology, Inc., 215 F. Supp. 3d 1094, 1127 (D. Colo. 2017)

(finding plaintiffs adequately alleged scienter where plaintiffs

alleged that defendants had actual knowledge of the confirmed

response rates of the ongoing clinical trials but continued to

report the more favorable unconfirmed response rates to

investors).

“In securities litigation cases premised upon a drug

company’s partial non-disclosure of drug trials to the investing

public, the key inquiry is whether the non-disclosure at issue

results in a suspiciously incomplete data set that yields a strong

inference of scienter.” In re Hum. Genome Scis. Inc. Sec. Litig.,

933 F. Supp. 2d 751, 760 (D. Md. 2013) (collecting cases). As one

district court noted:

The key, of course, is the honest belief of the

management in the truth of the information issued to the

public. If the management knows that certain facts will

necessarily prevent the regulatory approval or the

marketing of the drug and conceals these facts from the

investing public, then there is scienter. There is also

scienter if the management is reckless in dealing with

such adverse facts.

In re AstraZeneca Sec. Litig., 559 F. Supp. 2d 453, 470 (S.D.N.Y.

2008), judgment aff’d sub nom., State Univs. Ret. Sys. v.

AstraZeneca PLC, 334 F. App’x 404 (2d Cir. 2009).

The court must undertake a comparative analysis of the

scienter allegations and any opposing inferences that may be drawn

from the facts. Zak, 780 F.3d at 606. “When weighing inferences,

‘the court’s job is not to scrutinize each allegation in isolation

but to assess all the allegations holistically.’” City of

Southfield Gen. Emps.’ Ret. Sys., 167 F.4th at 646 (quoting

Tellabs, 551 U.S. at 326). Ultimately, “a complaint will not be

dismissed so long as ‘the malicious inference is at least as

compelling as any opposing innocent inference.’” Zak, 780 F.3d at

606 (quoting Yates v. Mun. Mortg. & Equity, LLC, 744 F.3d 874, 885

(4th Cir. 2014)).

1. Product safety fraud

a. Material false or misleading statements

Plaintiffs challenge Defendants’ statements regarding

Symvess’s safety in six ways. (Doc. 37 ¶ 103.) According to

Plaintiffs, (1) Defendants “downplayed the risk of HAV rupture and

anastomotic failure”; (2) Defendants “touted” Symvess’s positive

30-day results in part by counting even deceased patients without

30-day follow-ups as successes; (3) Defendants similarly “touted”

the 30-day results “while downplaying the need for long-term data”;

(4) Defendants falsely and misleadingly claimed that the

literature review benchmarks were agreed to by the FDA, even though

the benchmark data was “inapplicable”; (5) Defendants positively

presented data from the V017 trial without disclosing the trial as

retrospective and observational, which permitted researchers to

“cherry-pick positive results”; and (6) Defendants “misled the

market about” the reasons for the FDA’s delayed approval of the

BLA. (Id.)

i. Symvess’s safety risks

Defendants contend that Plaintiffs fail to allege “any facts

establishing that Defendants actually concealed any safety risks.”

(Doc. 41 at 23.) Rather, Defendants assert, Humacyte reported the

adverse events and risks from the V005 and V017 trials in the 2023

Form 10-K. (Id.) Further, Defendants argue that Humacyte

disclosed the black-box warning “within hours of receiving FDA

approval.” (Id.) Ultimately, Defendants contend that any

challenged statement amounts to only a non-actionable disagreement

over data interpretation. (Id. at 23-24.)

In the 2023 Form 10-K, Humacyte disclosed that only one

patient among the V005 trial’s extremity group suffered an HAV

rupture.5 (Doc. 41-1 at 197.) Based on this data, Humacyte

maintained that only 2.0% of extremity group patients suffered a

rupture. (Id.) But in the Clinical Review Memorandum, the FDA

reviewer noted that four, or 7.4%, of V005 trial extremity group

patients suffered an HAV rupture – either via mid-graft rupture or

anastomotic failure. (Id. at 142; see Doc. 37 ¶ 83.) The reviewer

also noted three ruptures among the trial’s 17 torso/iatrogenic

group patients. (Doc. 41-1 at 142.) The FDA therefore concluded

that seven, or 9.9%, of V005 trial patients suffered a “loss of

SYMVESS integrity” due to rupture. (Id. at 19, 142; see Doc. 37

¶ 83.)

In addressing this discrepancy, Defendants characterize the

differences between Humacyte’s analysis and the FDA’s analysis as

“a reasonable difference in interpretation” of data. (Doc. 43 at

8.) Accordingly, Defendants rely heavily on Employees’ Retirement

System, where the Fourth Circuit held that the defendants had no

duty to disclose a graph where they “accurately interpreted” and

“orally communicated” the graph’s data. Emps.’ Ret. Sys., 61 F.4th

at 385. The court further reasoned, “It would be a stretch for us

to find the existence of false or misleading statements where ‘a

defendant’s competing analysis or interpretation of data is itself

5 The 2023 Form 10-K does not appear to report adverse events for the

V005 trial’s torso/iatrogenic group. (See Doc. 41-1 at 197.)

reasonable.’” Id. (quoting Kleinman v. Elan Corp., plc, 706 F.3d

145, 154 (2d Cir. 2013)).

Here, as Plaintiffs correctly assert and unlike the

challenged data interpretation in Employees’ Retirement System,

Defendants’ challenged statements involve the reported V005 trial

data itself.6 Specifically, in the 2023 Form 10-K, Humacyte

reported only one rupture among the extremity group (Doc. 41-1 at

197), whereas the FDA reviewer concluded in the Clinical Review

Memorandum that four patients from the extremity group lost

“SYMVESS integrity” because of rupture, along with three patients

in the torso/iatrogenic group (id. at 19, 142). The FDA reviewer

did note that Humacyte had classified one rupture in the V005

trial’s extremity group as a “vascular graft complication,” but

the two additional ruptures among the extremity group remain

unexplained by Defendants. (Id. at 142; see Doc. 41 at 23-24.)

Moreover, the FDA reviewer described Symvess’s observed rate of

rupture as “worrisome” and noted that benchmark literature

“suggests” an incidence of rupture from zero to six percent “when

using autologous vein or synthetic grafts.” (Doc. 41-1 at 147,

6 Even if Defendants’ challenged statements constituted an interpretation

of data, the court would be disinclined to find Defendants’

interpretation non-actionable at the pleading stage given the FDA’s

previous recommendations that uncertain or missing data from the while-

on-treatment approach “should be handled conservatively.” (Doc. 41-1

at 121.) As noted, “disclosure of material information is required ‘when

necessary to make statements made, in the light of the circumstances

under which they were made, not misleading.’” Singer, 883 F.3d at 440

(quoting Matrixx Initiatives, 563 U.S. at 44).

161; see Doc. 37 ¶ 83.) Thus, given the FDA’s revised data,

Symvess did not represent a safer alternative to existing treatment

methods, and the “serious risk of arterial bleeding from mid-graft

rupture or anastomotic failure” warranted a black-box warning.

(Doc. 41-1 at 19; see Doc. 37 ¶¶ 83(a), 125.)

ii. Clinical trials

Next, as to the clinical trials, Defendants contend that

Plaintiffs’ allegations “boil down to disagreements with how

Humacyte designed and conducted clinical trials.” (Doc. 41 at 24-

25.) Further, Defendants argue that the 2023 Form 10-K disclosed

the existence of clinical trial limitations that could result in

a failure to establish the safety and efficacy of Symvess. (Id.

at 25.) Defendants also point to the fact that the FDA ultimately

approved Symvess based on the V005 and V017 trials while noting

that the data “support the conclusion that ATEV can provide

meaningful clinical benefit” with “substantial evidence of

effectiveness.” (Id. at 26; see Doc. 41-1 at 21, 161.)

In support, Defendants again rely on Employees’ Retirement

System, where the court noted that “[s]ecurities law is simply not

a vehicle through which courts will police . . . the parameters of

clinical trials.” Emps.’ Ret. Sys., 61 F.4th at 388 (quoting

Zagami v. Cellceutix Corp., No. 15 Civ. 7194, 2016 WL 3199531, at

*13 (S.D.N.Y. June 8, 2016)). Indeed, “[w]here a company

accurately reports the results of a scientific study, it is under

no obligation to second-guess the methodology of that study.” Id.

at 385 (quoting Lerner, 273 F. Supp. 3d at 587-88). Defendants

also cite In re Novan, Inc., No. 17CR999, 2018 WL 6732990, at *10

(M.D.N.C. Nov. 30, 2018), where the court found that the defendant

had no duty to disclose unfavorable FDA recommendations on its

clinical trial design after the defendant affirmatively

represented that its trial design was based on FDA feedback.

Plaintiffs, on the other hand, contend that Defendants had a

duty to disclose details of the while-on-treatment approach to

make the V005 and V017 trial data “not misleading.” (Doc. 42 at

29.) According to Plaintiffs, this duty was compounded by Dr.

Niklason’s misleading assertion that the FDA had agreed to “the

structure of the literature review and the meta-analysis” before

the trials. (Id. at 29-30; Doc. 37 ¶ 104(b).) And finally,

Plaintiffs argue that Defendants released incomplete information

to conceal known weaknesses in Symvess’s safety and efficacy.

(Doc. 42 at 30.)

Here, Defendants repeatedly disclosed data obtained via the

while-on-treatment approach to favorably compare Symvess to

synthetic grafts. (Doc. 37 ¶ 125(b) (collecting every instance of

comparison).) Using this while-on-treatment approach, Defendants

sometimes counted patients who died or had their limbs amputated

as successes, so long as the independent adjudication committee

determined Symvess did not cause the death or limb loss. (Doc. 41

at 14.) To be sure, the FDA did broadly agree to this while-on-

treatment strategy. (Doc. 41-1 at 121.) But the FDA also

recommended that when causality of the patient’s death or

amputation could not be determined, or when patency status was

missing post-implant, such patients should be included as patency

failures. (Id.) And as Plaintiffs rightly contend, the FDA

ultimately conducted its own adjudication and concluded that

Symvess’s primary patency rate, secondary patency rate, and

infection rate were all worse than the rates observed with

synthetic grafts in the benchmark literature.7 (Id. at 44.) Given

the fact that the real trial results were arguably contrary to

Humacyte’s disclosures, it is difficult at this stage to conclude

that Humacyte “accurately reported the results of [the] scientific

study.” Cf. Emps.’ Ret. Sys., 61 F.4th at 385 (quoting Lerner,

273 F. Supp. 3d at 587-88).

Further, the complaint and referenced FDA documents support

the claim that Defendants received notice of the likelihood of the

FDA’s disagreement while misleadingly suggesting that the FDA had

agreed to the clinical trials’ parameters. For example, the BLA

7 After FDA adjudication, the primary patency rate for Symvess at Day 30

was 66.7%, while the primary patency rate for synthetic grafts was 82.4%.

(Doc. 41-1 at 84.) The secondary patency rate for Symvess at Day 30 was

72.2%, while the secondary patency rate for synthetic grafts was 78.9%.

(Id.) The limb salvage rate for Symvess at Day 30 was 75.9%. (Id.)

The infection rate for Symvess at Day 30 was 3.7%, while the infection

rate for synthetic grafts in civilian trauma was 2.5%. (Id. at 84-85.)

Clinical Review Memorandum indicates that the FDA had recommended

to Humacyte that uncertain or missing data from the while-on-

treatment approach “should be handled conservatively.” (Doc. 41-

1 at 121; see Doc. 37 ¶¶ 95, 125(b).) Dr. Niklason, meanwhile,

attested that the FDA had agreed to “the structure of the

literature review and meta-analysis” before the V005 trial. (Doc.

37 ¶ 104(b).)

But unlike the defendant in Novan, Defendants here failed to

disclose that the feedback received from the FDA in advance of the

V005 and V017 trials “did not constitute an agreement that the

FDA” had accepted the trials’ design. Cf. Novan, 2018 WL 6732990,

at *11. Humacyte’s generic warnings in its 2023 Form 10-K that

“the FDA may still determine that [the] trials do not adequately

establish the safety and effectiveness of our products” and that

“[d]ata obtained from preclinical and clinical studies are subject

to varying interpretations, which may delay, limit, or prevent

marketing approval” lack context and do not mitigate the otherwise

misleading data reported. (Doc. 41-1 at 256); see Singer, 883

F.3d at 442 (holding general warnings in a Form 10-K insufficient

to shield an otherwise misleading omission).

∗ ∗ ∗

At bottom, as to the product safety fraud, Plaintiffs

sufficiently allege that Defendants inaccurately reported the

ruptures in the V005 trial. Moreover, because Defendants favorably

presented the results of the V005 and V017 trials in comparison to

the benchmark literature review of synthetic grafts, Plaintiffs

sufficiently allege a duty on the part of Defendants to disclose

the limitations of the while-on-treatment approach. See

Schueneman v. Arena Pharms., Inc., 840 F.3d 698, 705-06 (9th Cir.

2016) (“But ‘once defendants cho[o]se to tout’ positive

information to the market, ‘they [are] bound to do so in a manner

that wouldn’t mislead investors,’ including disclosing adverse

information that cuts against the positive information.”

(alterations in original) (quoting Berson v. Applied Signal Tech.,

Inc., 527 F.3d 982, 987 (9th Cir. 2008))).

These two allegations are enough to sustain Plaintiffs’

Section 10(b) claims, based on product safety fraud, that

Defendants’ misstatements and omissions misled investors that

Symvess represented a more effective and safer alternative to

synthetic grafts. And because a reasonable investor would have

considered these facts important in deciding whether to buy or

sell Humacyte stock or would have found the total mix of

information significantly altered by these facts, Defendants’

statements and omissions were material. Thus, the material

misrepresentation element is satisfied.

b. Scienter

Plaintiffs must also satisfy the scienter element. And here,

Defendants contend that Plaintiffs have failed to allege facts

establishing that concerns over Symvess’s safety caused the delay

in FDA approval. (Doc. 41 at 37.) Rather, Defendants assert that

Plaintiffs seek to establish scienter through an impermissible

chain of inferences. (Id.) Moreover, Defendants argue that

Humacyte’s repeated correspondence with both the FDA and the public

during the class period regarding the trial limitations and safety

risks “strengthens the competing inference of innocence.” (Id. at

38 (quoting In re Triangle Cap. Corp. Sec. Litig., 988 F.3d 743,

755 (4th Cir. 2021)).)

Plaintiffs counter that Defendants focus narrowly on the role

of product safety concerns in the delayed BLA approval but ignore

the continual presentation of misleading trial data. (Doc. 42 at

45.) According to Plaintiffs, the complaint sufficiently alleges

that the FDA expressed concerns over trial design, long-term follow

up, trial benchmarks, trial modifications, and the black-box

warning throughout the class period. (Id.) At minimum, Plaintiffs

point to the Late Cycle Meeting on May 20, 2024, at which time

Plaintiffs allege that the FDA made Defendants aware of serious

concerns related to Symvess. (Id. at 45-46; see Doc. 37 ¶¶ 168-

72.)

The complaint alleges that Humacyte had almost real-time

awareness of adverse events - like ruptures - because the V005

trial protocol required investigators to notify the contract

research organization within 24 hours, which then had to inform

Humacyte within one business day thereafter. (Doc. 37 ¶ 97.) It

also alleges that the FDA raised concerns over the BLA throughout

the class period. (Id. ¶¶ 98, 168, 170.) In fact, as previously

noted, the Clinical Review Memorandum clearly indicates that the

FDA recommended to Humacyte that uncertain or missing data from

the while-on-treatment approach “should be handled

conservatively.” (Doc. 41-1 at 121.) Humacyte, therefore,

plausibly knew of the likelihood that the FDA would disagree with

its data and reach a contrary conclusion regarding Symvess’s safety

compared to synthetic grafts. And while the inference that

Defendants may have known their reported data was inaccurate “does

not alone satisfy the scienter requirement,” Maguire Fin., LP v.

PowerSecure Int’l, Inc., 876 F.3d 541, 547 (4th Cir. 2017), the

court must “assess all the allegations holistically,” City of

Southfield Gen. Emps.’ Ret. Sys., 167 F.4th at 646 (quoting

Tellabs, 551 U.S. at 326).

Plaintiffs also allege more generalized theories of scienter,

focusing largely on Defendants’ trading activity. “Insider

trading allegations will only support an inference of scienter ‘if

the timing and amount of a defendant’s trading were unusual or

suspicious.’” Yates, 744 F.3d at 890 (quoting Tchrs.’ Ret. Sys.

v. Hunter, 477 F.3d 162, 184 (4th Cir. 2007)). “To determine

whether an insider’s sales were ‘unusual in scope,’” the court

considers “factors such as ‘the amount of profit made, the amount

of stock traded, the portion of stockholdings sold, or the number

of insiders involved.’” Id. (quoting In re Suprema Specialties,

Inc. Sec. Litig., 438 F.3d 256, 277 (3d Cir. 2006)). “When the

sale of stock during the class period is not substantially out of

line with the sale of stock during the control period, the

inference of scienter is lessened.” KBC Asset Mgmt. NV v. DXC

Tech. Co., 19 F.4th 601, 611 (4th Cir. 2021).

Here, Plaintiffs allege that Dr. Niklason netted around $38.8

million from stock sales during the class period, and she

transferred almost all her direct holdings to a non-reporting trust

in the weeks before the May 2024 Late Cycle Meeting. (Doc. 37

¶¶ 185-86.) In comparison to the preceding 17.5-month control

period, these proceeds represented a 29.81% increase; they were

also 33.5 times her total compensation in 2023 and 2024. (Id.

¶ 187(a).) And contrary to Defendants’ assertions, the inference

created by Dr. Niklason’s $38.8 million gain is only partially

mitigated by her exercise of options worth $182,000, the fact that

her sales occurred through an LLC co-owned by her and her husband

(who, Plaintiffs allege, serves as Chairman of Humacyte), and the

fact that the transfer to a trust did not independently realize

any income.8 Thus, Dr. Niklason’s stock transactions, in both

8 Defendants cite City of North Miami Beach Police Officers’ &

Firefighters’ Retirement Plan v. National General Holdings Corp., 19-

CV-10825, 2021 WL 212337, at *7 (S.D.N.Y. Jan. 21, 2021), for the

proposition that the LLC’s sales do not establish Dr. Niklason’s scienter

because her husband “solely controls the LLC.” (Doc. 41 at 41.) But

timing and amount, lend support to an inference of scienter.

As for COO Prichard, Plaintiffs allege that she netted

approximately $1.2 million from a single stock sale during the

class period, where she fully sold her Humacyte position less than

two weeks after the Late Cycle Meeting. (Id. ¶ 187(b).) On the

other hand, in the 17.5 months preceding the class period, COO

Prichard’s stock transactions netted a loss of $7,391.36. (Id.)

Moreover, according to Plaintiffs, her net gains during the class

period were 2.5 times her salary and almost double her total

compensation from 2023 and 2024. (Id.) COO Prichard may have

retained stock options in Humacyte despite her sell-off, as

Defendants contend, but these retained stock options only

partially mitigate the alleged insider transaction. Both the

timing and amount of COO Prichard’s sale therefore lend support to

an inference of scienter.

while Plaintiffs here allege significant individual sales by COO Prichard

and CFO Sander, the plaintiffs in City of North Miami Beach did not

allege any individual defendant sold shares during the class period.

City of N. Miami Beach, 2021 WL 212337, at *7. Moreover, Plaintiffs

allege that Dr. Niklason and her husband co-own the LLC at issue here,

whereas a defendant’s “extended” family owned the relevant entity in

City of North Miami Beach. Id.

Defendants also cite In re DraftKings, Inc. Securities Litigation, 650

F. Supp. 3d 120, 176 n.31 (S.D.N.Y. 2023), for the proposition that a

transfer, unaccompanied by a sale, does not support an inference of

scienter. But the court in DraftKings noted that the complaint did not

allege any additional facts “to support the claim that an intra-family

transfer, unaccompanied by a sale, would be indicative of scienter.”

DraftKings, 650 F. Supp. 3d at 176 n.31. Here, on the other hand, Dr.

Niklason’s transfer is only one of several suspicious insider

transactions alleged by Plaintiffs. (See Doc. 37 ¶ 186.)

And as for CFO Sander, Plaintiffs allege that he made

$162,282.68 in net proceeds from a single stock transaction during

the class period. (Id. ¶ 137(c).) During the prior 17.5 months,

however, CFO Sander purchased 2,000 shares for a net cost of

$9,060. (Id.) Moreover, Plaintiffs allege that CFO Sander’s

proceeds from stock transactions during the class period were 32.2%

of his salary and 23.5% of his total compensation in 2023 and 2024.

(Id.) As Defendants persuasively point out, however, CFO Sander’s

one sale came after Humacyte’s stock dropped because of the

announced delay in BLA approval. (Doc. 43 at 24.) Nevertheless,

the sale did occur shortly before Humacyte announced additional

capital raises in late 2024, which substantially affected its share

price. Accordingly, CFO Sander’s insider transaction lends slight

support to an inference of scienter.

Plaintiffs further allege an additional series of facts to

support additional generalized inferences of scienter.

Specifically, Plaintiffs allege that Humacyte’s fundraising during

the class period, the alleged fraud’s implication of core

operations, the quotations or SOX-certifications from the

individual Defendants in various SEC filings, the purported

violations of Humacyte’s insider trading policy, and the

departures of high-level Humacyte employees all combine to support

Defendants’ scienter. And while Defendants are correct that any

one of these facts, by itself, would not suffice, a holistic

assessment of the complaint creates an inference of wrongdoing

that is at least as likely as any opposing, innocent explanation.

See Matrix Cap. Mgmt. Fund, 576 F.3d at 187-88 (“[A]llegations of

scienter that would not independently create a strong inference of

scienter might compl[e]ment each other to create an inference of

sufficient strength to satisfy the PSLRA.”); cf. Yates, 744 F.3d

at 89 (holding that the plaintiffs failed to meet their burden of

pleading scienter under the PSLRA, where the facts indicated that

the “more compelling . . . inference [was] that the [defendants]

were, at most, negligent”). Accordingly, Defendants’ motion to

dismiss Plaintiffs’ Section 10(b) claims based on alleged product

safety fraud will be denied.

2. Facility fraud

a. Material false or misleading statements

Plaintiffs challenge Defendants’ statements regarding the

Durham facility in three main ways, largely related to the FDA’s

April 2024 facility inspection and resulting Form 483: (1)

Defendants misled about the facility’s readiness to safely

manufacture Symvess at commercial scale; (2) Defendants misled

about the sufficiency of the facility’s quality assurance and

oversight; and (3) Defendants misled about the outcome of the FDA’s

inspection. (Doc. 37 ¶ 126.)

Defendants argue that their pre-inspection statements

constitute non-actionable opinions and that fraud cannot be

established by hindsight due to a later-issued Form 483. (Doc. 41

at 28.) Moreover, Defendants contend that they had no independent

obligation to disclose the Form 483, nor do the observations noted

in the Form 483 contradict any of Defendants’ statements. (Id. at

29-30.) Finally, Defendants assert that several of the challenged

statements were forward-looking and protected by the PSLRA’s safe

harbor. (Id. at 31.)

Plaintiffs counter that Defendants’ opinion statements are

actionable because Defendants either lacked a reasonable basis for

the opinions or omitted material facts necessary to prevent the

opinions from misleading investors. (Doc. 42 at 34-35.) They

argue that Defendants’ post-inspection statements were, at

minimum, misleading because Defendants had at least some

indication after the Form 483 that they were not on track for BLA

approval by the August 10, 2024 PDUFA date. (Id. at 34.) According

to Plaintiffs, once Defendants chose to speak positively of the

results of the FDA inspection, they had to disclose the Form 483’s

findings. (Id.) Moreover, Plaintiffs contend, the PSLRA’s safe

harbor does not apply because Defendants had actual knowledge of

the statements’ falsity and many of the challenged statements

lacked meaningful cautionary language. (Id. at 35-36.) Finally,

Plaintiffs point to several allegations in the complaint to argue

they have sufficiently pled falsity on statements regarding

Humacyte’s ability to manufacture Symvess at commercial scale.

(Id. at 36.)

“Unlike statements of fact, statements of opinion do not

‘express[] certainty about a thing.’” Emps.’ Ret. Sys., 61 F.4th

at 387 (alteration in original) (quoting Omnicare, Inc. v. Laborers

Dist. Council Constr. Indus. Pension Fund, 575 U.S. 175, 183

(2015)). “Opinions are only actionable under the securities laws

if they are not honestly believed and lack a reasonable basis.”

Id. (quoting City of Edinburgh Council v. Pfizer, Inc., 754 F.3d

159, 170 (3d Cir. 2014)).

First, Plaintiffs fault Defendants for several public

statements related to their future ability to manufacture Symvess

at commercial scale. (See Doc. 37 ¶ 137.) According to

Plaintiffs, Humacyte’s lack of quality oversight and other known

manufacturing issues made these statements false and misleading.

(Id.) But Plaintiffs allege no facts to indicate that these issues

would have prevented Humacyte from appropriately scaling its

Symvess production, or that they delayed approval of the BLA. (See

id. ¶¶ 127-31, 137.) At most, the facts alleged demonstrate that

Defendants knew of manufacturing or oversight issues present in

the months prior to the August 2024 PDUFA date while they continued

to express confidence in a future ability to manufacture Symvess

at scale.9 Indeed, Plaintiffs never contest the reality that

9 Several of Defendants’ statements regarding their future ability to

produce Symvess at scale also constitute opinions, forward-looking

Humacyte seemingly does now produce Symvess at commercial scale

from the same Durham facility.

Next, Plaintiffs challenge several of Defendants’ pre-

inspection statements. For example, Dr. Niklason stated that

Humacyte “fe[lt] very confident about how this inspection [was]

going to go” and “believe[d] the facility [was] in great shape.”

(Id. ¶ 130.) Yet, through confidential witnesses, Plaintiffs

allege that Defendants knew of insufficient microbial quality

assurance prior to the FDA inspection. (E.g., id. ¶ 41(c).)

According to Plaintiffs, the employee responsible for microbial

quality assurance left Humacyte before the April 2024 inspection,

and Humacyte had not replaced her by the time of the inspection.

(Id.) The Form 483 ultimately noted this lack of microbial quality

assurance. (Id. ¶ 45.)

Even if Defendants knew of the issues described prior to the

inspection, however, Plaintiffs have not specifically alleged that

Defendants believed their readiness for inspection was false. In

fact, the results of the FDA inspection militate against a finding

that Defendants lacked a reasonable basis for their pre-inspection

optimism, because the relevant FDA document suggests that the FDA

statements, or both. (See, e.g., Doc. 37 ¶ 129 (noting that Humacyte’s

existing facilities “are expected to have the capacity to provide

thousands of vessels”); id. ¶ 131(e) (“[W]e believe [it] will enable us

to manufacture our HAVs, if approved, in commercial quantities in

compliance with [current good manufacturing practices].” (first and

second alterations in original)).)

considered its Form 483 observations remediable without further

FDA action. Specifically, the BLA approval letter indicated that

the FDA classified the April 2024 inspection of the Durham facility

as “Voluntary Action Indicated” (Doc. 41-1 at 14), which means

that the FDA “determined that the facility can voluntarily correct

its deficiencies and will not recommend any action” (Doc. 41 at 17

(quoting Inspection Classification Database, U.S. Food & Drug

Admin. (Sep. 13, 2024), https://www.fda.gov/inspections-

compliance-enforcement-and-criminal-investigations/inspection-

classification-database)).

Plaintiffs also challenge several of Defendants’ post-

inspection statements. For example, Dr. Niklason asserted, “We

remain on track with our BLA review and commercial launch

preparations,” while COO Prichard stated, “[W]e completed our pre-

license inspection of our manufacturing facility and had a very

successful outcome.” (Doc. 37 ¶ 133(a)-(b) (alteration in

original).) Dr. Niklason also stated that the FDA “already

completed the inspection of [Humacyte’s] facility,” that Humacyte

saw “no reason that the PDUFA date will shift,” and that Humacyte

“ha[d] no indication that [the BLA was] not on track.” (Id.

¶ 133(d).)

In defending the post-inspection statements, Defendants rely

heavily on In re Genzyme Corp. Securities Litigation, 754 F.3d 31,

41 (1st Cir. 2014), where the court held that the defendants did

not fraudulently conceal a Form 483, even where the PDUFA date was

ultimately delayed, in part because the Form 483 did not postpone

the PDUFA date or “otherwise state that the . . . BLA had been

compromised.” The court further reasoned that the relevance of

the Form 483 was not made clear until four months after its

issuance, “given the advisory language that accompanies all Forms

483, to the effect that the circumstances noted therein are merely

observational in nature, and do not represent the FDA’s final

word.” Genzyme, 754 F.3d at 42.

Here, Plaintiffs have again failed to sufficiently allege

that Defendants lacked a reasonable basis for the statements of

opinion on the inspection or the BLA approval process. Moreover,

the court is not persuaded that the failure to mention the Form

483 constitutes an actionable omission. As the court in Genzyme

explained, a Form 483 contains advisory language and does not

represent the FDA’s final word. Plaintiffs also never allege that

the Form 483 postponed the PDUFA date or otherwise indicated that

Humacyte’s BLA for Symvess had been compromised. In fact, the

relevant FDA documents here directly contradict the notion that

the delay in BLA approval related to observations in the Form 483

or to any other facility shortfall.

The FDA’s BLA approval letter described the Durham facility

as “sufficient and acceptable.” (Doc. 41-1 at 13.) The BLA

approval letter then noted that Humacyte had “adequately responded

to the [Form 483] observations” and “[a]ll inspectional issues

were resolved.” (Id. at 14.) And even though the BLA approval

letter provided no indication as to when Humacyte resolved the

inspectional issues, the FDA’s BLA Review Addendum disclosed that

the lack of a decision “on the PDUFA action date [was] due to

further clarification needed for the clinical benefit/risk

assessment.” (Id. at 28 (emphasis added).) Given this undisputed

evidence, in addition to the FDA’s determination that Humacyte

could voluntarily correct its deficiencies without further action,

Defendants’ statements were not false or misleading even by their

failure to mention the Form 483.

Moreover, Plaintiffs do not ever allege that Humacyte’s

inability to resolve the specific “inspectional observations”

noted in the Form 483 led to the delay in BLA approval. Rather,

to connect the delay to the alleged facility fraud, Plaintiffs

point to several facility-related allegations stemming from

confidential witnesses who observed challenges at the Durham

facility pertaining to quality control, manufacturing, and

sterility testing in addition to poor maintenance tracking. But

even assuming that the individual Defendants were personally aware

of such challenges, it does not follow that they doubted Humacyte’s

ability to produce Symvess at scale in accordance with FDA

requirements by the PDUFA date. Again, the FDA’s April 2024

inspection resulted only in a “Voluntary Action Indicated”

classification, and the FDA’s own BLA approval addendum attributed

the delay to the need to further clarify “the clinical benefit/risk

assessment.” (Id. at 14, 28.) And while the complaint alleges

Humacyte’s “slow response” to the FDA’s sterilization validation

concerns, it contains no facts suggesting Humacyte’s response to

these concerns served as a prerequisite for BLA approval.10 (See

Doc. 37 ¶¶ 64, 66(d), 169, 172.)

Finally, Defendants are correct that several of the

challenged facility fraud statements are protected by the PSLRA’s

safe harbor as forward-looking statements. See 15 U.S.C. § 78u-

5(c). A defendant cannot be liable for any forward-looking

statement if:

(1) the forward-looking statement is “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”;

(2) the forward-looking statement is “immaterial”; or

(3) the plaintiff fails to prove that the forward-

looking statement was made by a person – or if the

statement [is] a business entity’s, was made or approved

by an officer - “with actual knowledge by that person

[or officer] that the statement was false or

misleading.”

TransEnterix Inv. Grp. v. TransEnterix, Inc., 272 F. Supp. 3d 740,

10 Plaintiffs also allege that Humacyte “wanted to address” apparently

unrelated problems with sterility assurance identified in the Form 483

by November 13, 2024. (Doc. 37 ¶ 66(e).) But again, Plaintiffs never

directly allege that Humacyte’s problem with sterility assurance would

have prevented BLA approval – especially where the Form 483 did not

appear to mention any sterility issues, and the FDA classified the

inspection as “Voluntary Action Indicated.” (See Doc. 37 ¶ 45.)

757 (E.D.N.C. 2017) (second alteration in original) (quoting 15

U.S.C. § 78u-5(c)(1)). And as already noted, Plaintiffs have not

sufficiently alleged that Defendants made forward-looking

statements about Humacyte’s manufacturing capabilities, the Durham

facility’s inspection readiness, or the BLA approval timeline with

actual knowledge that these statements were false or misleading.

b. Scienter

However, even if Plaintiffs sufficiently alleged false or

misleading statements regarding facility fraud, the allegations do

not support the necessary “strong inference” of scienter.

Confidential witnesses may have identified challenges related to

Defendants’ manufacture of Symvess, but presumably every

biopharmaceutical company developing and scaling a new product

faces some manufacturing difficulties. Allegations of deferred

maintenance, low yield rates before the PDUFA date, and even the

closeout of incomplete work orders do not provide sufficient

evidence of Defendants’ reckless disregard of the likelihood of

misleading investors, especially where the alleged facts otherwise

suggest that the FDA permitted Humacyte to voluntarily resolve the

inspectional issues and the delay in FDA approval was unrelated.

The same is true for the alleged sterilization concerns, which the

court is asked to infer caused, at least in part, the delay of the

BLA’s approval. Seemingly, the court “should then ‘infer from

that inference that [defendants] acted with scienter.’” City of

Southfield Gen. Emps.’ Ret. Sys., 167 F.4th at 648 (alteration in

original) (quoting Maguire Fin., 876 F.3d at 547). But “[a]

plaintiff may not stack inference upon inference to satisfy the

PSLRA’s pleading standard,” and the “strong inference of scienter”

must “be supported by facts, not other inferences.” Maguire Fin.,

876 F.3d at 547. Plaintiffs’ generalized theories of scienter

also do not sufficiently move the needle as to the facility fraud

claims.

Ultimately, the more likely inference is that Defendants

reasonably and correctly believed they could resolve any

manufacturing challenges - including those identified in the Form

483 - prior to the PDUFA date, or that the identified issues would

not prevent BLA approval. Indeed, after the announcement of the

BLA approval delay, Dr. Niklason said as much when she explained

that certain post-inspection follow-ups had always been “slated

for post-PDUFA” and were not believed to have impacted the timing

of approval. (Doc. 37 ¶ 136(b).) Thus, as to facility fraud, the

court finds that Plaintiffs’ allegations are not as cogent or

compelling as the competing, innocent inference. Defendants’

motion to dismiss Plaintiffs’ Section 10(b) claims related to

facility fraud will therefore be granted.

3. Liquidity fraud

a. Material false or misleading statements

Plaintiffs challenge several of Defendants’ statements about

whether Humacyte had sufficient cash and cash equivalents to fund

its operations. (Doc. 37 ¶ 138.) Defendants argue that they

adequately disclosed Humacyte’s reliance on the Oberland funding

agreement and that the act of raising funds at various points

throughout 2024 and 2025 does not mean that any liquidity

projections were false. (Doc. 41 at 34-35.) Further, Defendants

contend that that the liquidity statements are non-actionable both

as opinions and forward-looking statements. (Id. at 35.)

Plaintiffs counter that the challenged liquidity projections

generally failed to disclose any reliance on the Oberland funding

agreement. (Doc. 42 at 36-37.) Further, Plaintiffs assert that

the statements were at least misleading and lacked a reasonable

basis when made by Defendants, especially considering how quickly

and frequently Humacyte raised capital at discounted prices after

the announced delay of BLA approval. (Id. at 37-38.) Finally,

Plaintiffs contend that confidential witness statements regarding

Humacyte’s “cost-cutting measures” support an inference that

Humacyte raised capital not because of “prudent” fiscal management

but rather because of realized funding shortfalls. (Id. at 38.)

As both parties acknowledge, the relevant liquidity

statements fall largely into one of two buckets: either (1)

Humacyte had enough money to fund operations past the anticipated

timeline for FDA approval and commercialization of Symvess based

on cash, cash equivalents, and the Oberland funding agreement; or

(2) Humacyte had enough money to fund operations for the next

relevant 12-month period based solely on cash and cash equivalents.

(Doc. 42 at 37; Doc. 43 at 17-18.) Defendants correctly point out

that these two timelines are distinct, and it is plainly logical

that the Oberland funding agreement would be necessary to support

the longer timeline of Symvess’s anticipated commercialization but

not necessary for any individual 12-month period identified in a

quarterly financial statement. (Doc. 43 at 17-18.) Moreover,

Defendants are correct that the liquidity statements, as

statements of opinion, are not actionable unless the statements

were not honestly believed or lacked a reasonable basis when made.

See In re Lehman Bros. Sec. & ERISA Litig., 799 F. Supp. 2d 258,

298 (S.D.N.Y. 2011) (“[T]he statements that [the defendant’s]

liquidity pool was sufficient to meet its expected needs over the

next twelve months . . . were statements of opinion.”).

Plaintiffs have failed to sufficiently allege facts

supporting the argument that the challenged liquidity statements

are actionable. True, Defendants represented a belief in May 2024

that their cash and cash equivalents would adequately fund

operations for the next 12 months (that is, until May 2025) - “well

past the currently anticipated timelines for FDA approval [and]

commercialization of the HAV in the vascular trauma indication.”

(Doc. 37 ¶ 141(a) (emphasis added).) But the anticipated timelines

for FDA approval and commercialization shifted when the FDA

indicated it would not provide a decision by the PDUFA date. (Id.

¶ 7.)

The fact that Humacyte’s August 2024 Form 10-Q – issued after

the announced delay - included a going concern warning does not

contradict Humacyte’s previous statement that it believed its cash

and cash equivalents would last until May 2025, let alone

demonstrate that Humacyte lacked a reasonable basis for its

positive liquidity projection at the time it was shared. Indeed,

Humacyte’s August 2024 admission that it “d[id] not believe [its]

available cash and cash equivalents on hand w[ould] be sufficient

to fund operations . . . for at least one year from the date of

this Quarterly Report,” unless Humacyte obtained timely FDA

approval and/or additional capital, represented a new 12-month

period three months beyond Humacyte’s May 2024 projection. (See

Doc. 43-1 at 62.) As Defendants persuasively argue, Humacyte

presumably based this sudden pessimism on new facts and a delayed

ability to generate revenue, given that Humacyte would be forced

to operate at a net loss for longer than anticipated.

Plaintiffs further contend that the temporal proximity

between the announced delay of BLA approval and Humacyte’s three

subsequent capital raises supports an inference that Defendants

lacked a reasonable basis to believe that cash and cash equivalents

would fund operations until May 2025. (Doc. 42 at 37; see Doc. 37

¶ 143(c)-(d).) Similarly, Plaintiffs point to allegations from

confidential witnesses that cash shortfalls prevented the

resolution of various maintenance issues while Humacyte leadership

emphasized a need to cut back on spending during a company-wide

meeting in late 2023. (Id. at 38; see Doc. 37 ¶ 143(e).) But as

Defendants rightly contend, “it is only prudent for companies to

curb spending or raise capital well before they run out of cash.”

(Doc. 43 at 17.) In fact, it would seem to impose an untenable

burden on medical innovation to find evidence of securities fraud

where a company shared positive 12-month liquidity projections but

then raised capital or cutback spending within that 12-month

window.11

b. Scienter

Even assuming Plaintiffs sufficiently alleged that the

challenged liquidity statements were false or misleading because

of Humacyte’s decision to raise capital during the subsequent 12-

month periods, Plaintiffs have not provided a strong inference of

scienter. In fact, Humacyte’s almost immediate disclosure

following the BLA approval delay that it “d[id] not believe [its]

available cash and cash equivalents on hand w[ould] be sufficient

to fund operations . . . for at least one year from the date” of

the August 2024 Form 10-Q more strongly supports Defendants’

11 This reality likewise forecloses the finding of actionable

misstatements based on Humacyte’s August and November 2023 Form 10-Qs,

which expressed a belief that Humacyte’s cash and cash equivalents would

fund operations for the next 12-month periods, where Humacyte then

offered discounted shares in February 2024. (See Doc. 37 ¶ 143(a).)

transparency rather than a fraudulent attempt to mislead. And

similar to the facility fraud claims, Plaintiffs’ generalized

scienter allegations do not sufficiently alter the balance of

inferences as to the liquidity fraud claims. Accordingly, the

facts, when evaluated holistically and viewed in the light most

favorable to Plaintiffs, are more consistent with Defendants

having a good faith belief in their 12-month liquidity projections

- before reacting to indefinitely delayed BLA approval by raising

capital - rather than acting with dishonest or reckless behavior

to mislead investors.

Ultimately, the complaint does not allege sufficient facts to

demonstrate that Humacyte became illiquid during the 12-month

period after its quarterly projections, let alone that Humacyte

lacked a reasonable belief in its 12-month liquidity projections

at the time these projections were made or acted with scienter.

Again, “[a] plaintiff may not stack inference upon inference to

satisfy the PSLRA’s pleading standard.” Maguire Fin., 876 F.3d at

548. Defendants’ motion to dismiss Plaintiffs’ Section 10(b)

claims based on Defendants’ alleged liquidity fraud will therefore

be granted.

C. Section 20(a) Claims

Plaintiffs also allege the individual Defendants violated

Section 20(a) of the Exchange Act. (Doc. 37 ¶¶ 229-32.) Section

20(a) imposes liability on any person who “directly or indirectly,

controls any person liable” for violations of the Exchange Act,

“unless the controlling person acted in good faith and did not

directly or indirectly induce the act or acts constituting the

violation or cause of action.” 15 U.S.C. § 78t(a). Plaintiffs

have alleged that each of the individual Defendants had authority

over the content and dissemination of the challenged statements

and qualifies as a control person within the meaning of Section

20(a) of the Exchange Act. (Doc. 37 ¶¶ 229-32.)

Defendants’ argument for dismissal of the Section 20(a)

claims turns on the dismissal of the Section 10(b) claims. (Doc.

41 at 46.) Thus, Plaintiffs’ Section 20(a) claims will be

dismissed to the extent they are based on the alleged facility

fraud or liquidity fraud. Because the court will decline to

dismiss the Section 10(b) claims based on the alleged product

safety fraud, however, these Section 20(a) claims also survive.

See Singer, 883 F.3d at 438 (“The liability of a control person

under section 20(a) is derivative of – and dependent upon –

liability of a controlled person under section 10(b).”).

III. CONCLUSION

For the reasons stated,

IT IS THEREFORE ORDERED that Defendants’ motion to dismiss

(Doc. 40) is GRANTED IN PART and DENIED IN PART, and that

Plaintiffs’ claims pursuant to Sections 10(b) and 20(a) related to

alleged facility fraud and liquidity fraud are DISMISSED WITHOUT

PREJUDICE,12 leaving the claims to go forward to the extent they

are based on Defendants’ alleged product safety fraud.

/s/ Thomas D. Schroeder

United States District Judge

March 31, 2026

12 The court dismisses Plaintiffs’ claims without prejudice because, in

their response in opposition to Defendants’ motion to dismiss, Plaintiffs

ask for leave to amend “to address the Court’s concerns” if the court

declines to deny Defendants’ motion. (Doc. 42 at 51 n.25.) However,

no motion to amend has been filed. In such circumstances, the Fourth

Circuit has declined to “find that requests made in opposition memoranda

constitute a proper motion to amend.” ACA Fin. Guar. Corp. v. City of

Buena Vista, 917 F.3d 206, 218 (4th Cir. 2019).