Company reports often wrap problems in vague but fancy words that hide rather than reveal. The complaint for this class action quotes a conference call by Ocular Therapeutix with sentences like, “The issue relates primarily to completion of an investigation that we have underway in regard to the particular matter solidifying specifications for in process [sic], 100% visual inspection of our inserts, as well as enhancing our operator training.” What was that really about? According to the complaint, more than half of the medicine the company was producing was contaminated, and the company’s obfuscation was a violation of Securities Exchange Act of 1934.
The class for this action is all persons and entities who acquired the publicly-traded securities of Ocular Therapeutix between May 5, 2017 and July 11, 2017.
Ocular Therapeutix is a US company that develops treatments for conditions of the eye that use its proprietary hydrogel platform. Its lead product is Dextenza, as a treatment for post-surgical pain and inflammation and allergic conjunctivitis, for which is in the Phase III clinical trial stage.
On May 5, 2017, the company put out a press release saying it had received a Form 483from the Food and Drug Administration (FDA), presenting concerns after an inspection of the company’s manufacturing process. The press release said, vaguely, that the 483 was “focused on procedures for manufacturing processes and analytical tests, related to manufacture of drug product for commercial production.” The company said it planned to respond within fifteen days “with corrective action plans” to complete the process.
On a conference call the same day, a company official said, “We feel quite comfortable that we have the situation under control…” When pressed on whether this might cause delays, the company’s CEO insisted that “we think these are resolvable issues, and we have responses.”
According to the complaint, however, the problem was that more than fifty percent of lots of Dextenza made by the company contained bad product, and such an extensive problem could endanger the FDA’s approval of the drug.
The complaint claims that a July 6, 2017 Seeking Alpha article broke the news with the down-to-earth title, “Ocular: A Poke in the Eye”. The article quoted the much more direct language of the Form 483 and commented, “In plain English, this means that OCUL still doesn’t know [how] to make their product consistently.”
On the same day, STAT published an article claiming that the FDA might reject Dextenza because contamination, including aluminum, had been found in the drug.
At the news, the company’s stock fell over 30% during two trading days. On July 11, the company put out a press release using somewhat plainer language and admitting that it was having difficulties with approval of the drug. The stock fell by another 12%