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OvaScience IPO Filings Augment Treatment Information Hiding Class Action

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With women preferring to have children at later ages, successful fertility treatments are a promising product, even for a company that has not yet earned any revenue. According to the complaint, however, OvaScience, Inc. made misrepresentations about its Augment procedure in the Registration Statement for its initial public offering (IPO), in violation of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933.

The class for this action is all those who bought OvaScience’s common stock directly in the company’s Offering and who were damaged thereby.

OvaScience is a life science company working on new fertility treatments using “egg precursor cells” or EggPCs. One of them, Augment, takes mitochondria from EggPCs in the lining of a woman’s ovaries and injects them into her eggs as part of an in vitro fertilization (IVF) procedure.

In late 2012, the company claimed it planned “to begin generation of revenues from Augment in the second half of 2014… We do not believe we will be required to seek premarket approval or clearance of Augment from regulatory authorities…”

In the fall of 2013, the company announced it was enrolling people in studies outside the US. The trials were performed in Canada and Turkey in 2014, and in its filings, the company claimed they had achieved a success rate of between 25% and 53%. The company’s IPO filings in January 2015 claimed it would enroll 1,000 patients in a trial and generate revenue that same year.

At the IPO, OvaScience’s stock sold for $50 per share. Only after this, the complaint claims, did the following information begin to emerge:

  • The science behind Augment was untested and in doubt. A similar project had produced genetic mutations in offspring.
  • The 2014 trials were flawed, with too few subjects, no control group, and younger patients.
  • The 2014 trials did not achieve a pregnancy success rate higher than IVF alone.
  • The company held trials outside the US because the FDA had said it should file an Investigational New Drug application, requiring it to meet stringent and costly approval standards.
  • The company would not be able to avoid FDA regulation of Augment.
  • The company was far from achieving profitability.

The complaint alleges that the IPO filings omitted all of these concerns, even though by law the company was obliged to disclose adverse conditions, risks, and uncertainties in its Registration Statement.

The stock’s downward spiral began in March 2015, when the company announced success rates for clinics using Augment that were comparable to or lower than IVF alone. Articles in subsequent months claimed that Augment did not show a significant success rate and that the Canadian and Turkish studies were too small. Finally, in September, the company issued a press release saying it would not meet the goal of 1,000 treatment cycles in 2015.

The stock fell from its $50 IPO price to $1.50 at the filing of the complaint, a loss of 97% of its value.

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