United States District Court, D. Massachusetts
BATTLE CONSTRUCTION CO., INC., individually and on behalf of all others similarly situated
INVIVO THERAPEUTICS HOLDINGS CORP. and FRANK REYNOLDS
For Battle Construction Co., Inc., individually and on behalf of all others similarly situated, Edmond Ganem, Plaintiffs: Thomas G. Shapiro, Shapiro Haber & Urmy LLP, Boston, MA.
For Steve Adams, Plaintiff: Christopher A. Duggan, Smith Duggan Buell & Rufo LLP, Boston, MA.
For InVivo Therapeutics Holdings Corp., Defendant: Zachary C. Kleinsasser, LEAD ATTORNEY, Greenberg Traurig, LLP, Boston, MA; Andrew S. Dulberg, Wilmer Cutler Pickering Hale and Dorr LLP (Bos), Boston, MA; James W. Prendergast, Wilmer Hale LLP, Boston, MA; Michael G. Bongiorno, Wilmer Cutler Pickering Hale and Dorr LLP, New York, NY; Peter A. Spaeth, Wilmer Hale LLP, Boston, MA.
For Frank Reynolds, Defendant: Richard J. Rosensweig, LEAD ATTORNEY, Goulston & Storrs, PC, Boston, MA; Barbara L. Moorem, Goulston & Storrs, Boston, MA; David M. Zucker, Goulston & Storrs, Boston, MA; Derek B. Domian, Goulston & Storrs, PC, Boston, MA; Matthew P. Horvitz, Goulston & Storrs, PC, Boston, MA.
For Walden Consulting, LLC, Movant: Jason M. Leviton, LEAD ATTORNEY, Block & Leviton LLP, Boston, MA.
For Peter Imbert, Movant: Mark Booker, Law Offices of Mark Booker, Boston, MA.
MEMORANDUM AND ORDER ON DEFENDANTS' MOTION TO DISMISS
Richard G. Stearns, UNITED STATES DISTRICT JUDGE.
This is a federal securities class action brought on behalf of purchasers of common stock of defendant InVivo Therapeutics Holdings Corp. during the period from April 5, 2013, through August 26, 2013. Lead plaintiff Edmond Ganem alleges that InVivo intentionally misrepresented in a company press release the conditions imposed by the Food and Drug Administration (FDA) in approving a first-in-human clinical study of InVivo's biopolymer scaffold spinal injury repair product. The Amended Complaint alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. InVivo and individual defendant Frank Reynolds move to dismiss both counts pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state an actionable claim.
InVivo is a Massachusetts-based biotechnology company that seeks innovative treatments for spinal cord injuries. Defendant Frank Reynolds served as InVivo's Chairman, Chief Executive Officer, and Chief Financial Officer until August 22, 2013. On April 4, 2013, InVivo announced through a press release that FDA had designated its biopolymer Neuro-Spinal Scaffold as a Humanitarian Use Device. By the end of the day, InVivo stock closed at $2.75 a share, up 16 percent from the previous day's closing price of $2.36. Trading volume rose to 683,500 shares, compared to an average 71,000 shares over the previous three trading days.
On April 5, 2013, prior to the market opening, InVivo issued a second press release announcing that the FDA had additionally approved an Investigational Device Exemption for a five-patient pilot study of the Neuro-Spinal Scaffold. The press release stated that InVivo " intend[ed] to commence a first-in-man clinical study in the next few months" and that it " expect[ed] the study to occur over approximately 15 months." Am. Compl. ¶ 22. Reynolds was quoted in the press release as saying that " we expect to have all data to the FDA by the end of 2014." Id. ¶ 23. InVivo stock closed at $2.80 a share on April 5, 2013, trading at a volume of 504,900 shares. On the following trading day, April 8, 2013, InVivo stock closed at $3.19 a share with a volume of 1,333,800 shares, and continued to rise over the next month.
On May 9, 2013, in a press release reporting InVivo's first quarter financial results, Reynolds announced that that because InVivo stock " has appreciated significantly since [obtaining FDA approval for the clinical study, InVivo will] call investor warrants that will provide up to $16.1 million of equity capital, but more importantly will remove an accounting liability that has been an impediment to up-listing to a national securities exchange." Id. ¶ 30. InVivo also iterated that " ...