United States District Court, D. Massachusetts
ERSTE-SPARINVEST KAPITALANLAGEGESELLSCHAFT MBH and OKLAHOMA LAW ENFORCEMENT RETIREMENT SYSTEM, Individually and On Behalf of All Other Persons Similarly Situated, Plaintiffs,
SERES THERAPEUTICS, INC., ROGER J. POMERANTZ, and MICHELE TRUCKSIS, Defendants.
MEMORANDUM AND ORDER
J. CASPER, UNITED STATES DISTRICT JUDGE
Erste-Sparinvest Kapitalanlagegellschaft MBH
(“ESK”) and Oklahoma Law Enforcement Retirement
System (“OLERS”) (collectively,
“Plaintiffs”) have filed this lawsuit against
Defendants Seres Therapeutics, Inc., Roger J. Pomerantz
(“Pomerantz”) and Michele Trucksis
(“Trucksis”) (collectively, “Seres”)
individually and on behalf of a proposed class of similarly
situated persons alleging violations of Section 10(b) of the
Exchange Act and Rule 10b-5 promulgated thereunder (Count I),
15 U.S.C. § 78j; 17 C.F.R. 240.10b-5, and Section 20 of
the Exchange Act (Count II), 15 U.S.C. § 78t. D. 32.
Defendants have moved to dismiss. D. 43. For the reasons
stated below, the Court ALLOWS the motion.
Standard of Review
motion to dismiss for failure to state a claim upon which
relief can be granted pursuant to Fed.R.Civ.P. 12(b)(6), the
Court must determine if the facts alleged “plausibly
narrate a claim for relief.” Schatz v. Republican
State Leadership Comm., 669 F.3d 50, 55 (1st Cir. 2012)
(internal citation omitted). Reading the complaint “as
a whole, ” the Court must conduct a two-step,
context-specific inquiry. García-Catalán v.
United States, 734 F.3d 100, 103 (1st Cir. 2013). First,
the Court must perform a close reading of the claim to
distinguish the factual allegations from the conclusory legal
allegations contained therein. Id. Factual
allegations must be accepted as true, while conclusory legal
conclusions are not entitled credit. Id. Second, the
Court must determine whether the factual allegations present
a “reasonable inference that the defendant is liable
for the misconduct alleged.” Haley v. City of
Boston, 657 F.3d 39, 46 (1st Cir. 2011). In sum, the
complaint must provide sufficient factual allegations for the
Court to find the claim “plausible on its face.”
García-Catalán, 734 F.3d at 103.
Court will dismiss a pleading that fails to include
“enough facts to state a claim to relief that is
plausible on its face.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007). “To avoid
dismissal, a complaint must provide ‘a short and plain
statement of the claim showing that the pleader is entitled
to relief.'” García-Catalán,
734 F.3d at 102. “A pleading that offers ‘labels
and conclusions' or ‘a formulaic recitation of the
elements of a cause of action will not do.'”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting
Twombly, 550 U.S. at 555). “Nor does a
complaint suffice if it tenders ‘naked
assertion[s]' devoid of ‘further factual
enhancement.'” Id. (quoting
Twombly, 550 U.S. at 557) (alteration in original).
“In determining whether a [pleading] crosses the
plausibility threshold, ‘the reviewing court [must]
draw on its judicial experience and common sense.'”
García-Catalán, 734 F.3d at 103
(internal citations omitted).
is a start-up biopharmaceutical company focusing on
developing products intended to restore the function of an
imbalanced (“dysbiotic”) human microbiome, the
bacteria, fungi and viruses naturally present in the human
gut. D. 32, ¶¶ 4, 25. Seres has its headquarters in
Cambridge, Massachusetts, and its stock is traded publicly on
NASDAQ. D. 32, ¶ 24. Pomerantz is Seres's Chairman,
President and Chief Executive Officer (“CEO”). D.
32, ¶ 26. Trucksis is Seres's Chief Medical Office
(“CMO”) and Executive Vice President
(“EVP”). D. 32, ¶ 27.
an Austrian investment company responsible for managing fund
assets. D. 32, ¶ 22. OLERS is a retirement plan
responsible for managing assets for its members. D. 32,
¶ 23. ES and OLERS both purchased Seres stock during the
alleged class period of June 25, 2015, to July 29, 2016
(“Class Period”), and ES and OLERS were appointed
as lead plaintiffs on December 28, 2016. D. 32, ¶ 21.
Development of SER-109
was developing SER-109 for regulatory approval and
commercialization. D. 32, ¶ 32. SER-109 is a pill-based
treatment that aims to prevent a particular kind of infection
of the colon that causes severe and persistent diarrhea
(“CDI”), in a manner that is less invasive and
less harsh on the human microbiome than currently approved
conducted a Phase 1b/2 clinical study of SER-109 in 2013-2014
to evaluate its safety and efficacy. D. 32, ¶ 33. In
September 2014, Seres announced the results of the Phase 1b/2
study. D. 32, ¶ 35. It announced that twenty-six of
thirty patients across both enrolled groups in the Phase 1b/2
study (87%) had achieved the primary efficacy endpoint,
measured by the patient being CDI-free eight weeks after
treatment, and an overall “clinical cure rate” of
97% . Id. Three other patients were CDI-free at the
eight-week mark, but had experienced recurrences during the
period of the study. Id. The Phase 1b/2 study was
done without an investigational new drug application
(“IND”), which would have allowed the FDA to
review Seres's testing and manufacturing protocols. D.
32, ¶¶ 36-37.
2015, Seres completed its IPO, and on June 26, 2015, became a
publicly traded company on NASDAQ. D. 32, ¶¶ 55-56.
At the time of the IPO, Seres's stock was $18 per share.
D. 32, ¶ 56. On the first day of its listing on NASDAQ
for public trading, the share price closed at $51.40 per
began a Phase 2 clinical study of SER-109. D. 32, ¶ 43.
The FDA required Seres to conduct the Phase 2 study under an
IND, meaning their manufacturing practices were subject to
review and would have to be followed in the same manner as
they would after the drug's approval, when the drug would
be available commercially. Id. As a result, Seres
transitioned the manufacture of SER-109 in-house for the
Phase 2 study, whereas the drug had been manufactured by
physicians at the clinical testing sites during the Phase
1b/2 study. D. 32, ¶¶ 44-45, 47. Seres also had to
create a “new formulation” of SER-109 for the
Phase 2 trial, eliminating any variations in dosing and
strength. D. 32, ¶ 48.
Phase 2 study measured the same primary efficacy endpoint as
Phase 1b/2 - i.e., whether patients were CDI-free eight weeks
after treatment. D. 32, ¶ 57. The Phase 2 study was,
unlike Phase 1b/2, double-blinded and placebo-controlled.
Id. It also included an “open label extension
study, ” through which any patient who suffered from a
recurrence of CDI during the Phase 2 study, from the placebo
or SER-109 groups, would be able to receive an additional
SER-109 treatment. D. 32, ¶ 65. Seres explained that
this extension would encourage patient enrollment and provide
“additional safety data and . . . greater understanding
of the impact of a second dose of SER-109.”
Id. The estimated “primary completion
date” of Phase 2 was originally March 2016,
anticipating a total of 87 test subjects, D. 32, ¶¶
57, 71, although Seres had originally disclosed in June 2015
that it expected results to the Phase 2 trial sometime in the
middle of 2016, D. 32, ¶ 83.
Phase 2 Interim Results
allege, based on a confidential witness who was a senior
executive in manufacturing and quality at Seres during the
Class Period (“CW1”),  that Trucksis would have
received updates and information regarding the Phase 2 study.
D. 32, ¶ 68. Furthermore, despite the Phase 2 study
being double-blinded, Plaintiffs allege that Defendants were
receiving real-time updates about the interim results from
medical monitors at the testing sites and clinics dealing
with patients who had relapsed. D. 32, ¶¶ 67, 69.
Plaintiffs' consulting expert, Ms. Chew
(“Chew”), who is referenced in the amended complaint,
states that real-time synchronization of patient data with
the company sponsoring the drug trial is an industry standard
practice intended to allow companies to track safety data. D.
32, ¶ 70. Plaintiffs allege that this information would
have been gathered and available in February 2016. D. 32,
also allege that Defendants were aware of negative interim
results because patients in the Phase 2 study experienced a
“high rate of serious adverse events”
(“SAEs”), and patients in the SER-109 group
experienced more SAEs than those in the placebo group. D. 32,
Phase 2 ...