United States District Court, D. Massachusetts
FADI DAHHAN, Individually and on Behalf of All Others Similarly Situated, Plaintiff,
OVASCIENCE, INC., et al, Defendant.
MEMORANDUM & ORDER
Talwani, United States District Judge.
Plaintiff Freedman Family Investments LLC (“Freedman
Family”) brings this action against Defendants
OvaScience, Inc. (“OvaScience”), Michelle Dipp,
and Jeffrey Young. Count I of the Amended Class Action
Complaint [#27] alleges that OvaScience and Dipp
artificially raised the market price of OvaScience's
stock by disseminating false and misleading information and
failing to disclose material facts, in violation of Section
10(b) of the Securities Exchange Act and Rule 10b-5
promulgated thereunder. Count II alleges that Dipp and Young
are liable under Section 20(a) of the Exchange Act, because
they were controlling persons of OvaScience and thus had the
ability to prevent issuance of false statements. Defendants
move to dismiss the claims against them for failure to state
a claim on which relief may be granted, pursuant to Federal
Rule of Civil Procedure 12(b)(6). For the reasons that
follow, Defendants' motion is DENIED.
is a fertility company launched in 2011. Compl. ¶ 2
[#27]. It has developed to the point of commercialization
only one potential treatment. Id. That treatment,
known as AUGMENT, involves “harvesting mitochondria
from [a woman's immature egg cells (also called
“egg precursor cells” or “EggPC
cells”)] and injecting them into her egg at the time of
[in vitro fertilization (“IVF”)] in order to
supplement the energy level in the egg and to address
problems caused in the development of newly formed embryos by
inadequate energy in the cell division process.”
first sought to launch AUGMENT in the United States.
Id. ¶ 3. When it began its U.S.-based study in
February 2013, OvaScience stated that it would commercialize
the treatment only if it showed “positive efficacy and
safety.” Id. ¶¶ 3, 35-36.
subsequently received a letter from the Food and Drug
Administration (“FDA”) advising OvaScience to
file an investigational new drug application for AUGMENT.
Id. ¶ 37. “Instead of facing that [review
and approval process] and pursuing clinical data evidencing
AUGMENT's efficacy, ” OvaScience
“discontinued its U.S.-based clinical study and
transferred its study overseas.” Id. ¶
38. It developed a plan that involved partnering with IVF
clinics in other international regions, first providing free
treatment cycles, and then turning them into commercial
centers for the treatment. Id. ¶ 39. In January
2014, OvaScience stated that it would introduce these
programs “for physicians to gain experience using
AUGMENT and to generate data.” Id. ¶ 39.
OvaScience announced a plan to initiate 40 to 60 AUGMENT
cycles in 2014, that these initial cycles would be free, but
with the goal of ultimately charging for AUGMENT by the end
of 2014. Id. ¶ 41.
first Investor Day on December 17, 2014, Defendants announced
that AUGMENT had performed 150 cycles by the end of 2014, and
had “transitioned some of its IVF clinics to commercial
centers.” Id. ¶ 14. Treatment added $15,
000 to $25, 000 to the cost of each IVF cycle, and involved
an invasive procedure, id. ¶ 58, but Defendants
nonetheless stated that they expected 1, 000 paying patients
in 2015. Id. ¶¶ 45-47. In response to this
news, OvaScience stock increased from a closing price of
$29.38 on December 16, 2014, to $47.85 on December 19, 2014,
a 62.87% increase in value. Id. ¶ 48.
completed a secondary public offering of the company's
stock on January 13, 2015. Id. ¶¶ 6, 77.
Through the offering, OvaScience sold 2, 645, 000 shares of
common stock at $50.00 per share, raising $132.25 million.
Id. ¶ 77.
March 17, 2015, Defendants released abstracts containing the
first AUGMENT clinical data. Id. ¶ 50. The fact
that Defendants had released some data was encouraging to
investors, who had not expected metrics at that time.
Id. ¶ 51. OvaScience's stock price on March
25, 2015, closed at $49.80. Id. ¶ 53.
then issued two additional press releases on March 26 and
March 28, and held a public conference call on March 27
regarding the actual data. Id. ¶¶ 50, 117.
The results revealed data for only 34 patients from two
clinics, even though OvaScience had offered free AUGMENT
cycles to 150 patients at that point. Id. ¶ 51.
While Defendants highlighted a purported pregnancy success
rate of 53% for the Canadian patients, that rate was based on
a subset of women who had developed viable embryos for
transfers, and did not include those who did not develop any
viable embryos. Id. ¶ 52. The real pregnancy
success rate was approximately 27% of the Canadian patients,
and 23.5% for all 34 patients (including the non-Canadian
patients). Id. ¶¶ 52, 117. By contrast,
the success rate of IVF without AUGMENT for a similar patient
population is 33%. Id. ¶¶ 55-56.
OvaScience's stock price dropped to $38.18 by March 30,
2015. Id. ¶ 120.
August, Defendants continued to reassure the market that
OvaScience was on track to sell 1, 000 cycles in 2015.
Id. ¶¶ 58-59. But between January and
August, 2015, Defendants sold, at most, 17 AUGMENT cycles.
Id. ¶ 66.
September 29, 2015, Defendants revealed that OvaScience had
only had approximately 35 commercial patients in 2015, and
that the majority of those treatments occurred in September
2015. Id. ¶¶ 62, 66. OvaScience's
stock price dropped by 40.98% on the day of the announcement,
and fell further the following trading day. Id.