District Judge Catherine Eagles issued an order granting Fennec Pharmaceuticals, Inc’s motion to dismiss. She found that the lead plaintiff, Jeffrey Fisher, failed to plead scienter in his securities case.
Fennec Pharmaceuticals is a biotech company that has developed, and was, as of the events of the case, seeking Food and Drug Administration (FDA) New Drug Approval for Pedmark, a drug to prevent hearing or balance issues in children undergoing chemotherapy. Jeffrey Fisher, a stock-investor, alleged that Fennec and its executives were misleadingly optimistic in their portrayals of hopeful FDA approval.
In Fennec’s quest to get Pedmark approved, they were rejected twice, not due to a lack of efficacy but because Fennec’s chosen manufacturer, Pharmaceutics International, Inc. could not meet the FDA’s standards. After the first rejection in August 2020, Fennec resubmitted the following May, ostensibly with various improvements at Pharmaceuticals International.
In September, just before Fisher purchased stock, executives remained optimistic about FDA approval, though they cautioned that nothing was sure, and that if they were rejected again, they had a backup plan. A week later, Fennec announced that they had been rejected yet again for insufficient manufacturing quality.
The judge ruled that the lead plaintiff had not presented enough evidence for a reasonable observer to infer that Fennec had intentionally misled the public. She stated that it was equally plausible that the executives themselves believed that Pharmaceutics International had made enough improvements to warrant approval, and thus the Private Securities Litigation Reform Act’s safe harbor provision applied.
Notably, the defendants also filed a motion to admit as evidence the eventual FDA approval of Pedmark, though in the same order, Judge Eagles denied this motion as moot.
The case took place in the Middle District of North Carolina, where Fennec is based. Plaintiffs were represented by Pomerantz, LLP and Schiller & Schiller, PLLC. The defendants were represented by Wyrick Robbins Yates & Ponton, LLP and Wilson Sonsisi Goodrich & Rosati, PC.