The 1st U.S. Circuit Court of Appeals upheld the dismissal of a shareholder lawsuit against InVivo Therapeutics, saying that the plaintiff did not do enough to prove that the defendants committed securities fraud. The lead plaintiff, Edmond Ganem, accused InVivo and former CEO Frank Reynolds of inflating stock prices with false or misleading press releases regarding the company’s clinical trials.
The press releases in question date back to April and May 2013, when the company received approval from the FDA for its 1st clinical trial evaluating its biopolymer scaffold for spinal cord injury patients. Ganem alleged that statements in the press releases pertaining to the clinical trials projected timeline were false or misleading, and that InVivo left out details from the FDA’s approval letter such as the watchdog’s recommendation that the company modify its study design so it could serve as the basis for approval of a larger study.
After the 1st press release in April 2013 was published, InVivo’s stock price rose from $2.85 apiece to $3.19.
The lawsuit brought against InVivo claimed that “defendants failed to disclose in the April 5 and May 9 press releases that the FDA’s approval of the clinical study included conditions that made it impossible to complete the study in 15 months or to submit data to the FDA by the end of 2014, as represented.”
The appeals court ruled with the district court, concluding that the plaintiffs failed to prove that the omitted details delayed the timeline of the clinical trial.
For example, the FDA required InVivo to make certain changes to the informed consent form before any human was tested with the device and InVivo did not disclose that information in either press release. The appeals court agreed with the district court’s opinion, which said “while the FDA did require additional information of a corrective nature from InVivo, it did not condition the 1st enrollment on the prior receipt of this information.” The appeals court also pointed out that the FDA’s approval letter explicitly informed InVivo that it “may enroll 1 subject at this time.”
Yesterday, InVivo Therapeutics said that Rhode Island Hospital in Providence, RI has been added as its 29th clinical site for the INSPIRE study evaluating its neuro-spinal scaffold.
“My research interests lie in understanding repair and plasticity within the spinal cord. I look forward to being a part of the INSPIRE study and evaluating InVivo’s Neuro-Spinal Scaffold firsthand,” principal investigator Dr. Adetokunbo Oyelese said in prepared remarks.
“We extend a warm welcome to Dr. Oyelese and the team at Rhode Island Hospital,” InVivo’s chairman & CEO Mark Perrin added. “The hospital’s significant catchment area represents a valuable addition to INSPIRE as we look to enroll more patients.”