b'Decisions Issued by the First Circuit and District of MassachusettsIn re Ocular Therapeutix, Inc. SecuritiesFollowing a drop in Oculars share price after the sec-Litigation, Case No. 19-1557, 955 F.3d 194ond CRL, investors filed a putative class action com-(1st Cir. 2020)plaint in the District of Massachusetts under Sections 10(b) and 20(a) and Rule 10b-5 of the 1934 Act, alleging Manufacturing Issues that Ocular, its CEO, and its EVP of Regulatory, Quality Ocular Therapeutix, Inc. (Ocular) is a Massachusetts-and Compliance made materially false and misleading based biopharmaceutical company focused on devel- statements regarding Dextenza and the Forms 483. oping and commercializing therapies for diseases andSpecifically, the amended complaint alleged that defen-conditions of the eye. In September 2015, Ocular sub- dants issued false or misleading statements regarding mitted a new drug application (NDA) to FDA seekingOculars significant manufacturing issues related to approval of Dextenza, its treatment for post-surgicalDextenza and the drugs prospects for FDA approval. eye pain and inflammation. In February 2016, followingDefendants filed a motion to dismiss, and the district a pre-NDA inspection of Oculars manufacturing facility,court granted the motion in full, holding that the amend-FDA issued a Form 483 identifying ten observationsed complaint failed to plead an actionable misstatement of non-compliance with certain FDA regulations. In itsor omission, and independently, that plaintiffs failed to 2015 Form 10-K filed in March 2016, Ocular disclosedallege a strong inference of scienter. that it had received the Form 483, and that it ad- Upon plaintiffs appeal, the First Circuit affirmed. The dressed some observations before the inspection wascourt declined to address plaintiffs allegations that the closed and responded to FDA with a corrective actiontwo sets of statements at issue on appeal were materi-plan to complete the inspection process. In July 2016,ally false or misleading: (1) statements made in Oculars Ocular received a complete response letter (CRL) fromForms 10-K that it used current good manufacturing FDA rejecting Oculars NDA. Ocular disclosed that itpractices (cGMP) at its multi-product manufacturing had received the CRL and that the concerns raised byfacility, and (2) statements made during the May 2017 FDA [in the CRL] pertain to deficiencies in manufactur- earnings call that Oculars manufacturing process was ing process and controls identified during a pre-NDAfully developed. Instead, the court reasoned that, approval inspection of Oculars manufacturing facility.even if these statements were false and misleading, In January 2017, Ocular resubmitted its NDA to FDA.plaintiffs had failed to allege facts that could support a In April and May 2017, FDA made additional visits tostrong inference of scienter. Turning first to the alleged Oculars manufacturing facilities, and in May 2017, themisstatements in Oculars Forms 10-K, the court rea-agency issued another Form 483 identifying six ob- soned that the informative disclosures Ocular made servations. The next day, Ocular released its financialconcerning the 2016 Form 483 weakened any infer-results for Q1 2017 and held an earnings call. On thatence that defendants had intentionally or recklessly call, Ocular disclosed the second Form 483 and statedmisled investors by stating that the company was using that the company had the situation under controlcGMP. Specifically, the court cited Oculars transparent and expected to be able to resolve the issues identi- disclosures in its Forms 10-K that a failure to resolve fied in the Form 483 in a timely manner. An Ocularthe observations in the 2016 Form 483 could delay officer also twice referred to Oculars manufacturingDextanzas approval, and that FDA had rejected the process as fully developed,. In July 2017, the websiteNDA in part because of deficiencies in the manufac-Seeking Alpha published the two Forms 483, and STATturing process. The court separately reasoned that published an article asserting that Dextenza could beeven if an inference of scienter could be drawn from the rejected by FDA due to product contamination. Latercomplaints allegations, the more reasonable infer-that month, FDA issued a second CRL rejecting Ocularsence was that defendants were expressing an intent to NDA. comply with cGMP in its Forms 10-K, not claiming that 10'