b'In April 2019, investors filed a putative class actionthat the statements had been taken out of context and complaint against Teligent and its CEO alleging viola- actually pertained to a different regulatory program tions of Sections 10(b) and 20(a) and Rule 10b-5 of thethan the Forms 483 actually issued, holding that it was 1934 Act. Specifically, plaintiffs alleged that defendantsnot clear that a reasonable investor would have un-made a number of false and misleading statements withderstood them as such. The court also concluded that respect to Teligents regulatory compliance, primarilyplaintiffs met their burden to plead a strong inference by failing to disclose the receipt of the September 2016of scienter with respect to the misleading statements, and October 2017 Forms 483.adequately pleading that the company and its officers The court granted defendants motion to dismiss in partknew about the Forms 483 that allegedly contradicted and denied in part. The court first rejected liability pre- their public statements. Finally, the court concluded mised on certain statements from the Risk Disclosuresthat plaintiffs adequately alleged loss causation even sections of Teligents 2016 Form 10-K and subsequentthough the November 2017 press release that led to 10-Qs describing Teligents obligations to comply withthe drop in Teligents stock price did not reveal the cGMPs (current Good Manufacturing Practices) andForms 483 or the issues identified in them, because the submit to periodic inspection by the FDA. The courtstock drop was caused by the disclosure of pipeline held that such statements were not rendered mislead- and manufacturing problemsa materialization of the ing by the fact that the company faced complianceconcealed risk.issues because the statements did not comment onOn August 17, 2020, defendants answered the amend-the companys compliance, or lack thereof, but insteaded complaint. The parties are now engaged in discov-merely disclosed the risks associated with complianceery, and summary judgment motions are due by April 1, issues. Likewise, the court concluded that statements2022.in press releases and conference calls reflecting that the company was committed to upholding [its] re-sponsibilities with respect to the FDA to ensure In re Aceto Corporation Securities Litigation, the timely processing of [its] applications and thatCase No. 2:18-cv-2425 (ERK), 2020 WL the business was [b]uilt on a solid product develop- 4452059 (E.D.N.Y. Aug. 3, 2020) ment platform, excellent regulatory capabilities andDisclosure of Supply Issuestimely and effective product launch constituted non- actionable puffery and were protected by the PSLRAsAceto Corporation (Aceto) is a company engaged in safe harbor. The court concluded that a statementthe manufacture and distribution of specialty chemicals, by Teligents CEO during an investor call highlightingintermediates, and reagents for use by life sciences and regulatory inspection issues at the companys suppli- technology companies. Beginning in June 2016, Aceto ers was a closer call because it arguably implied thatdisclosed to investors that the company was dependent Teligent was not facing similar challenges, but ultimatelyon suppliers for its ability to fulfill customer orders and held that the statement was not materially misleadingthat any interruption in its supply could adversely affect because it did not compare the strength of Teligentsthe company. In November 2016, the company acquired regulatory compliance with that of its suppliers. generic drug products from two companies, Citron However, the court concluded that the complaint suc- Pharma LLC (Citron) and Lucid Pharma LLC (Lucid), cessfully pled that certain of the statements at issuewhich required Aceto to enter into a supply agreement were materially misleading. For example, statements inwith Aurobindo, a pharmaceutical manufacturer, for the the companys 2016 Form 10-K warning that manufac- drugs. After the acquisitions, Aceto disclosed in a Form turing deficiencies or other noncompliance with regula- 8-K that Aurobindo would be responsible for the man-tory requirements could result in warning letters, whileufacture and supply of 78 of the 81 products that Aceto omitting any reference to the fact that the company hadacquired from Citron and Lucid. By November 2017, in fact already received a Form 483 identifying obser- Aceto began disclosing to investors that it was having vations in September 2016, were misleading due to thesupply challenges related to the products acquired omission. Similarly, the court held that statements madefrom Citron and Lucid due to manufacturing issues at during the companys March 2017 investor call highlight- Aurobindo. As the situation worsened, Aceto disclosed ing issues that competitors faced with regulatory com- the financial consequences of the supply challenges, pliance were materially misleading because they omit- which were primarily failure-to-supply penalties to its ted reference to the Forms 483 the company itself hadcustomers. In February 2019, Aceto filed for bankruptcy received. In addition, the court held that the complaintand later sued Aurobindo for breach of contract.adequately alleged that statements reflecting that thereOn April 24, 2018, an Aceto investor filed a putative had been no 483 observations in three FDA auditsclass action complaint against Aceto and three of its at Teligents facility over the previous five years weredirectors and officers for violations of the Sections 10(b) misleading. The court rejected defendants arguments 33'