b'Ampio conduct an additional randomized trial with athe central nervous system, including its candidate concurrent control group, and to first request a SpecialFINTEPLA, a drug designed to treat pediatric seizures. Protocol Assessment to obtain FDA concurrence of theBecause FDA previously approved the key ingredient trial design. After Ampio disclosed this news in a pressin FINTEPLA (fenfluramine), FDA informed Zogenix it release, Ampios stock price fell by more than 78%. could submit its NDA through a streamlined pathway On August 25, 2018, investors filed a putative classunder which the company would not need to duplicate action complaint against Ampio and two of its officers,previous studies and could rely in part on other parties alleging violations of Sections 10(b) and 20(a) and Ruleinvestigations or publicly available literature. When 10b5 of the 1934 Act. The first amended complaintZogenix informed investors, the market reacted favor-alleged that defendants made misleading statementsably. Between 2016 and 2018, Zogenix completed two about the AP-003-C trial, including statements concern- clinical trials of FINTEPLA. The first trial, according to ing the trials design and compliance with FDA guid- the company, demonstrated a reduction in the frequen-ance, as well as statements reflecting that Ampio wascy of seizures in patients with Dravet Syndrome, a form looking forward to working closely with FDA in light ofof childhood-onset epilepsy. The results of the second the trials positive results. According to the complaint,trial were consistent and suggested that FINTEPLA was defendants allegedly knew or were deliberately reck- superior to other, existing Dravet Syndrome treatments. less of the fact that FDA would find Ampios AP-003-CMoreover, unlike another fenfluramine-based drugs trial to be inadequate and not well-controlled. that FDA had previously taken off the market, neither FINTEPLA trial suggested an association with an in-On June 19, 2020, the court granted defendants mo- creased risk of valvular heart disease.tion to dismiss plaintiffs first amended complaint, hold- On February 6, 2019, Zogenix announced in a press ing that the complaint failed to sufficiently allege scien- release that it had submitted an NDA for FINTEPLA. ter. While plaintiffs had advanced three theories in anBut on an April 8, 2019 call with analysts, Zogenix attempt to plead scienter, the court explained that noneannounced it had received a Refuse-to-File letter from of the theories supported the conclusion that Ampio, aFDA (RTF) reflecting that the NDA did not satisfy company highly dependent on the success of the newFDAs threshold requirements for a complete, substan-drug, would knowingly or recklessly carry on a defec- tive review because it omitted reference to certain tive triala premise that the court noted virtuallyhistorical studies. After this news, Zogenixs stock price defies reason. First, with respect to allegations that de- fell approximately 20%, reflecting a one-day market fendants had a motive to artificially inflate its stock pricecapitalization loss of nearly $500 million.to engage in insider trading, the court held that there were no allegations in the complaint of stock sales thatOn April 12, 2019, investors filed a putative class action were inconsistent with usual trading patterns. Second,complaint against Zogenix and two officers for viola-plaintiffs theory that Ampio misled shareholders abouttions of Sections 10(b) and 20(a) and Rule 10b5 of the AP-003-C to obtain financing on favorable terms, or1934 Act, alleging that Zogenixs February 2019 press attract merger partners was inherently implausible,release announcing the NDA filing was materially mis-and in any case the complaint lacked sufficient factualleading because it failed to disclose the companys de-allegations to support this theory. Third, the court re- cision to exclude reference to prior fenfluramine studies jected the significance of allegations from three confi- from the NDA. According to plaintiffs, defendants dential witnesses, who the court deemed as offering,omission concealed the exceedingly high risk that FDA at best, weak circumstantial evidence. Thus, taking awould refuse to file the NDA due to the absence of nec-holistic view of plaintiffs allegations, the court heldessary toxicology studies, thereby artificially inflating that plaintiffs failed to plead a strong inference of sci- the price of Zogenix stock.enter. Concluding that leave to amend would be futile, the court dismissed plaintiffs complaint with prejudice. Plaintiffs did not appeal the decision.The court also emphasized the absence Immanuel Lake, et al. v. Zogenix, Inc.,of a plausible motive from the amended Case No. 19-cv-01975 (RS), 2020 WLcomplaint, highlighting that plaintiffs 3820424 (N.D. Cal. Jan. 27, 2020)hypothetical rationales as to why Refusal to File NDA defendants would jeopardize FDA approval Zogenix, Inc. (Zogenix) is a biotechnology companyby intentionally submitting a deficient NDA headquartered in Emeryville, California that develops therapies for people suffering from conditions affectingsimply did not hold water.51'