New York Litigation Team Earns Complete Victory for Aratana Therapeutics in Securities Class Action

Federal court agreed with Latham’s arguments that there were no false statements and no fraudulent intent.

June 15, 2018

A Latham team won a victory for Aratana Therapeutics, Inc. (“Aratana”) and its senior officers in a shareholder class action before Judge Engelmayer in the United States District Court for the Southern District of New York. 

Aratana is a publicly traded pet biotechnology company that was founded in 2010 with the goal of advancing drug development to extend and improve the lives of cats and dogs. Since its founding, Aratana has developed six new USDA and/or FDA-approved drugs, including one called ENTYCE®, a cutting edge therapeutic that stimulates appetite in dogs. Unfortunately, Aratana experienced a setback in the drug’s release date when the FDA temporarily stalled its approval of Aratana’s new commercial-scale manufacturer for the drug.

Plaintiffs purporting to represent Aratana’s shareholders sued the Company, its CEO, and its CFO alleging violations of Sections 10(b) and 20(a) of the Exchange Act. The plaintiff alleged that Defendants devised a fraudulent scheme to intentionally mislead investors about the timeline for the release and commercialization of ENTYCE® by hiding that Aratana did not have a manufacturer in place to produce ENTYCE® on a commercial scale in line with Defendants’ publicly-disclosed expectations. As a motive for committing this fraud, the plaintiff pointed to sales of stock by the individual defendants, as well as asserting generalized allegations that the individuals wanted to increase the price of a secondary offering and to defer payments on a loan agreement, which Aratana could do under the loan terms based on the FDA’s approval of ENTYCE®. Latham moved to dismiss.

On June 12, 2018, Judge Engelmayer granted Latham’s motion to dismiss all claims with prejudice. In a thorough opinion, Judge Engelmayer held that plaintiffs failed to adequately allege falsity and scienter. Regarding falsity, Judge Engelmayer found that the bulk of the challenged statements were inactionable puffery, opinion and/or forward-looking statements, and that in any event Aratana had comprehensively disclosed to investors the potential risk of delays caused by the FDA approval process. As to scienter, Judge Engelmayer rejected plaintiffs’ allegations of motive and opportunity and recklessness, finding that the most “compelling inference from the facts pled is that defendants believed in good faith that they would obtain regulatory approval and commercialize on the anticipated timelines, but, upon encountering setbacks and changes in marketing strategy, timely updated the market.”

The Latham team includes Jamie Wine, Kevin McDonough, Jessica Rostoker, Corey Calabrese, Thomas Pearce and Brian Nowak.

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