Securities Regulation Daily Wrap Up, FRAUD AND MANIPULATION—E.D. Pa.: Biotech company disclosure about CFO termination met statutory requirements, (Jul 30, 2025)

By Rodney F. Tonkovic, J.D.

All the company was required to do was disclose that the CFO was terminated and the date.

A district court dismissed a fraud action asserting fraud claims against a biotechnology company. The plaintiff claimed losses arising from two corrective disclosures issued by the company. The court concluded that one disclosure was not material because the share price rebounded within two days. The other disclosure had a longer rebound period, but the court concluded that the challenged statements were not false. Despite the plaintiff's wishes otherwise, the company was not obligated to disclose with particularity the reasons for its CFO's departure—only the event and the date are required for Form 8-K (In re Ocugen, Inc. Securities Litigation, No. 2:24-cv-01500 (E.D. Pa. July 29, 2025)).

Defendant Ocugen, Inc. is a biotechnology company developing gene therapies for retinal diseases. At issue in this case are Ocugen's Q2 2023 Form 10-Q and a collaboration agreement with another company.

2023 Form 10-Q. The plaintiff's first confidential witness ("CW1") was a financial planning and analysis manager at Ocugen. CW1 said that Ocugen would often change the initiation dates of its clinical trials. This should have required a change in its financial estimates, but when CW1 ran the changed projections past Ocugen's CEO and Chief Scientific Officer, they instead came up with their own numbers and estimates.

CW1 and a second confidential witness stated that Ocugen's then-CFO refused to sign the Q2 2023 Form 10-Q due to alleged misrepresentations and was terminated, along with other financial department employees who also refused. On August 15, 2023, Ocugen filed a notification for late filing, stating that the delay was the result of a transition in Ocugen's management. When filed, the Form 10-Q was signed only by the CEO.

Collaboration agreement. In late 2019, Ocugen entered into an agreement with another company to develop certain Ocugen products. The plaintiff alleged that Ocugen improperly accounted for this collaboration agreement in a way that inflated its financials. On April 1, 2024, Ocugen announced that its financial statements from 2020 through Q3 2023 were materially misstated and that the errors would result in a restatement related to "a collaboration agreement."

No loss causation. The complaint only pleaded loss causation as to the August 15, 2023, and April 1, 2024, corrective disclosures. Ocugen asserted that all of the alleged misstatements were immaterial because its share price increased shortly after the corrective disclosures. The court agreed with Ocugen as to the April 1 corrective disclosure, finding that the two-day rebound was evidence that the disclosure was not material.

The August 15 corrective disclosure, however, was a different story, since the stock took six days to rebound, which the court took to be insufficient to warrant dismissal. That said, the court found no actionable misstatement in the disclosure. According to the court, Ocugen satisfied its disclosure obligations under Item 5.02(b) in its Form 8-K by disclosing the CFO's departure and the date. In this instance, that was all that was required, and the court concluded that the complaint failed to adequately plead materiality and falsity.

The case is No. 2:24-cv-01500.

Judge: Hodge, K.

Attorneys: Jacob A. Goldberg (The Rosen Law Firm, P.A.) for Austin Patterson. Brenda Szydlo (Pomerantz LLP) for Stephen Gary Mansfield. Jay A. Dubow (Troutman Pepper Locke LLP) for Ocugen, Inc. and Shankar Musunuri.

Companies: Ocugen, Inc.

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