CLASS ACTION COMPLAINT
GLANCY BINKOW & GOLDBERG LLP
Lionel Z. Glancy
Michael Goldberg
Robert V. Prongay
Casey E. Sadler
1925 Century Park East, Suite 2100
Los Angeles, California 90067
Telephone: (310) 201-9150
Facsimile: (310) 201-9160
LAW OFFICES OF HOWARD G. SMITH
Howard G. Smith
3070 Bristol Pike, Suite 112
Bensalem, PA 19020
Telephone: (215) 638-4847
Facsimile: (215) 638-4867
Attorneys for Plaintiff
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
PLAINTIFF, Individually and on Behalf of
All Others Similarly Situated,
Plaintiff,
v.
SAREPTA THERAPEUTICS, INC.,
CHRISTOPHER GARABEDIAN, and
SANDESH MAHATME,
Defendants.
Case No. DRAFT
CLASS ACTION COMPLAINT FOR
VIOLATIONS OF THE FEDERAL
SECURITIES LAWS
JURY TRIAL DEMANDED
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Plaintiff (“Plaintiff”), by and through his attorneys, alleges the following upon
information and belief, except as to those allegations concerning Plaintiff, which are alleged
upon personal knowledge. Plaintiff’s information and belief is based upon, among other things,
his counsel’s investigation, which includes without limitation: (a) review and analysis of
regulatory filings made by SAREPTA THERAPEUTICS, INC. (“Sarepta” or the “Company”),
with the United States Securities and Exchange Commission (“SEC”); (b) review and analysis of
press releases and media reports issued by and disseminated by Sarepta; and (c) review of other
publicly available information concerning Sarepta.
NATURE OF THE ACTION AND OVERVIEW
1. This is a class action on behalf of purchasers of Sarepta securities between April
21, 2014 and October 27, 2014, inclusive (the “Class Period”), seeking to pursue remedies under
the Securities Exchange Act of 1934 (the “Exchange Act”).
2. Sarepta is a biopharmaceutical company focused on the discovery and
development of unique RNA-based therapeutics for the treatment of rare and infectious diseases.
3. The Company is focused on advancing the development of its Duchenne muscular
dystrophy (“DMD”) drug candidates, including its lead product candidate, eteplirsen, for which
the Company is in process of conducting or starting several studies. These include an ongoing
open label extension study following completion of its initial Phase IIb clinical trials, several
clinical trials in Exon 51 amenable genotypes, including a confirmatory study in ambulatory
patients, studies on participants with early stage and advanced stage DMD and a placebo-
controlled confirmatory study with one or more of the Company’s follow-on DMD exon-
skipping drug candidates. Additionally, the Company is working on a Phase I/IIa clinical trial
for an Exon 53 skipping product candidate in the European Union and has an open
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investigational new drug (“IND”) application for its Exon 45 skipping product candidate for
which it plans to begin a clinical trial early next year. The Company is also developing
therapeutics for the treatment of infectious diseases.
4. On October 27, 2014, the Company revealed that it had received an update from
the Food and Drug Administration (“FDA”) regarding its planned New Drug Application
(“NDA”) submission for eteplirsen for the treatment of DMD. The FDA guidance indicated that
additional information was required for the NDA submission, including the results from an
independent assessment of dystrophin images and the 168-week clinical data from study 202, as
well as more specific data, including a minimum duration of safety in new patients exposed to
eteplirsen, patient-level natural history data to be obtained by Sarepta from independent
academic institutions, and MRI data from a recent study conducted by an independent academic
group. According to the Company, Sarepta plans to submit an NDA by mid-year 2015, pending
any additional requests from further discussions with the FDA.
5. On this news, shares of Sarepta declined $7.65 per share, over 32%, to close on
October 27, 2014, at $15.91 per share, on unusually heavy volume.
6. Throughout the Class Period, Defendants made false and/or misleading
statements, as well as failed to disclose material adverse facts about the Company’s business,
operations, and prospects. Specifically, Defendants made false and/or misleading statements
and/or failed to disclose: (1) that the Company failed to provide sufficient data for its NDA
submission; (2) that, as a result, the Company’s NDA for eteplirsen would likely be filed mid-
2015 instead of by the end of 2014; and (3) that, as a result of the foregoing, the Company’s
statements about its business, operations, and prospects, including statements about eteplirsen’s
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prospects for FDA approval in the treatment of DMD, were materially false and misleading
and/or lacked a reasonable basis.
7. As a result of Defendants’ wrongful acts and omissions, and the precipitous
decline in the market value of the Company’s securities, Plaintiff and other Class members have
suffered significant losses and damages.
JURISDICTION AND VENUE
8. The claims asserted herein arise under Sections 10(b) and 20(a) of the Exchange
Act (15 U.S.C. §§78j(b) and 78t(a)) and Rule 10b-5 promulgated thereunder by the SEC (17
C.F.R. § 240.10b-5).
9. This Court has jurisdiction over the subject matter of this action pursuant to 28
U.S.C. §1331 and Section 27 of the Exchange Act (15 U.S.C. §78aa).
10. Venue is proper in this Judicial District pursuant to 28 U.S.C. §1391(b) and
Section 27 of the Exchange Act (15 U.S.C. §78aa(c)). Substantial acts in furtherance of the
alleged fraud or the effects of the fraud have occurred in this Judicial District. Many of the acts
charged herein, including the preparation and dissemination of materially false and/or misleading
information, occurred in substantial part in this Judicial District. Additionally, Sarepta’s
principal executive offices are located within this Judicial District.
11. In connection with the acts, transactions, and conduct alleged herein, Defendants
directly and indirectly used the means and instrumentalities of interstate commerce, including the
United States mail, interstate telephone communications, and the facilities of a national securities
exchange.
PARTIES
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12. Plaintiff, as set forth in the accompanying certification, incorporated by reference
herein, purchased Sarepta common stock during the Class Period, and suffered damages as a
result of the federal securities law violations and false and/or misleading statements and/or
material omissions alleged herein.
13. Defendant Sarepta is a Delaware corporation with its principal executive offices
located at 215 First Street, Suite 415, Cambridge, Massachusetts 02142.
14. Defendant Christopher Garabedian (“Garabedian”) was, at all relevant times,
Chief Executive Officer (“CEO”) and a director of Sarepta.
15. Defendant Sandesh Mahatme (“Mahatme”) was, at all relevant times, Chief
Financial Officer (“CFO”) of Sarepta.
16. Defendants Garabedian and Mahatme are collectively referred to hereinafter as
the “Individual Defendants.” The Individual Defendants, because of their positions with the
Company, possessed the power and authority to control the contents of Sarepta’s reports to the
SEC, press releases and presentations to securities analysts, money and portfolio managers and
institutional investors, i.e., the market. Each defendant was provided with copies of the
Company’s reports and press releases alleged herein to be misleading prior to, or shortly after,
their issuance and had the ability and opportunity to prevent their issuance or cause them to be
corrected. Because of their positions and access to material non-public information available to
them, each of these defendants knew that the adverse facts specified herein had not been
disclosed to, and were being concealed from, the public, and that the positive representations
which were being made were then materially false and/or misleading. The Individual
Defendants are liable for the false statements pleaded herein, as those statements were each
“group-published” information, the result of the collective actions of the Individual Defendants.
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SUBSTANTIVE ALLEGATIONS
Background
17. Sarepta is a biopharmaceutical company focused on the discovery and
development of unique RNA-based therapeutics for the treatment of rare and infectious diseases.
Materially False and Misleading
Statements Issued During the Class Period
18. The Class Period begins on April 21, 2014. On this day, the Company issued a
press release entitled, “Sarepta Therapeutics Announces Plans to Submit New Drug Application
to FDA for Eteplirsen for the Treatment of Duchenne Muscular Dystrophy by Year End 2014.”
Therein, the Company, in relevant part, stated:
— FDA provides updated guidance on potential early approval pathway for
eteplirsen;
— Agreement reached with the Agency on eteplirsen open-label confirmatory
studies
with enrollment of a broader base of DMD patients later this year;
— FDA provides initial guidance on development of follow-on DMD drug
candidates;
— Company to hold teleconference at 8:00 a.m. EDT
Sarepta Therapeutics, Inc. (NASDAQ: SRPT), a developer of innovative RNA-
based therapeutics, today announced it plans to submit a New Drug Application
(NDA) to the U.S. Food and Drug Administration (FDA) by the end of 2014 for
the approval of eteplirsen for the treatment of Duchenne muscular dystrophy
(DMD). Eteplirsen is Sarepta’s lead exon-skipping drug candidate in development
for the treatment of patients with DMD who have a genotype amenable to
skipping of exon 51.
The plan to submit an NDA for eteplirsen by the end of 2014 is based on a
guidance letter from the Agency that proposed a strategy regarding the
submission of an NDA for eteplirsen under a potential Accelerated Approval
pathway and served as the final meeting minutes for four meetings that took place
between November, 2013 and March, 2014. The Agency stated that “with
additional data to support the efficacy and safety of eteplirsen for the treatment of
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DMD, an NDA should be fileable,” and outlined examples of additional data and
analysis that, if positive, will be important to enhance the acceptability of an NDA
filing by addressing areas of ongoing concern in the existing dataset.
Additionally, the Agency provided clear guidance on an open-label, historically
controlled confirmatory study of eteplirsen, as well as initial guidance on a
placebo-controlled study of one or more follow-on DMD drug candidates, which,
like the open-label study, could also be considered an acceptable confirmatory
study to verify the clinical benefit of eteplirsen in the event of an accelerated
approval.
“As we announce our plan to submit an eteplirsen NDA by the end of 2014, we
are very pleased with the detailed guidance that the FDA has provided us on a
potential eteplirsen approval pathway and their support of a historically controlled
eteplirsen confirmatory study,” said Chris Garabedian, president and chief
executive officer of Sarepta Therapeutics. “We also appreciate that the FDA
shares our urgency in dosing a broader base of eteplirsen patients and has
encouraged us to begin the clinical program with our follow-on exon-skipping
drugs as soon as possible.”
Based on the Agency’s guidance, Sarepta plans to initiate several additional
clinical studies with eteplirsen later this year in exon-51 amenable genotypes.
These studies will include a clinical trial with predefined efficacy endpoints for
ambulatory patients between the ages of 7 to 16 years who can walk a minimum
distance, and two additional clinical trials that will evaluate safety and biomarkers
in DMD patients younger than 7 years and DMD patients who have advanced in
their disease progression to a point they cannot walk a minimum distance or have
become non-ambulant. Additionally, Sarepta plans to initiate a placebo-controlled
study with one or more of its follow-on DMD exon-skipping drug candidates by
the end of the year.
“We are excited to have guidance from the FDA that allows us to move quickly
into additional clinical trials with eteplirsen to confirm our current understanding
of eteplirsen’s safety profile, its effect on dystrophin production, and its impact on
clinical outcomes in DMD patients,” said Edward Kaye, M.D., senior vice
president and chief medical officer of Sarepta Therapeutics. “We are particularly
pleased that the FDA shares our interest in accelerating the clinical development
of our follow-on exon-skipping drugs and we expect to initiate enrollment in this
trial later this year.”
Sarepta plans to immediately take steps to initiate the additional eteplirsen clinical
studies with the goal of beginning dosing in the confirmatory study in the third
quarter, with dosing in the additional trials (i.e., younger and more advanced
DMD patients) to begin later this year. Once available, detailed study eligibility
criteria and clinical site information will be posted on www.ClinicalTrials.gov
and Let’s Skip Ahead, an online resource center from Sarepta for the DMD
community available at www.SkipAhead.com.
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Excerpts from the FDA’s letter on an NDA filing included:
“…with additional data to support the efficacy and safety of eteplirsen for the
treatment of DMD, described below, an NDA should be fileable (assuming other
aspects of the submitted application meet applicable standards). As we are sure
you appreciate, however, our willingness to consider an application for filing
cannot be taken to suggest the outcome of our review. We also note that if the
application is filed, you should expect public discussion of the NDA at an
Advisory Committee meeting.”
The FDA outlined two potential pathways to accelerated approval:
“1. The clinical data from Study 201/202 [Phase IIb clinical trial program] on 6-
minute walk could be considered a finding on an intermediate clinical endpoint
that could have the potential to support accelerated approval.”
Related to this first pathway to Accelerated Approval, the Agency stated that they
have “significant concerns regarding our ability to draw valid conclusions based
on the Study 201/202 data with respect to walking performance and other data,”
and identified areas relating to the interpretation of the existing data set that will
be addressed as part of an NDA review once the NDA is filed.
“2. We have discussed the possibility of using a number of modalities to quantify
dystrophin in muscle biopsies, and discussed how these biomarkers might be used
as a surrogate endpoint(s) to support accelerated approval.”
In evaluating this pathway, the FDA expressed concerns about methodological
problems in the assessments of dystrophin and, “remain skeptical about the
persuasiveness of the (dystrophin) data” and, as a result, the Agency is “uncertain
whether the existing dystrophin biomarker data will be persuasive enough to serve
as a surrogate endpoint that is reasonably likely to predict clinical benefit.”
However, the Agency further states that if they “were to find the biomarker data
to be adequate upon detailed review, however, they would have the potential to
support accelerated approval.” To that end, the Agency proposed “a collaborative
effort in which we will work to better understand the methods and analyses used
for the existing biomarker data,” and “also work together on methods for the
collection of additional data that could be more reliable.”
Furthermore, the Agency suggested that “another approach to demonstrating an
effect of eteplirsen on dystrophin protein production would be to obtain a fourth
muscle biopsy in patients who are continuing in Study 202,” which could serve to
enhance the acceptability of an NDA filing and accelerated approval.
Under either potential application of the Accelerated Approval pathway, the
FDA’s letter included comments expressing both a desire for more eteplirsen
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safety and efficacy data and a willingness to consider supplemental data in an
NDA filing or during an NDA review (following the NDA filing) from the
ongoing Study 202 and early safety and biomarker data from a confirmatory
eteplirsen study. The Agency also encouraged Sarepta to collect safety and
biomarker data with eteplirsen in a broader population of patients, including
DMD patients who were younger, older and non-ambulant, and previously treated
with drisapersen.
Additional excerpts from the FDA’s letter on the eteplirsen and follow-on exon-
skipping drug confirmatory studies:
“…any accelerated approval [of eteplirsen] would necessitate confirmatory
studies to verify the clinical benefit. Confirmatory studies should be underway at
the time of approval.”
The FDA outlined two approaches for confirmatory trials and urged Sarepta to
“initiate both of these trials as soon as possible.”
“1. A historically-controlled trial might be acceptable to confirm clinical benefit
following accelerated approval.”
“2. A randomized, placebo-controlled trial of another PMO [phosphorodiamidate
morpholino oligomer] with a similar mechanism of action, directed at a different
exon (e.g., SRP-4053 or SRP-4045), with a demonstration of a correlation
between dystrophin production and definitive clinical benefit on 6-minute walk or
another measure, could provide confirmatory evidence of eteplirsen’s clinical
benefit if approval were based on a surrogate endpoint.”
19. On or about April 24, 2014, the Company filed a prospectus with the SEC on
Form 424B5. The Company held an underwritten public offering of an aggregate of 2,650,000
shares of its common stock, excluding an over-allotment option, at a price to the public of $38.00
per share.
20. On May 8, 2014, the Company issued a press release entitled, “Sarepta
Therapeutics Announces First Quarter 2014 Financial Results and Recent Corporate
Developments.” Therein, the Company, in relevant part, stated:
New Drug Application for eteplirsen planned for submission to FDA by year end;
Multiple eteplirsen clinical studies in broader population of DMD patients to
begin dosing later this year;
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Investigational New Drug applications for two additional DMD drug candidates
targeting different genetic subpopulations to be submitted to FDA in third
quarter;
Well capitalized with $233.1 million in cash and other investments at quarter end,
with an additional $94.5 million raised post-quarter end
Sarepta Therapeutics, Inc. (NASDAQ: SRPT), a developer of innovative RNA-
based therapeutics, today reported financial results for the three months ended
March 31, 2014, and provided an update of recent corporate developments.
“The path toward an NDA filing and a potential accelerated approval of eteplirsen
has been laid out for us and we are busy preparing for the important clinical and
regulatory milestones toward achieving this goal,” said Chris Garabedian,
president and chief executive officer of Sarepta. “We are also preparing to
advance our broader DMD program beyond eteplirsen in the U.S., and will begin
the global clinical development program on our next exon-skipping drugs, as well
as seek EMA guidance on requirements for a potential eteplirsen submission in
the EU, later this year.”
Financial Results
For the first quarter of 2014, Sarepta reported a non-GAAP net loss of $20.7
million, or $0.55 per share, compared to a non-GAAP net loss of $13.0 million for
the first quarter of 2013, or $0.41 per share. The incremental loss is primarily the
result of an increase of $9.1 million in non-GAAP operating expenses due to
corporate growth, offset by an increase of $1.6 million in contract revenue.
On a GAAP basis, the net loss for the first quarter of 2014 was $28.3 million, or
$0.75 per share (including $4.4 million of stock-based compensation and
restructuring expenses), compared with a net loss of $42.1 million for the first
quarter of 2013, or $1.32 per share (including $2.1 million of stock-based
compensation and restructuring expenses). The decrease in net loss is primarily
due to a decrease of $23.7 million in loss on change in warrant valuation and an
increase of $1.6 million in contract revenue offset by an increase of $11.3 million
in operating expenses. The fluctuation in the fair value of the Company’s
outstanding warrant liability is primarily affected by the fluctuation of the
Company’s stock price during each financial reporting period.
Revenue for the first quarter of 2014 was $6.1 million, up from $4.5 million for
the first quarter of 2013. The $1.6 million increase was primarily due to the
timing of activities in connection with the Marburg portion of the July 2010 U.S.
government contract. Revenue from the Company’s European Union SKIP-NMD
agreement supporting development of an exon 53 skipping therapeutic and the
Company’s Children’s National Medical Center agreement also increased in the
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first quarter of 2014. These increases were partially offset by a decrease in
revenue from the August 2012 intramuscular agreement with the U.S.
government, which was completed in the third quarter of 2013.
Non-GAAP research and development expenses were $19.0 million for the first
quarter of 2014, compared to $13.0 million for the first quarter of 2013, an
increase of $6.0 million. GAAP research and development expenses were $20.9
million for the first quarter of 2014 (including $1.9 million of stock-based
compensation and restructuring expenses), compared to $13.8 million for the first
quarter of 2013 (including $0.8 million of stock-based compensation and
restructuring expenses), an increase of $7.1 million.
Non-GAAP general and administrative expenses were $7.8 million for the first
quarter of 2014, compared to $4.8 million for the first quarter of 2013, an increase
of $3.0 million. GAAP general and administrative expenses were $10.3 million
for the first quarter of 2014 (including $2.5 million of stock-based compensation
expense), compared to $6.1 million for the first quarter of 2013 (including $1.3
million of stock-based compensation and restructuring expenses), an increase of
$4.2 million.
The increased operating expenses were primarily caused by corporate growth as
the Company continues the development of its programs in Duchenne muscular
dystrophy (DMD).
The Company had cash, cash equivalents, short-term investments and restricted
investments related to its letters of credit of $233.1 million as of March 31, 2014
compared to $264.9 million as of December 31, 2013, a decrease of $31.8 million.
The decrease was primarily driven by the use of cash to fund the Company’s
ongoing operations in the first quarter of 2014.
In addition to the GAAP financial measures set forth in this press release, the
Company has included certain non-GAAP measurements: non-GAAP research
and development expenses, non-GAAP general and administrative expenses, non-
GAAP operating expenses, non-GAAP net loss, and non-GAAP basic and diluted
net loss per share, which present operating results on a basis adjusted for certain
items. The Company uses these non-GAAP measures as key performance
measures for the purpose of evaluating performance internally. The Company also
believes these non-GAAP measures provide the Company’s investors with useful
information regarding the Company’s historical operating results. These non-
GAAP measures are not intended to replace the presentation of the Company’s
financial results in accordance with GAAP. Use of the terms non-GAAP research
and development expenses, non-GAAP general and administrative expenses, non-
GAAP operating expenses, non-GAAP net loss, and non-GAAP basic and diluted
net loss per share may differ from similar measures reported by other companies.
All relevant non-GAAP measures are reconciled from their respective GAAP
measures in the attached table "Reconciliation of GAAP to non-GAAP Net Loss."
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Recent Corporate Developments
Duchenne Muscular Dystrophy Program
-- Based on new guidance from the U.S. Food and Drug Administration (FDA),
announced plans to submit a New Drug Application (NDA) to the FDA with
additional safety and efficacy data and analysis by the end of 2014 for the
approval of eteplirsen for the treatment of patients with DMD who have a
genotype amenable to skipping of exon 51.
-- Announced plans to initiate several clinical studies of eteplirsen based on the
new FDA guidance. Planned studies with eteplirsen in exon-51 amenable
genotypes include a historically controlled clinical trial with predefined efficacy
endpoints for ambulatory patients between the ages of 7 to 16 years who can walk
a minimum distance, and two additional clinical trials that will evaluate safety and
biomarkers in DMD patients younger than 7 years and DMD patients who have
advanced in their disease progression to a point where they cannot walk a
minimum distance or have become non-ambulant.
-- Additionally, announced plans to initiate a placebo-controlled study with one or
more of the Company’s follow-on DMD exon-skipping drug candidates by the
end of the year.
-- Presented clinical data through Week 120 from the Phase IIb open-label
extension study of eteplirsen in patients with DMD at the Muscular Dystrophy
Association Clinical Conference and the American Academy of Neurology
Annual Meeting.
Corporate Updates
-- Announced the company priced an underwritten public offering of an aggregate
of 2,650,000 shares of its common stock at a price to the public of $38.00 per
share. In addition, Sarepta has granted the underwriters a 30-day option to
purchase up to an additional 397,500 shares of common stock on the same terms
and conditions as the initial shares sold to the underwriters. The aggregate net
proceeds from the offering to the company was approximately $94.5 million, after
deducting the underwriting discount and estimated offering expenses payable by
Sarepta, but excluding any exercise of the underwriters’ option. The offering
closed on April 29, 2014.
21. On May 8, 2014, Sarepta filed its Quarterly Report with the SEC on Form 10-Q
for the 2014 fiscal first quarter. The Company’s Form 10-Q was signed by Defendants
Garabedian and Mahatme, and affirmed the results previously announced that day.
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22. On July 10, 2014, the Company issued a press release entitled, “Sarepta
Therapeutics Reports Long-Term Outcomes Through 144 Weeks from Phase IIb Study of
Eteplirsen in Duchenne Muscular Dystrophy.” Therein, the Company, in relevant part, stated:
Sarepta Therapeutics, Inc. (NASDAQ:SRPT), a developer of innovative RNA-
based therapeutics, today announced data through Week 144 from Study 202, a
Phase IIb open-label extension study of eteplirsen in patients with Duchenne
muscular dystrophy (DMD). After nearly three years of follow up, results on the
6-minute walk test (6MWT) showed a decline in walking ability at a rate slower
than would be expected based on available DMD natural history data. In addition,
a continued stabilization of respiratory muscle function was observed, as assessed
by pulmonary function tests. As previously reported, Study 202 met its primary
endpoint of increased novel dystrophin as assessed by muscle biopsy at Week 48
and is now in the long-term extension phase in which patients continue to be
followed for safety and clinical outcomes.
At Week 144, patients in the 30 mg/kg and 50 mg/kg eteplirsen cohorts who were
able to perform the 6MWT (modified Intent-to-Treat or mITT population; n=6)
experienced a decline of 33.2 meters, or about 8.5 percent, from baseline in
walking ability. A statistically significant treatment benefit of 75.1 meters
(p≤0.004) was observed for the mITT population compared with the
placebo/delayed-treatment cohort (n=4), which initiated treatment at Week 25
following 24 weeks of placebo. After experiencing a substantial decline of 68.4
meters from baseline to Week 36, the placebo/delayed-treatment cohort
demonstrated a decline of 39.0 meters in walking ability from Week 36 through
Week 144, the period from which meaningful levels of dystrophin were likely
produced. These analyses were based on the maximum 6MWT score when the
test was performed on two consecutive days.
“The long-term clinical data for eteplirsen showing a slowing in the decline of
walking ability in a population now on average 12 years old are very encouraging,
particularly when compared with the growing body of DMD natural history data
which clearly show that similarly aged patients typically experience an
increasingly rapid decline in walking ability and lose ambulation in their early
teen years,” said Jerry Mendell, M.D., director of the Centers for Gene Therapy
and Muscular Dystrophy at Nationwide Children's Hospital and principal
investigator of the Phase IIb study.
“We now have nearly three years of treatment experience with eteplirsen from our
Phase IIb clinical study program and, based on guidance from the U.S. Food and
Drug Administration earlier this year, we plan to submit these results along with
additional data and analysis as part of a New Drug Application for eteplirsen by
year-end,” said Chris Garabedian, president and chief executive officer of Sarepta
Therapeutics.
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Respiratory muscle function from baseline through Week 144 in the Intent-to-
Treat population (n=12), as measured by maximum inspiratory and expiratory
pressure (MIP and MEP), showed a 14.7 percent mean increase in MIP and a 12.8
percent mean increase in MEP. Analyses of MIP percent predicted (MIP adjusted
for weight) and MEP percent predicted (MEP adjusted for age) demonstrated a
mean change from 91.7 percent at baseline to 93.9 percent at Week 144 in MIP
percent predicted, and a mean change from 79.3 percent at baseline to 75.7
percent at Week 144 in MEP percent predicted. In addition, there was a mean
increase in forced vital capacity (FVC), a measure of lung volume, of 11.0
percent. FVC percent predicted (FVC adjusted for age and height) was maintained
above a mean of 90 percent at Week 144, with 101.3 percent at baseline and 90.9
percent at Week 144.
“We are encouraged to see continued stability on measures of respiratory muscle
function in patients treated with eteplirsen for nearly three years, particularly as
declines in MIP and MEP are often the first signs of pulmonary dysfunction in
DMD,” said Edward Kaye, M.D., senior vice president and chief medical officer
of Sarepta Therapeutics. “As we prepare to submit a New Drug Application for
eteplirsen including these data, we are also on track to initiate in the coming
months several new clinical studies of eteplirsen in a broader patient population to
further characterize the drug’s safety and efficacy profile.”
Through 144 weeks, eteplirsen was well tolerated and there were no reported
clinically significant treatment-related adverse events and no treatment-related
serious adverse events. In addition, there were no treatment-related
hospitalizations or discontinuations.
23. On August 7, 2014, the Company issued a press release entitled, “Sarepta
Therapeutics Announces Second Quarter 2014 Financial Results and Recent Corporate
Developments.” Therein, the Company, in relevant part, stated:
Progress achieved across eteplirsen clinical studies with patient screening
expected to begin this month
On track to submit New Drug Application for eteplirsen by year-end
Follow-on exon-skipping drugs targeting exons 45 and 53 advancing toward
clinical testing
Well capitalized with $284.2 million in cash and other investments at quarter end
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Sarepta Therapeutics, Inc. (NASDAQ: SRPT), a developer of innovative RNA-
based therapeutics, today reported financial results for the three and six months
ended June 30, 2014, and provided an update of recent corporate developments.
“We’ve made tremendous progress in advancing our eteplirsen clinical trials and
are ready to begin our confirmatory ambulatory study this month, the first of three
new studies with eteplirsen,” said President and Chief Executive Office Chris
Garabedian. “We continue to work on preparing our NDA submissions, while
making progress on both our additional studies with eteplirsen and studies with
follow-on exon-skipping drug candidates for Duchenne muscular dystrophy
patients with other genotypes.”
Financial Results
For the second quarter of 2014, Sarepta reported a non-GAAP net loss of $24.5
million, or $0.61 per share, compared to a non-GAAP net loss of $14.6 million for
the second quarter of 2013, or $0.46 per share. The incremental loss of $9.9
million was primarily the result of increased research and development and
general and administrative expenses as a result of corporate growth.
On a GAAP basis, the net loss for the second quarter of 2014 was $33.9 million,
or $0.85 per share (including $5.6 million of stock-based compensation and
restructuring expenses), compared to a net loss of $19.1 million, or $0.60 per
share (including $2.5 million of stock-based compensation and restructuring
expenses) for the second quarter of 2013. The increase in net loss is primarily due
to an increase of $12.8 million in operating expenses, an increase of $1.8 million
in loss on change in warrant valuation and a decrease of $0.4 million in contract
revenue.
Revenue for the second quarter of 2014 was $2.6 million, down from $3.0 million
for the second quarter of 2013. The $0.4 million decrease was primarily due to
decreases in revenue from the Company’s government contracts.
Non-GAAP research and development expenses were $18.3 million for the
second quarter of 2014, compared to $12.2 million for the second quarter of 2013,
an increase of $6.1 million. GAAP research and development expenses were
$20.6 million for the second quarter of 2014 (including $2.3 million of stock-
based compensation and restructuring expenses), compared to $13.0 million for
the second quarter of 2013 (including $0.8 million of stock-based compensation
and restructuring expenses), an increase of $7.6 million.
Non-GAAP general and administrative expenses were $9.0 million for the second
quarter of 2014, compared to $5.3 million for the second quarter of 2013, an
increase of $3.7 million. GAAP general and administrative expenses were $12.2
million for the second quarter of 2014 (including $3.2 million of stock-based
compensation expense), compared to $7.1 million for the second quarter of 2013
CLASS ACTION COMPLAINT
15
(including $1.7 million of stock-based compensation and restructuring expenses),
an increase of $5.1 million.
The increase in operating expenses was primarily caused by corporate growth,
including an expansion of manufacturing, pre-commercial and medical affairs
activities as the Company prepares for the possibility of a product approval next
year. The company also continues to expand clinical and regulatory activities in
support of the development of its programs in Duchenne muscular dystrophy
(DMD).
The Company had cash, cash equivalents, short-term investments and restricted
investments related to a letter of credit of $284.2 million as of June 30, 2014
compared to $264.9 million as of December 31, 2013, an increase of $19.3
million. The increase was primarily driven by the net proceeds received from the
Company’s public offering in April 2014, offset by the use of cash to fund the
Company’s ongoing operations in the first half of 2014.
In addition to the GAAP financial measures set forth in this press release, the
Company has included certain non-GAAP measurements: non-GAAP research
and development expenses, non-GAAP general and administrative expenses, non-
GAAP operating expenses, non-GAAP net loss, and non-GAAP basic and diluted
net loss per share, which present operating results on a basis adjusted for certain
items. The Company uses these non-GAAP measures as key performance
measures for the purpose of evaluating performance internally. The Company also
believes these non-GAAP measures provide the Company’s investors with useful
information regarding the Company’s historical operating results. These non-
GAAP measures are not intended to replace the presentation of the Company’s
financial results in accordance with GAAP. Use of the terms non-GAAP research
and development expenses, non-GAAP general and administrative expenses, non-
GAAP operating expenses, non-GAAP net loss, and non-GAAP basic and diluted
net loss per share may differ from similar measures reported by other companies.
All relevant non-GAAP measures are reconciled from their respective GAAP
measures in the attached table "Reconciliation of GAAP to Non-GAAP Net
Loss."
2014 Guidance
The Company now expects that Non-GAAP loss from operations will range from
$135 to $145 million, as compared with its previous guidance of $110 to $120
million. In addition, The Company is anticipating capital investments of
approximately $25 million for the remainder of 2014 in connection with its
manufacturing facility in Andover and 2015 inventory commitments. The
Company is not able to provide a reconciliation of this Non-GAAP guidance to its
relevant GAAP measure because full year loss from operations could include
incremental stock compensation expense related to the achievement of certain
criteria for performance awards.
CLASS ACTION COMPLAINT
16
Recent Corporate Developments
Duchenne Muscular Dystrophy Program
-- Announced updated data from Study 202, a Phase IIb open-label extension
study of eteplirsen in patients with DMD. Results on the 6-minute walk test
(6MWT) at 144 weeks showed a decline in walking ability at a rate slower than
would be expected based on available DMD natural history data. In addition, a
continued stabilization of respiratory muscle function was observed. As
previously reported, Study 202 met its primary endpoint of increased novel
dystrophin as assessed by muscle biopsy at week 48 and is now in the long-term
extension phase in which patients continue to be followed for safety and clinical
outcomes.
Corporate Updates
-- Acquisition of the multifunctional manufacturing facility on 26 acres of land in
Andover, Massachusetts supports large-scale manufacturing needs.
-- John Hodgman was named interim chairman of the board of directors.
24. On August 7, 2014, Sarepta filed its Quarterly Report with the SEC on Form 10-Q
for the 2014 fiscal second quarter. The Company’s Form 10-Q was signed by Defendants
Garabedian and Mahatme, and affirmed the results previously announced that day.
25. The statements contained in ¶¶__-__ were materially false and/or misleading
when made because defendants failed to disclose or indicate the following: (1) that the Company
failed to provide sufficient data for its NDA submission; (2) that, as a result, the Company’s
NDA for eteplirsen would likely be filed mid-2015 instead of by the end of 2014; and (3) that, as
a result of the foregoing, the Company’s statements about its business, operations, and prospects,
including statements about eteplirsen’s prospects for FDA approval in the treatment of DMD,
were materially false and misleading and/or lacked a reasonable basis.
Disclosures at the End of the Class Period
CLASS ACTION COMPLAINT
17
26. On October 27, 2014, the Company issued a press release entitled, “Sarepta
Therapeutics Announces Regulatory Update on Eteplirsen.” Therein, the Company, in relevant
part, stated:
Updated and additional guidance received from FDA on specific data
requirements for NDA;
FDA states further discussion needed to determine what constitutes a
“complete” NDA submission;
NDA submission planned for mid-year 2015;
Company to hold teleconference today at 8:00 a.m. EDT
Sarepta Therapeutics, Inc. (NASDAQ:SRPT), a developer of innovative RNA-
based therapeutics, today provided an update on its discussions with the U.S.
Food and Drug Administration (FDA) regarding its planned New Drug
Application (NDA) submission for the approval of eteplirsen for the treatment of
Duchenne muscular dystrophy (DMD).
In meeting minutes received last week from a Type B Pre-NDA meeting that took
place in September 2014, the FDA provided updated guidance regarding the
specific data to be included as part of, or at the time of, Sarepta’s NDA
submission. The guidance states that additional data are now required as part of
the NDA submission, including the results from an independent assessment of
dystrophin images and the 168-week clinical data from study 202. Additionally,
the guidance requests more specific data including a minimum duration of safety
in new patients exposed to eteplirsen, patient-level natural history data to be
obtained by Sarepta from independent academic institutions, and MRI data from a
recent study conducted by an independent academic group. The FDA indicated
that further discussion with Sarepta “will be necessary to determine what would
constitute a complete NDA.” Based on these requests, Sarepta plans to submit an
NDA by mid-year 2015, pending any additional requests from further discussions
with the FDA.
"We are committed to satisfying the FDA’s updated requests for these specific
data to be included as part of an NDA submission and will continue to work with
the Agency toward the goal of a complete and acceptable NDA filing," said Chris
Garabedian, president and chief executive officer of Sarepta Therapeutics. "We
believe all of the data requests and additional FDA discussions that have currently
been outlined can be completed in time for an NDA submission by mid-year
2015. Obtaining an FDA approval of eteplirsen for the DMD patients who may
benefit from the drug continues to be our highest priority.”
CLASS ACTION COMPLAINT
18
Excerpts from the Pre-NDA Meeting Minutes related to information that the FDA
is requesting as part of an NDA submission included:
"The sponsor should include 3-month data from at least 12 to 24 newly exposed
patients at the time the NDA is submitted."
"Available data from the other patients enrolled in the new eteplirsen studies
(studies 301, 203, 204) should also be included at the time the NDA is submitted,
even if exposure is less than 3 months in duration."
"Additional data from later time points and from newly enrolled patients should
be submitted in the 120-Day Safety Update."
"FDA strongly advises the sponsor to obtain and submit patient-level natural
history data. FDA is prepared to appeal to the academic groups holding the data
to allow the sponsor a means to acquire the data."
"The study 201/202 clinical site inspection conducted in May, 2014, after the
issuance of the April 15, 2014, guidance letter, uncovered marked disparities in
the immunohistochemistry methodology and concerns about the reproducibility of
the data. The lack of confirmation of robust dystrophin measurement during the
site visit necessitates including the independent assessment of dystrophin-positive
fibers and 168-week efficacy data from study 201/202 in the NDA."
“FDA strongly urged the sponsor to submit the MRI data with appropriate
natural history controls.”
The FDA also stated that “[a]dditional discussion between the sponsor and the
FDA will be necessary to determine what would constitute a complete NDA.”
27. On this news, shares of Sarepta declined $7.65 per share, over 32%, to close on
October 27, 2014, at $15.91 per share, on unusually heavy volume.
CLASS ACTION ALLEGATIONS
28. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil
Procedure 23(a) and (b)(3) on behalf of a class, consisting of all those who purchased Sarepta’s
securities between April 21, 2014 and October 27, 2014, inclusive (the “Class Period”) and who
were damaged thereby (the “Class”). Excluded from the Class are Defendants, the officers and
directors of the Company, at all relevant times, members of their immediate families and their
CLASS ACTION COMPLAINT
19
legal representatives, heirs, successors or assigns and any entity in which Defendants have or had
a controlling interest.
29. The members of the Class are so numerous that joinder of all members is
impracticable. Throughout the Class Period, Sarepta’s securities were actively traded on the
Nasdaq Stock Market (the “NASDAQ”). While the exact number of Class members is unknown
to Plaintiff at this time and can only be ascertained through appropriate discovery, Plaintiff
believes that there are hundreds or thousands of members in the proposed Class. Millions of
Sarepta shares were traded publicly during the Class Period on the NASDAQ. As of July 31,
2014, Sarepta had 40,923,746 shares of common stock outstanding. Record owners and other
members of the Class may be identified from records maintained by Sarepta or its transfer agent
and may be notified of the pendency of this action by mail, using the form of notice similar to
that customarily used in securities class actions.
30. Plaintiff’s claims are typical of the claims of the members of the Class as all
members of the Class are similarly affected by Defendants’ wrongful conduct in violation of
federal law that is complained of herein.
31. Plaintiff will fairly and adequately protect the interests of the members of the
Class and has retained counsel competent and experienced in class and securities litigation.
32. Common questions of law and fact exist as to all members of the Class and
predominate over any questions solely affecting individual members of the Class. Among the
questions of law and fact common to the Class are:
(a) whether the federal securities laws were violated by Defendants’ acts as
alleged herein;
CLASS ACTION COMPLAINT
20
(b) whether statements made by Defendants to the investing public during the
Class Period omitted and/or misrepresented material facts about the business, operations, and
prospects of Sarepta; and
(c) to what extent the members of the Class have sustained damages and the
proper measure of damages.
33. A class action is superior to all other available methods for the fair and efficient
adjudication of this controversy since joinder of all members is impracticable. Furthermore, as
the damages suffered by individual Class members may be relatively small, the expense and
burden of individual litigation makes it impossible for members of the Class to individually
redress the wrongs done to them. There will be no difficulty in the management of this action as
a class action.
UNDISCLOSED ADVERSE FACTS
34. The market for Sarepta’s securities was open, well-developed and efficient at all
relevant times. As a result of these materially false and/or misleading statements, and/or failures
to disclose, Sarepta’s securities traded at artificially inflated prices during the Class Period.
Plaintiff and other members of the Class purchased or otherwise acquired Sarepta’s securities
relying upon the integrity of the market price of the Company’s securities and market
information relating to Sarepta, and have been damaged thereby.
35. During the Class Period, Defendants materially misled the investing public,
thereby inflating the price of Sarepta’s securities, by publicly issuing false and/or misleading
statements and/or omitting to disclose material facts necessary to make Defendants’ statements,
as set forth herein, not false and/or misleading. Said statements and omissions were materially
CLASS ACTION COMPLAINT
21
false and/or misleading in that they failed to disclose material adverse information and/or
misrepresented the truth about Sarepta’s business, operations, and prospects as alleged herein.
36. At all relevant times, the material misrepresentations and omissions particularized
in this Complaint directly or proximately caused or were a substantial contributing cause of the
damages sustained by Plaintiff and other members of the Class. As described herein, during the
Class Period, Defendants made or caused to be made a series of materially false and/or
misleading statements about Sarepta’s financial well-being and prospects. These material
misstatements and/or omissions had the cause and effect of creating in the market an
unrealistically positive assessment of the Company and its financial well-being and prospects,
thus causing the Company’s securities to be overvalued and artificially inflated at all relevant
times. Defendants’ materially false and/or misleading statements during the Class Period
resulted in Plaintiff and other members of the Class purchasing the Company’s securities at
artificially inflated prices, thus causing the damages complained of herein.
LOSS CAUSATION
37. Defendants’ wrongful conduct, as alleged herein, directly and proximately caused
the economic loss suffered by Plaintiff and the Class.
38. During the Class Period, Plaintiff and the Class purchased Sarepta’s securities at
artificially inflated prices and were damaged thereby. The price of the Company’s securities
significantly declined when the misrepresentations made to the market, and/or the information
alleged herein to have been concealed from the market, and/or the effects thereof, were revealed,
causing investors’ losses.
SCIENTER ALLEGATIONS
CLASS ACTION COMPLAINT
22
39. As alleged herein, Defendants acted with scienter in that Defendants knew that
the public documents and statements issued or disseminated in the name of the Company were
materially false and/or misleading; knew that such statements or documents would be issued or
disseminated to the investing public; and knowingly and substantially participated or acquiesced
in the issuance or dissemination of such statements or documents as primary violations of the
federal securities laws. As set forth elsewhere herein in detail, Defendants, by virtue of their
receipt of information reflecting the true facts regarding Sarepta, his/her control over, and/or
receipt and/or modification of Sarepta’s allegedly materially misleading misstatements and/or
their associations with the Company which made them privy to confidential proprietary
information concerning Sarepta, participated in the fraudulent scheme alleged herein.
APPLICABILITY OF PRESUMPTION OF RELIANCE
(FRAUD-ON-THE-MARKET DOCTRINE)
40. The market for Sarepta’s securities was open, well-developed and efficient at all
relevant times. As a result of the materially false and/or misleading statements and/or failures to
disclose, Sarepta’s securities traded at artificially inflated prices during the Class Period. On
April 23, 2014, the Company’s stock closed at a Class Period high of $38.91 per share. Plaintiff
and other members of the Class purchased or otherwise acquired the Company’s securities
relying upon the integrity of the market price of Sarepta’s securities and market information
relating to Sarepta, and have been damaged thereby.
41. During the Class Period, the artificial inflation of Sarepta’s stock was caused by
the material misrepresentations and/or omissions particularized in this Complaint causing the
damages sustained by Plaintiff and other members of the Class. As described herein, during the
Class Period, Defendants made or caused to be made a series of materially false and/or
misleading statements about Sarepta’s business, prospects, and operations. These material
CLASS ACTION COMPLAINT
23
misstatements and/or omissions created an unrealistically positive assessment of Sarepta and its
business, operations, and prospects, thus causing the price of the Company’s securities to be
artificially inflated at all relevant times, and when disclosed, negatively affected the value of the
Company stock. Defendants’ materially false and/or misleading statements during the Class
Period resulted in Plaintiff and other members of the Class purchasing the Company’s securities
at such artificially inflated prices, and each of them has been damaged as a result.
42. At all relevant times, the market for Sarepta’s securities was an efficient market
for the following reasons, among others:
(a) Sarepta stock met the requirements for listing, and was listed and actively
traded on the NASDAQ, a highly efficient and automated market;
(b) As a regulated issuer, Sarepta filed periodic public reports with the SEC
and/or the NASDAQ;
(c) Sarepta regularly communicated with public investors via established
market communication mechanisms, including through regular dissemination of press releases
on the national circuits of major newswire services and through other wide-ranging public
disclosures, such as communications with the financial press and other similar reporting services;
and/or
(d) Sarepta was followed by securities analysts employed by brokerage firms
who wrote reports about the Company, and these reports were distributed to the sales force and
certain customers of their respective brokerage firms. Each of these reports was publicly
available and entered the public marketplace.
43. As a result of the foregoing, the market for Sarepta’s securities promptly digested
current information regarding Sarepta from all publicly available sources and reflected such
CLASS ACTION COMPLAINT
24
information in Sarepta’s stock price. Under these circumstances, all purchasers of Sarepta’s
securities during the Class Period suffered similar injury through their purchase of Sarepta’s
securities at artificially inflated prices and a presumption of reliance applies.
NO SAFE HARBOR
44. The statutory safe harbor provided for forward-looking statements under certain
circumstances does not apply to any of the allegedly false statements pleaded in this Complaint.
The statements alleged to be false and misleading herein all relate to then-existing facts and
conditions. In addition, to the extent certain of the statements alleged to be false may be
characterized as forward looking, they were not identified as “forward-looking statements” when
made and there were no meaningful cautionary statements identifying important factors that
could cause actual results to differ materially from those in the purportedly forward-looking
statements. In the alternative, to the extent that the statutory safe harbor is determined to apply to
any forward-looking statements pleaded herein, Defendants are liable for those false forward-
looking statements because at the time each of those forward-looking statements was made, the
speaker had actual knowledge that the forward-looking statement was materially false or
misleading, and/or the forward-looking statement was authorized or approved by an executive
officer of Sarepta who knew that the statement was false when made.
FIRST CLAIM
Violation of Section 10(b) of
The Exchange Act and Rule 10b-5
Promulgated Thereunder Against All Defendants
45. Plaintiff repeats and realleges each and every allegation contained above as if
fully set forth herein.
46. During the Class Period, Defendants carried out a plan, scheme and course of
conduct which was intended to and, throughout the Class Period, did: (i) deceive the investing
CLASS ACTION COMPLAINT
25
public, including Plaintiff and other Class members, as alleged herein; and (ii) cause Plaintiff and
other members of the Class to purchase Sarepta’s securities at artificially inflated prices. In
furtherance of this unlawful scheme, plan and course of conduct, defendants, and each of them,
took the actions set forth herein.
47. Defendants (i) employed devices, schemes, and artifices to defraud; (ii) made
untrue statements of material fact and/or omitted to state material facts necessary to make the
statements not misleading; and (iii) engaged in acts, practices, and a course of business which
operated as a fraud and deceit upon the purchasers of the Company’s securities in an effort to
maintain artificially high market prices for Sarepta’s securities in violation of Section 10(b) of
the Exchange Act and Rule 10b-5. All Defendants are sued either as primary participants in the
wrongful and illegal conduct charged herein or as controlling persons as alleged below.
48. Defendants, individually and in concert, directly and indirectly, by the use, means
or instrumentalities of interstate commerce and/or of the mails, engaged and participated in a
continuous course of conduct to conceal adverse material information about Sarepta’s financial
well-being and prospects, as specified herein.
49. These defendants employed devices, schemes and artifices to defraud, while in
possession of material adverse non-public information and engaged in acts, practices, and a
course of conduct as alleged herein in an effort to assure investors of Sarepta’s value and
performance and continued substantial growth, which included the making of, or the
participation in the making of, untrue statements of material facts and/or omitting to state
material facts necessary in order to make the statements made about Sarepta and its business
operations and future prospects in light of the circumstances under which they were made, not
misleading, as set forth more particularly herein, and engaged in transactions, practices and a
CLASS ACTION COMPLAINT
26
course of business which operated as a fraud and deceit upon the purchasers of the Company’s
securities during the Class Period.
50. Each of the Individual Defendants’ primary liability, and controlling person
liability, arises from the following facts: (i) the Individual Defendants were high-level executives
and/or directors at the Company during the Class Period and members of the Company’s
management team or had control thereof; (ii) each of these defendants, by virtue of their
responsibilities and activities as a senior officer and/or director of the Company, was privy to and
participated in the creation, development and reporting of the Company’s internal budgets, plans,
projections and/or reports; (iii) each of these defendants enjoyed significant personal contact and
familiarity with the other defendants and was advised of, and had access to, other members of the
Company’s management team, internal reports and other data and information about the
Company’s finances, operations, and sales at all relevant times; and (iv) each of these defendants
was aware of the Company’s dissemination of information to the investing public which they
knew and/or recklessly disregarded was materially false and misleading.
51. The defendants had actual knowledge of the misrepresentations and/or omissions
of material facts set forth herein, or acted with reckless disregard for the truth in that they failed
to ascertain and to disclose such facts, even though such facts were available to them. Such
defendants’ material misrepresentations and/or omissions were done knowingly or recklessly and
for the purpose and effect of concealing Sarepta’s financial well-being and prospects from the
investing public and supporting the artificially inflated price of its securities. As demonstrated
by Defendants’ overstatements and/or misstatements of the Company’s business, operations,
financial well-being, and prospects throughout the Class Period, Defendants, if they did not have
actual knowledge of the misrepresentations and/or omissions alleged, were reckless in failing to
CLASS ACTION COMPLAINT
27
obtain such knowledge by deliberately refraining from taking those steps necessary to discover
whether those statements were false or misleading.
52. As a result of the dissemination of the materially false and/or misleading
information and/or failure to disclose material facts, as set forth above, the market price of
Sarepta’s securities was artificially inflated during the Class Period. In ignorance of the fact that
market prices of the Company’s securities were artificially inflated, and relying directly or
indirectly on the false and misleading statements made by Defendants, or upon the integrity of
the market in which the securities trades, and/or in the absence of material adverse information
that was known to or recklessly disregarded by Defendants, but not disclosed in public
statements by Defendants during the Class Period, Plaintiff and the other members of the Class
acquired Sarepta’s securities during the Class Period at artificially high prices and were damaged
thereby.
53. At the time of said misrepresentations and/or omissions, Plaintiff and other
members of the Class were ignorant of their falsity, and believed them to be true. Had Plaintiff
and the other members of the Class and the marketplace known the truth regarding the problems
that Sarepta was experiencing, which were not disclosed by Defendants, Plaintiff and other
members of the Class would not have purchased or otherwise acquired their Sarepta securities,
or, if they had acquired such securities during the Class Period, they would not have done so at
the artificially inflated prices which they paid.
54. By virtue of the foregoing, Defendants have violated Section 10(b) of the
Exchange Act and Rule 10b-5 promulgated thereunder.
CLASS ACTION COMPLAINT
28
55. As a direct and proximate result of Defendants’ wrongful conduct, Plaintiff and
the other members of the Class suffered damages in connection with their respective purchases
and sales of the Company’s securities during the Class Period.
SECOND CLAIM
Violation of Section 20(a) of
The Exchange Act Against the Individual Defendants
56. Plaintiff repeats and realleges each and every allegation contained above as if
fully set forth herein.
57. The Individual Defendants acted as controlling persons of Sarepta within the
meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their high-level
positions, and their ownership and contractual rights, participation in and/or awareness of the
Company’s operations and/or intimate knowledge of the false financial statements filed by the
Company with the SEC and disseminated to the investing public, the Individual Defendants had
the power to influence and control and did influence and control, directly or indirectly, the
decision-making of the Company, including the content and dissemination of the various
statements which Plaintiff contends are false and misleading. The Individual Defendants were
provided with or had unlimited access to copies of the Company’s reports, press releases, public
filings and other statements alleged by Plaintiff to be misleading prior to and/or shortly after
these statements were issued and had the ability to prevent the issuance of the statements or
cause the statements to be corrected.
58. In particular, each of these Defendants had direct and supervisory involvement in
the day-to-day operations of the Company and, therefore, is presumed to have had the power to
control or influence the particular transactions giving rise to the securities violations as alleged
herein, and exercised the same.
CLASS ACTION COMPLAINT
29
59. As set forth above, Sarepta and the Individual Defendants each violated Section
10(b) and Rule 10b-5 by their acts and/or omissions as alleged in this Complaint. By virtue of
their positions as controlling persons, the Individual Defendants are liable pursuant to Section
20(a) of the Exchange Act. As a direct and proximate result of Defendants’ wrongful conduct,
Plaintiff and other members of the Class suffered damages in connection with their purchases of
the Company’s securities during the Class Period.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff prays for relief and judgment, as follows:
(a) Determining that this action is a proper class action under Rule 23 of the Federal
Rules of Civil Procedure;
(b) Awarding compensatory damages in favor of Plaintiff and the other Class
members against all defendants, jointly and severally, for all damages sustained as a result of
Defendants’ wrongdoing, in an amount to be proven at trial, including interest thereon;
(c) Awarding Plaintiff and the Class their reasonable costs and expenses incurred in
this action, including counsel fees and expert fees; and
(d) Such other and further relief as the Court may deem just and proper.
JURY TRIAL DEMANDED
Plaintiff hereby demands a trial by jury.
DATED:
By:___DRAFT________________
GLANCY BINKOW & GOLDBERG LLP Lionel Z. Glancy
Michael Goldberg
Robert V. Prongay
Casey E. Sadler
CLASS ACTION COMPLAINT
30
1925 Century Park East, Suite 2100
Los Angeles, CA 90067
Telephone: (310) 201-9150
Facsimile: (310) 201-9160
LAW OFFICES OF HOWARD G. SMITH Howard G. Smith
3070 Bristol Pike, Suite 112
Bensalem, PA 19020
Telephone: (215) 638-4847
Facsimile: (215) 638-4867
Attorneys for Plaintiff