In re: Ocugen, Inc. Securities Litigation, No. 23-1570, Opinion (United States Court of Appeals for the Third Circuit, March 21, 2024)

Summary

In this non-precedential opinion filed March 21, 2024 (No. 23-1570), Judge Chung writes for the Third Circuit in affirming the dismissal with prejudice of a securities class action by investors led by Andre Galan Bernd Benayon against Ocugen, Inc., its co-founder and Chief Executive Officer Shankar Musunuri and its acting Chief Medical Officer Bruce Forrest. The Investors claimed Ocugen made false and misleading statements about its ability to obtain FDA Emergency Use Authorization for COVAXIN, the COVID-19 vaccine it was co-developing with Bharat Biotech after announcing the partnership on February 2, 2021. The court agreed with the District Court that the Investors failed to plead materially false or misleading statements or omissions, and wrote that hindsight does not substitute for contemporaneous knowledge in a securities fraud case.

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NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
____________

No. 23-1570
___________

IN RE: OCUGEN, INC. SECURITIES LITIGATION

Andre Galan Bernd Benayon,
Appellant

____________

On Appeal from the United States District Court
For the Eastern District of Pennsylvania
(District Court No. 2-21-cv-02725)
District Judge: Honorable Chad F. Kenney
____________

Submitted Pursuant to Third Circuit L.A.R. 34.1(a)
January 29, 2024
____________

Before: KRAUSE, PORTER, and CHUNG, Circuit Judges

(Filed: March 21, 2024)
____________

OPINION*
____________

*
This disposition is not an opinion of the full Court and, pursuant to I.O.P. 5.7, does
not constitute binding precedent.
CHUNG, Circuit Judge.

Andre Galan Bernd Benayon, individually and on behalf of a group of similarly

situated investors (collectively, “Investors”), filed an amended class action complaint

against Ocugen, Inc.; its co-founder, Chief Executive Officer, and Chairman, Shankar

Musunuri; and its acting Chief Medical Officer and advisor, Bruce Forrest.1 The

Investors claimed that Ocugen2 committed securities fraud by making materially false

and misleading public statements and omitting material facts regarding its ability to

obtain Emergency Use Authorization (“EUA”) from the United States Food and Drug

Administration (“FDA”) in order to quickly bring its COVID-19 vaccine, COVAXIN, to

the United States market.3 The District Court dismissed the amended complaint with

prejudice for failure to state a claim. We will affirm.

I. BACKGROUND

Ocugen was a failing pharmaceutical company in dire financial straits. In late

2020, Ocugen partnered with an Indian company, Bharat Biotech, to co-develop

Bharat’s COVID-19 vaccine candidate, COVAXIN, for the United States market.

COVAXIN is a whole-virion inactivated vaccine, meaning that the vaccine is created by

chemically inactivating the live COVID-19 virus. Under Ocugen’s agreement with

1
The initial complaint was filed on June 17, 2021. The Investors filed an amended
complaint the following year, on June 13, 2022. The amended complaint is the
operative complaint in this matter.
2
The Investors brought the securities fraud claim against Ocugen, Musunuri, and
Forrest. For ease of discussion, we will refer only to Ocugen.
3
The Investors also brought a control person liability claim against Musunuri and
Forrest and an insider trading claim against Musunuri. The two individual claims rely
on the same allegedly false and misleading statements.
2
Bharat, Ocugen was to be responsible for, among other things, regulatory approval of

COVAXIN, including obtaining EUA approval from the FDA.

Ocugen issued a press release informing the public about the Bharat partnership

on February 2, 2021.4 The press release stated that Ocugen had initiated discussions

with the FDA “to develop a regulatory path to EUA” for COVAXIN. JA 117. Ocugen

also informed securities analysts that it expected to distribute 100 million doses of

COVAXIN in the U.S. in 2021. The announcements caused Ocugen’s stock price to

soar.

Beginning on that date and continuing until June 2021, Ocugen proceeded to

issue similar statements, all essentially declaring that Ocugen was engaged in

discussions with the FDA about obtaining EUA for COVAXIN, that it expected prompt

EUA approval, and that it anticipated distributing mass quantities of COVAXIN in the

U.S. very soon. For instance, Ocugen’s SEC filings described Ocugen as engaging in

“pre-EUA discussions with [the] FDA,” Ocugen’s plan to file for EUA in the first half

of 2021, and its expectation that COVAXIN would be available in the U.S. by the

second half of 2021. JA 119. Similarly, Musunuri stated in press interviews that

Ocugen had initiated discussions with the FDA to pursue EUA approval and aimed to

distribute 100 million doses of COVAXIN in 2021. Although the FDA revised its EUA

guidance in May 2021 to provide information specific to the development of drugs for

COVID-19 treatment and prevention, Ocugen reassured investors that it remained “on

4
The class period is alleged to run from February 2, 2021, through June 9, 2021.
3
track” to submit an EUA application, that the new guidance did not apply to COVAXIN,

and that it believed it was meeting all EUA criteria. JA 162.

Ocugen’s plan to obtain EUA approval in the second half of 2021 did not come to

pass. In June 2021, Ocugen issued a press release announcing that the FDA had

recommended that it terminate its pursuit of the EUA path, and that Ocugen would

instead pursue a Biologics License Application for COVAXIN — a change that would

significantly extend its timeline for approval and distribution. The news caused

Ocugen’s stock price to drop dramatically. The Investors’ complaint followed soon

after.

II. ANALYSIS5

A. Securities Fraud

To state a securities fraud claim, the Investors were required to plead that:

(1) Ocugen made a materially false or misleading statement or omitted a material fact

needed to make a statement not misleading; (2) Ocugen acted with scienter; and (3) the

Investors’ reliance on Ocugen’s misstatement caused them injury.6 In re: Burlington

5
The District Court had jurisdiction under 28 U.S.C. § 1331 and 15 U.S.C. § 78aa.
We have jurisdiction under 28 U.S.C. § 1291. We exercise plenary review of the
dismissal of the amended complaint, accepting all well-pled factual allegations as true
and drawing all reasonable inferences in the Investors’ favor. See Nekrilov v. City of
Jersey City, 45 F.4th 662, 668 (3d Cir. 2022). To survive dismissal, the amended
complaint must contain sufficient factual allegations, which, taken as true, set forth a
claim for relief that is plausible on its face. Id.
6
The complaint also must satisfy the heightened fraud pleading standards of Fed.
R. Civ. P. 9(b) and the Private Securities Litigation Reform Act (“PSLRA”), 15 U.S.C.
§ 78u–4(b). Cal. Pub. Emps.’ Ret. Sys. v. Chubb Corp., 394 F.3d 126, 144 (3d Cir.
2004). Rule 9(b) requires that the circumstances constituting fraud be set forth with

4
Coat Factory Sec. Litig., 114 F.3d 1410, 1417 (3d Cir. 1997); 15 U.S.C. § 78j(b); 17

C.F.R. § 240.10b-5. The District Court concluded that the Investors failed to plead

materially false or misleading statements or omissions. We agree.

Corporate statements or failures to disclose are actionable if, when considered in

light of all the information available to the market, they conveyed a false or misleading

impression and the truth or disclosure was material — that is, a reasonable investor

would view the information as significantly altering the total mix of available

information. Fan v. StoneMor Partners LP, 927 F.3d 710, 715–16 (3d Cir. 2019). We

consider whether the defendant disclosed information that would render the alleged

misrepresentation or omission not misleading. Id. at 716. We also set aside subjective

or vague opinions and general statements of intent or optimism as immaterial, because

reasonable investors would not rely upon them in deciding how to act. In re: Aetna, Inc.

Sec. Litig., 617 F.3d 272, 283 (3d Cir. 2010).

1. Alleged False and Misleading Statements

The Investors specify fifteen allegedly false and/or misleading statements, all

touting that Ocugen was engaged in discussions with the FDA, that it expected speedy

EUA approval, and that it anticipated distributing vast quantities of COVAXIN in 2021.

particularity, while the PSLRA requires a securities fraud complaint to “specify each
statement alleged to have been misleading, the reason or reasons why the statement is
misleading, and, if an allegation regarding the statement or omission is made on
information and belief, [to] state with particularity all facts on which that belief is
formed.” In re: Rockefeller Ctr. Props., Inc. Sec. Litig., 311 F.3d 198, 217 (3d Cir.
2002) (quoting 15 U.S.C. § 78u-4(b)(1)).

5
The Investors claim these “profoundly optimistic statements” were false or misleading

because they “communicated to investors that — at the time — there were no serious

known impediments to an expeditious FDA authorization.” JA 128. The Investors

additionally claim that Ocugen withheld material information by “fail[ing] to disclose

adverse facts about the prospects for and timing of any FDA authorization/approval of

COVAXIN in the United States.” JA 130. The Investors claim Ocugen withheld and/or

misrepresented facts that “made a significant delay in [EUA approval] inevitable,” JA

128, due to FDA guidance, including:

(1) FDA guidance for EUAs requiring “a study of a diverse cross-section of the
target U.S. population,” id.;

(2) FDA guidance for EUAs requiring “clear and compelling data from a well-
designed Phase 3 clinical trial,” id.;

(3) FDA guidance encouraging vaccine sponsors to work with the FDA at all stages
of vaccine development; and

(4) FDA guidance and other government action7 making EUA approval for an
inactivated virus vaccine “extremely unlikely,” id.

The Investors thus rely heavily on FDA guidance for their securities fraud claim,

as they contend the guidance made it clear from the outset that Ocugen would need to

undertake time-consuming U.S. clinical trials, that “an EUA pathway for COVAXIN

authorization in the U.S. was extremely unlikely,” id., and that authorization and

distribution of COVAXIN would not be possible until at least late 2022. When the FDA

7
The Government’s Operation Warp Speed (“OWS”) was a program to accelerate
the development of, among other things, COVID-19 vaccines. OWS did not include
inactivated virus vaccines in its development program.
6
guidance is considered in conjunction with Ocugen’s statements, however, it is apparent

that the Investors have failed to plead material falsehoods or omissions.8

We first consider the Investors’ allegation that they were misled by Ocugen’s

statements indicating that it was actively engaged in discussions with the FDA to obtain

EUA for COVAXIN. Although the Investors plausibly claim that the EUA path requires

an applicant to work with the FDA, they fail to plead that Ocugen made any omission or

misrepresentation in this regard, let alone a material one. As the District Court correctly

observed, the Investors do not identify any point in the EUA process at which Ocugen

did not actually engage with the FDA as it had announced.9 The amended complaint

instead relies on mere speculation and conclusory statements, which are insufficient to

support a securities fraud claim. See In re: Burlington Coat Factory, 114 F.3d at 1418

We next consider the Investors’ claims concerning the differences between

Ocugen’s approach to developing COVAXIN and the FDA’s EUA guidance. We

conclude that the amended complaint shows that the relevant information — namely, the

8
Although the Investors’ claims rely on their position that the FDA’s guidance was
mandatory, the FDA’s June 2020 guidance, November 2020 guidance, and revised May
2021 guidance all expressly stated that they were “not binding on FDA or the public”
and that use of “an alternative approach [is permitted] if it satisfies the requirements of
the applicable statutes and regulations.” JA 321, 346, 435. Indeed, every page of each
FDA guidance contains an italicized, boldface heading announcing that the document
“Contains Nonbinding Recommendations.” JA 318–41, JA 346–63, JA 432–56 (bold
in original).
9
The amended complaint acknowledges, for instance, that Ocugen submitted a
Master File to the FDA in March 2021, early in the class period. If the Investors’ claim
is that the submission of paperwork is not sufficient to demonstrate that Ocugen was
“working” or “in discussions” with the FDA, see, e.g., JA 128, they have not set forth
allegations to plausibly support this view and absent such allegations, we fail to see that
the distinction is material to their claim.
7
FDA’s guidance and Ocugen’s efforts — was readily available to any reasonable

investor, so Ocugen’s statements and/or omissions concerning the likelihood of EUA

approval, even in light of these differences, would not have significantly altered the mix

of information available to a reasonable investor. See Fan, 927 F.3d at 715–16.

For instance, the Investors claim that the FDA guidance can be interpreted to

make EUA of an inactivated virus vaccine extremely unlikely.10 Yet both that guidance

and Ocugen’s plan to market an inactivated virus vaccine were well known to

investors.11 To the extent the Investors complain that Ocugen made overly optimistic

statements about its expectation of COVAXIN’s EUA approval notwithstanding

contrary FDA guidance, such optimism is immaterial because it is not the sort of

information on which a reasonable investor would rely. See Fan, 927 F.3d at 716.

Similarly, the Investors claim Ocugen knew that the clinical trial Bharat was

conducting in India would never pass muster for the EUA process and, as a result, the

EUA approval timeline Ocugen had been touting would never come to be, rendering its

statements anticipating EUA approval false and misleading. They contend, for instance,

that Ocugen knew the FDA never would accept a study that did not include U.S. racial

and ethnic minorities. They also claim the study was conducted poorly, breaching

applicable protocols and guidelines. They claim Ocugen knew that these adverse facts

10
We need not reach any conclusion on the plausibility of this proposition, although
we note that we have not found any clear statement in the FDA guidance to this effect.
11
To the extent the Investors also rely on the fact that OWS did not pursue an
inactivated virus vaccine, this, too, was publicized.
8
would prevent EUA approval but nonetheless misled investors to expect that EUA was

achievable.

Yet once again, information about the quality of the Indian COVAXIN study and

the FDA’s guidance concerning study protocols and diversity was readily available to

any reasonable investor.12 The amended complaint does not set forth statements or

omissions by Ocugen that would have significantly altered the mix of information

available to reasonable investors regarding the nature of the COVAXIN clinical study.

See Fan, 927 F.3d at 715–16.

2. Falsity by Omission

The Investors also attempt to pursue a broader “overarching omission” theory,

claiming that Ocugen’s omissions of material information led the Investors to believe

that Ocugen was adhering to the FDA’s EUA guidance, when that was not the case.

This theory lacks merit. As we have already discussed, Ocugen itself disclosed a great

deal of information about its departures from FDA guidance, including its decision to

pursue an inactivated virus vaccine and data about the clinical study of Indian

participants in India. These disclosures provided information to render non-misleading

12
As the District Court correctly observed, “even if racial diversity was a necessary
requirement for EUA, reasonable shareholders were empowered with all material facts:
the nature of the FDA guidance and that COVAXIN trials were taking place in India and
using Indian participants.” JA 23 n.14. Ocugen issued statements specifically
addressing the diversity of the study participants, acknowledging that the participants all
were from India but observing that they were diverse as to age, weight, body mass
index, health conditions, and socioeconomic factors. Similarly, to the extent there were
questions about whether the study adhered to proper protocols, the amended complaint
observes that the issue was reported in the Indian media before the class period even
began.
9
Ocugen’s alleged omission of the “overarching” fact that its efforts to date did not

strictly adhere to FDA guidance. See Fan, 927 F.3d at 716.

3. Omnicare Omissions

Under Omnicare, Inc. v. Laborers Dist. Council Constr. Indus. Pension Fund, 575

U.S. 175 (2015), a reasonable investor can expect not only that a company believes its

opinions, but also that the opinions are reasonably based on the information the

company possesses at the time.13 See id. at 188–89. The Investors argue that Ocugen’s

opinion statements were without reasonable basis because its COVAXIN strategy was

not feasible in light of FDA guidance. We are not persuaded. We have already

concluded that the statements of fact embedded within these opinion statements were not

materially false or misleading. Additionally, we conclude that Investors have failed to

sufficiently allege that Ocugen’s opinions were baseless.

The Investors contend the FDA applied its guidance strictly,14 and so Ocugen,

knowing that it did not strictly adhere to the FDA’s guidance, lacked a basis to announce

any contrary opinion about COVAXIN’s likelihood of EUA approval. To support this

strict guidance theory, the Investors cite multiple statements by the FDA and other

agencies indicating that rigorous scientific and ethical standards would apply to the EUA

13
The Investors’ Omnicare theory relies on the same fifteen statements anticipating
EUA success and rapid COVAXIN distribution that underlie its other fraud claims. See,
e.g., JA 192.
14
As previously noted, the FDA’s guidance repeated on every page that it
“Contains Nonbinding Recommendations.” JA 318–41, JA 346–63, JA 432–56
(emphasis in original).

10
process. But Ocugen’s awareness that rigorous scientific and ethical standards would

apply does not lead to the conclusion that Ocugen should also have assumed every

aspect of the FDA guidelines was mandatory, despite FDA’s express statements to the

contrary. In addition, the amended complaint does not plausibly support a conclusion

that Ocugen lacked a basis for opining that it was applying rigorous scientific and ethical

principles.

One FDA statement on which the Investors rely to establish their strict

compliance theory, for example, proclaimed that FDA’s “goal” was to “hav[e] a diverse

study population that is able to provide safety and effectiveness data across the

demographic spectrum.” JA 88. This statement did not define diversity, however, and

clarified that the FDA “ha[s] not ever had requirements for demographic composition of

data to support licensure of a vaccine and . . . it would be very difficult to outline such

requirements for EUA.” Id. Ocugen, meanwhile, expressed its view that its COVAXIN

study in India was diverse in many ways. See JA 142 (statement by Forrest noting

Indian population studied was diverse as to age, weight, body mass index, health

conditions, and socioeconomic factors). Accordingly, the fact of FDA’s broad goal of

diversity in EUA studies does not plausibly demonstrate that Ocugen lacked a basis for

opining that its COVAXIN study was diverse.

Upon review, neither this FDA statement nor any other that the Investors identify

plausibly supports a conclusion that Ocugen lacked a basis for opining that COVAXIN

could achieve EUA approval despite its lack of strict adherence to the FDA guidance.

To the extent the Investors rely on facts that only later became known to demonstrate

11
that Ocugen’s opinions about its expectation of EUA approval were incorrect, such as

the FDA’s eventual determination that Ocugen must conduct a clinical study in the U.S.,

hindsight does not substitute for contemporaneous knowledge in a securities fraud case.

See In re: NAHC, Inc. Sec. Litig., 306 F.3d 1314, 1330 (3d Cir. 2002).

In sum, we are not persuaded by the Investors’ arguments on appeal. We agree

with the District Court that the amended complaint failed to set forth a plausible claim

that Ocugen engaged in securities fraud by making material misrepresentations and/or

omissions about its pursuit of EUA approval for COVAXIN.

B. Other Claims

The District Court properly dismissed the Investors’ control person liability and

insider trading claims as well. As we have already discussed, the Investors failed to

plead a predicate securities fraud claim. Because a viable claim of securities fraud was

necessary to support the control person liability and insider trading claims against

Musunuri and Forrest, the two individual claims were properly dismissed. See City of

Edinburgh Council v. Pfizer, Inc., 754 F.3d 159, 177 (3d Cir. 2014).

C. Futility of Amendment

The District Court denied the Investors’ request to file a second amended

complaint because they failed to suggest any factual developments that would cure the

deficiencies of the complaint. We see no abuse of discretion in that determination. A

District Court need not grant leave to amend when the party seeking such leave does not

attach a draft amended complaint to its motion or explain how it would amend the

pleading. In re: Allergan ERISA Litig., 975 F.3d 348, 358 (3d Cir. 2020).

12
III. CONCLUSION

For the foregoing reasons, we will affirm the judgment dismissing the amended

complaint with prejudice for failure to state a claim.

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