Biotech Firm Cleared From Shareholder Suit

     SAN FRANCISCO (CN) — A federal judge dismissed without leave to amend shareholders’ claims that Cellular Biomedicine Group inflated its share price by hiding deaths related to a cancer treatment.
     Lead plaintiff Francis Bonnano sued Cellular Biomedicine Group, a Delaware corporation based in Palo Alto, in April 2015, then added several other institutions and individuals to the complaint.
     Bonnano claimed the company paid marketing firms for positive forecasts to drive the company’s value toward $500 million. Its stock price rose from $13.79 to $47.06 a share from January to March 2015.
     Bonnano also claimed the company hid patient deaths related to clinical trials for its Car-T cancer treatment technology and its connections to an illegal offshore stem cell clinic.
     When that information was divulged in a report posted by a blogger named Pump Stopper, on the financial news website, Cellular Biomedicine’s share price dropped by $7, or 21.7 percent, on April 7, 2015.
     U.S. District Judge William Orrick III dismissed the first amended complaint with leave to amend on May 20 this year, finding the plaintiffs failed to adequately plead loss causation.
     On Sept. 2, Orrick dismissed it for good, finding that further attempts would be futile. He pointed out that at an Aug. 17 hearing, “plaintiffs’ counsel stated that he did not want further leave to amend the complaint if I dismissed it again.”
     Orrick said Bonnano failed to explain when the “true facts” about the company were revealed or to identify which portions of the Pump Stopper report had not been made public.
     “Because the Pump Stopper Report only collected and opined on already public information, it does not constitute disclosure of ‘the truth’ as required for a corrective disclosure,” Orrick wrote.
     Cellular Biomedicine’s lead counsel, Adrienne Ward, called the dismissal a significant ruling for small companies such as her client, who are “easily targeted by short-sellers.”
     Ward, with Ellenoff Grossman & Schole in New York City, called the lawsuit an example of speculation unsupported by facts.
     “Today when you do have negative blog posts by anonymous short-sellers, companies that didn’t do anything wrong have a tool to fight back before facing the burden of class action discovery,” Ward said.
     In the second amended complaint, Bonnano claimed that paid marketing firms did not disclose their relationship to Cellular Biomedicine, or “buried [the disclosure] behind so many links that a reasonable investor would never think they existed, or believe there was a reason to look.”
     Orrick rejected that.
     “This argument fails,” the judge wrote. “It is irrelevant if the public information at issue comes directly from the company or from non-company sources; all public information will be incorporated into stock prices in an efficient market.”
     Cellular Biomedicine said in a statement that it was “extremely pleased,” and would continue its work in immune-oncology and stem-cell research.
     Plaintiffs’ attorney Jennifer Pafiti, with the Pomerantz firm in Beverly Hills, did not return a phone call seeking comment on the dismissal Friday afternoon.

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