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District Of Massachusetts Dismisses Putative Class Action Against Gene Therapy Company For Failure To Adequately Allege Misstatements And Scienter
09/22/2026On September 15, 2026, Judge Brian E. Murphy of the United States District Court for the District of Massachusetts dismissed with prejudice a putative class action asserting claims under the Securities Exchange Act of 1934 against a gene therapy company and certain of its executives. In re Sarepta Therapeutics Sec. Litig., 2026 WL 2720122 (D. Mass. Sept. 15, 2026). Plaintiffs alleged that defendants made material misstatements about the safety of the company’s flagship gene therapy product, the progress of a separate gene therapy program, and the status of a long-running confirmatory clinical trial. The Court held that most of the challenged statements were not actionable, and that plaintiffs failed to adequately allege scienter for any of the challenged statements.
The company is a biopharmaceutical company focused on developing gene therapies and RNA based therapies for neuromuscular diseases. Id. at *1. Plaintiffs contended that statements about the company’s flagship product, certain gene therapies, and a clinical trial for an RNA based therapy were false and misleading.
According to plaintiffs’ allegations, the company’s flagship product, a gene therapy for a rare and devastating genetic condition primarily afflicting young boys, received accelerated FDA approval in June 2023 for a limited patient population, over the objections of an FDA review team and members of an FDA advisory committee. Id. at *2. The company conducted further clinical trials that the FDA required as a condition of its approval and plaintiffs contended that the company’s internal safety data from these trials allegedly showed the product created elevated liver toxicity risks, particularly for non-ambulatory patients. Id. at *3. Throughout this period the company spoke positively about its product. Beginning in March 2025, three patient deaths occurred—two of the patients were non-ambulatory patients treated with the product and a third patient was treated with a related therapy at a higher dose. Id. at *3–4. Plaintiffs alleged that the disclosures of these patient deaths, along with the disclosure of a European clinical trial freeze, the addition of a black-box warning to the product, and the product’s ultimate withdrawal from the market, allegedly caused the company’s stock price to decline substantially. Id. at *4.
Plaintiffs’ allegations also addressed the company’s separate gene therapy program to treat a particular muscular disease, Limb-Girdle Muscular Dystrophy. Id. This program sought to treat all five subtypes of the disease using the same platform as its flagship product. Id. Plaintiffs alleged that the company pulled back on its treatment efforts while making positive public statements about the therapy program. Id. at *5. The company ultimately announced that it would reduce its investments in this treatment program.
Finally, plaintiffs included allegations regarding the company’s RNA based therapies, also referred to as exon-skipping therapies. Id. At the start of the putative class period, these therapies were responsible for the majority of the company’s revenue. Id. The company conducted a long running clinical trial to test these therapies, but the clinical trial was impacted by the COVID-19 pandemic, which caused patients to miss doses. Id. The company ultimately was unable to publish results that were statistically significant due to the number of patients whose data was not collected during the pandemic. Id.
Plaintiffs challenged 59 statements across three categories: (i) statements characterizing the gene therapy’s safety profile as “favorable,” “stable,” “manageable,” and comparable to or better than competitors, while internal data purportedly showed elevated liver toxicity risks, especially for non-ambulatory patients; (ii) statements touting “rapid progress” in a separate gene therapy program that had allegedly stalled due to manufacturing difficulties and resource diversion; and (iii) statements about the status of the RNA-based therapy clinical trial that allegedly understated the impact of COVID-19 disruptions. For these allegations, plaintiffs relied on statements from seven confidential former employees and internal safety data.
First, the Court determined that the vast majority of the challenged safety-related statements were non actionable opinions about clinical data. The Court explained that as long as the company’s characterizations of its data have a reasonable basis, they are non-actionable opinions. Id. at *11. Accordingly, the Court held that the FDA’s initial and expanded approvals rendered defendants’ optimistic characterizations of the safety data “per se reasonable as a matter of law.” Id. at *11. The Court distinguished this case from a First Circuit case, Shash v. Biogen, 84 F.4th 1 (1st Cir. 2023), in which defendants had allegedly affirmed that “all data” supported their position. Id. Rather, the Court explained that, here, defendants’ characterizations aligned with the FDA’s own conclusions and were reflective of the fact that the company’s data was subject to multiple interpretations, while also noting that defendants repeatedly disclosed liver toxicity risks when making statements about the company’s flagship product. Id. at *12.
The Court further found certain post-disclosure statements were objectively true when made or were not adequately alleged to be false. For example, while plaintiffs claimed that an executive lied about whether patients treated for Limb-Girdle Muscular Dystrophy suffered from liver failure in light of the death of the third patient who suffered from this disease, the Court emphasized plaintiffs did not adequately allege when the patient died relative to the applicable statement. Id. at *13. And the Court held that comparative statements about the company’s competitors were grounded in the FDA-approved label, and that superlative characterizations the company supplied—such as “one of the most impressive safety profiles”—constituted non actionable puffery. Id.
However, the Court concluded that certain alleged misstatements suggesting similar outcomes for ambulatory and non-ambulatory patients were potentially actionable—such as asserting there was “no difference” in the “risk of elevated liver enzymes or liver injury” between ambulatory and non-ambulatory patients. Id. at *10, *14. The Court explained that, at the time these statements were made, the company’s internal data allegedly showed non-ambulatory patients faced at least a 34% increased liver risk. The Court distinguished these statements from broader statements about the “overall safety profile”—which the FDA’s approval rendered reasonable—because these statements specifically compared liver injury risk between populations, a claim the FDA had not endorsed. Id. at *14.
Second, the Court found that certain challenged statements about the separate gene therapy program were non-actionable puffery—including characterizations such as “rapidly progressing” and “very, very excited.” Id. For the remaining such statements, the Court concluded that they were only alleged to be false on the basis of allegations from confidential former employees that lacked sufficient reliability—two of the four relevant former employees did not work at the company during the class period, and the roles of the remaining two were insufficiently connected to the program’s clinical progress. Id. at *15–16.
Finally, as to the confirmatory trial, the Court found that defendants had made clear disclosures about COVID-19 disruptions in the same SEC filings plaintiffs cited. Id. at *16. While the company noted that the clinical trial was “complete” and “fully enrolled,” the Court held that these statements were not contradicted by any particularized factual allegations. Id.
The Court independently dismissed all claims—including the two actionable misstatements—for failure to adequately allege scienter. Evaluating the complaint holistically, the Court concluded that plaintiffs alleged no “telltale” scienter motives, such as that the executive defendants engaged in insider trading or made statements to preserve their jobs. Id. at *17. Instead, plaintiffs contended that the individual defendants were incentivized to monitor the company’s clinical study in light of commercial pressures, and argued that their confidential witnesses confirmed that the executives were informed about the problems the company’s products faced. Id. But the Court explained that “all corporate executives face pressure to deliver positive financial returns, especially in competitive industries.” Id. at *18. And the Court determined that none of plaintiffs’ confidential witnesses could establish what defendants actually knew or believed, as most had left the company before or during the class period and none had direct contact with defendants around the time of their statements. Id.
Even assuming defendants were aware of all clinical data and the former employees’ concerns, the FDA’s repeated approvals supported a stronger innocent inference—that executives genuinely believed their statements. The Court emphasized that defendants’ repeated voluntary disclosures of liver toxicity risk “erode[d] inferences of scienter,” and that such warnings “are not the actions of a company bent on deceiving investors.” Id. at *19.
The Court denied leave to replead, concluding that plaintiffs had already amended once and further amendment would be futile because they had identified no new facts that would be included in a second amended complaint. Id.
Securities Litigation