Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

The TransEnterix Investor Group v. Transenterix, Inc.

United States District Court, E.D. North Carolina, Western Division

September 22, 2017

THE TRANSENTERIX INVESTOR GROUP, Individually and on behalf of All Others Similarly Situated, Plaintiffs,
v.
TRANSENTERIX, INC., et al., Defendants.

          ORDER

          JAMES C. DEVER III CHIEF UNITED STATES DISTRICT JUDGE

         On June 2, 2016, plaintiff TransEnterix Investor Group, individually and on behalf of others j similarly situated (collectively, "plaintiffs"), sued TransEnterix, Inc. ("TransEnterix"), two of its officers, several of its directors, and the underwriter of one of TransEnterix's securities offerings (collectively, "defendants") for violations of the Securities Act of 1933 and the Securities Exchange Act of 1934 [D.E. 1]. On September 26, 2016, plaintiffs amended the complaint [D.E. 62]. On November 8, 2016, defendants moved to dismiss the amended complaint under Rule 12(b)(6) of the -Federal Rules of Civil Procedure [D.E. 82, 84] and filed memoranda in support [D.E. 83, 85]. On December 22, 2016, plaintiffs responded in opposition [D.E. 88]. On January 20, 2017, defendants replied [D.E. 92, 93]. As explained below, the court grants the motions to dismiss.

         I.

         TransEnterix is a medical-device company that manufactures robotics for use in surgeries. Am. Compl. [D.E. 62] ¶ 3. Among TransEnterix's products was the robotically enhanced surgical device known as the SurgiBot system ("SurgiBot"). Id. With a price tag of $500, 000, SurgiBot was designed as a lower-cost alternative for the surgical-robot industry. Id.

         On June 1, 2015, TransEnterix submitted a "510(k) application" for SurgiBot to the Food and Drag Administration ("FDA"). Id. ¶¶ 4, 7. Otherwise known as a "premarket notification, " a 510(k) application gives the FDA 90 days' notice of a manufacturer's intent to market a medical device. Id. ¶ 5. During the intervening 90 days, the FDA determines whether the device is "substantially equivalent" to a device already on the market. Id. Until the FDA makes that determination, a manufacturer cannot market the device. Id. ¶ 6.

         On July 27, 2015, the FDA hosted a public forum designated "Robotically-Assisted Surgical Devices: Challenges and Opportunities." Id. ¶28(a). At the forum, speakers-including the FDAjs Director of the Office of Device Evaluation and Deputy Director of the Division of Surgical Devices!-signaled an increased scrutiny of robotically assisted devices like SurgiBot. Id.. ¶ 28(a)-(g). For example, the FDA expected applications to include "human-factors data, " i.e., the application of knowledge about medical-device users' abilities, limitations, and other characteristics to the design of medical devices. Id. ¶ 28(d), (h).

         In August 2015, the FDA requested additional information from TransEnterix. Id. ¶¶ 28(k), 53. "Among other things, the FDA's request... focused on human factors testing and evaluation." Id. ¶ 28(1). TransEnterix "immediately undertook the actions necessary to respond to [the] request." Id. ¶ 72. In February 2016, TransEnterix finalized its response, "attempt[ing] to satisfy the FDA's requests concerning human factors issues." Id. ¶ 28(k)-(1). "In total, over the course of the submission [TransEnterix] provided over 11, 000 pages of requested material to the FDA." Id. ¶ 72.

         In February 2016, the FDA issued several guidance documents. Id. ¶ 28(h). The guidance expressed the FDA's expectation that manufacturers of robotic surgery devices would support their 510(k) applications with human-factors data. Id. The guidance recommended that manufacturers "either provide the data and testing identified within the guidance documents or provide a detailed explanation as to why such data is not necessary." Id.

         On February 9, 2016, TransEnterix commenced an "at-the-market" stock offering. Id. ¶¶ 2, 31, 71, 97, 118. TransEnterix detailed the offering in a supplemental prospectus (the "2016 ATM Prospectus") concerning the company's Form S-3 Registration Statement initially filed with the SEC on January 8, 2014. See Id. ¶¶ 101, 104. The 2016 ATM Prospectus stated, in relevant part, that:

On June 1, 2015, we submitted our 510(k) application to the FDA for clearance of the SurgiBot System which was accepted for review. In August 2015, the FDA requested additional information related to the SurgiBot System 510(k) submission. We responded to that additional information request in February 2016. We anticipate that we will receive FDA clearance for the SurgiBot System by the end of the first quarter of 2016 and thereafter intend to launch sales of the SurgiBot System during the second quarter of 2016.

Id. ¶ 104 (emphasis in original). The 2016 at-the-market offering involved the sale of approximately 8.7 million shares. Id. ¶¶ 31, 119. Plaintiffs purchased common stock "in connection with" the 2016 at-the-market offering. Id. ¶ 118.

         The day after TransEnterix commenced the at-the-market offering, TransEnterix announced via a press release that it had completed its response to the FDA's request for additional information and discussed plans for SurgiBot:

Since September 3 0, 2015, the Company has raised $ 18 million in net proceeds at an average price of $3.23 per share under its $25 million "at-the-market" (ATM) equity sales facility that was established in February 2015. There is no further availability under this facility. The proceeds from these sales will be utilized to continue to support investments for the commercialization o/the ALF-X® system in Europe, as well as the SurgiBot in the United States, following FDA clearance.
* * *
We are pleased to have completed our response to the FDA and strengthened our balance sheet. We continue to expect FDA clearance for the SurgiBot System in the first quarter of this year, and our cashposition allows us to accelerate our transition to commercializing both the ALF-X and the SurgiBot.

Id. ¶ 44 (emphasis in original).

         On March 3, 2016, TransEnterix issued a press release expressing optimism for SurgiBot's FDA approval prospects and the company's intentions to commercialize SurgiBot once approved:

2015 was a transformative year for TransEnterix, as we are now positioned as a global surgical robotics company. In 2016, our focus will shift from product development to commercial execution" said Todd M. Pope, President and Chief Executive Officer of TransEnterix. "We will continue building the infrastructure to support the commercialization of the ALF-X in multiple countries that accept CE Mark, and we remain focused on achieving FDA clearance for the SurgiBot by the end of March, 2016, and preparing for a U.S. commercial launch."
* * *
During 2016, the Company will continue to expand its sales and service infrastructure for the ALF-X System in Europe and the Middle East. Following SurgiBot FDA clearance, the Company intends to expand its U.S. sales and service infrastructure, develop training sites and work with key opinion leaders to gain clinical experience on SurgiBot. The Company plans to submit a 510(K) application to the FDA for the ALF-X system in the fourth quarter of 2016 and capitalize on the U.S. market opportunity in 2017 with a dual-platform portfolio.

Id. ¶¶ 47-48 (emphasis in original).

         In a conference call that same day, two of TransEnterix's officers echoed the press release.

         TransEnterix's President and CEO Todd Pope ("Pope") said:

In the second quarter of 2015, we filed our 510(k) which was a big undertaking. It was a very extensive and comprehensive filing. We felt very good about it. As planned, we knew we'd hear back from the FDA with some of their feedback and questions, which we did in the Q3. And we 've been taking the last quarter or two to really build up our answers to their questions. We 've had a very proactive relationship with the FDA, very good. It continues to this day. And in the first quarter of 2016, we finalized our response and sent it back to the FDA.
We built eight complete systems of the SurgiBot and over 1, 200 instruments in support of this machine. So we really felt like we got good experience with our manufacturing. We continue to expect about Ql FDA clearance, which would be later this month. I just have to say, as I step back and look at 2015; it was a tremendous year for the company. We really hit all of our targets that we set out to and then we took on a new one with the acquisition of ALF-X and that's turned out to be tremendous. So we're really proud of 2015 and super excited as we turn the page to look toward 2016.
* * *
With the SurgiBot, following clearance, which we expect later this month, we want to expand our U.S. sales and service infrastructure. We want to early on develop trainee sites and work with those sites to develop key opinion leaders and gain valuable clinical experience as you do any time you launch a new platform.
* * *
[W]ith SurgiBot following our FDA clearance, our plans are as follows. We want to hire three area sales managers shortly after clearance. As we've been talking to you, we've been interviewing for a while. We've got atremendous pipeline of candidates and we've got them lined up to be able to make those hires. And we want to go out and establish our commercial foundation. It always involves developing early clinical experience, making sure that the sites you sell into are willing to host other accounts and be a training site, you want to get a KOL or key opinion leader network, so they can go out and not only have a podium presence but a publication presence. And then we want to build a customer support infrastructure with service and the other things that go around early commercialization.

Id. ¶ 50 (emphasis and alteration in original). When asked about another of TransEnterix's devices-the ALF-X system-Pope responded that the company had yet to meet with the FDA concerning the ALF-X and wanted to "finalize [its] work with SurgiBot with [the FDA] and then turn [its] attention to" the ALF-X. Id. ¶ 51. When asked for insight into TransEnterix's last interaction with the FDA, Pope stated that:

As we've characterized in the past, we filed, [the FDA] gave us their questions in a timely manner as we expected, we responded to their questions in a timely manner as they expected. And they confirmed that they received our questions and they're working through them. We have a good interaction with them. Any interaction over the prior month or a couple of weeks have just been clarifying questions. So everything continues to be on the path that we set out last year.

Id. ¶ 52 (emphasis and alteration in original).

         On March 3, 2016, TransEnterix also filed with the SEC its 2015 annual report on Form 10-K (the "2015 Form 10-K"). Id. ¶ 53. In relevant part, 2015 Form 10-K stated:

In August 2015, the FDA requested additional information related to the SurgiBot System 501(k) submission. The Company responded to the additional information request in February 2016. The Company anticipates that it will receive FDA clearance for the SurgiBot System by the end of the first quarter of 2016, and thereafter intends to launch sales of the SurgiBot System during the second quarter of 2016.

Id. (emphasis in original).

         On March 9, 2016, the price of TransEnterix stock closed at $4.36/share, up from $3.20/share on March 3, 2016, the day of TransEnterix's press release and conference call. Id. ¶ 56.

         On March 11, 2016, TransEnterix filed prospectuses concerning the sale of shares of TransEnterix common stock to certain individuals or entities. Id. ¶ 57. Both prospectuses stated:

On June 1, 2015, we submitted our 510(k) application to the FDA for clearance of the SurgiBot System which was accepted for review. In August 2015, the FDA requested additional information related to the SurgiBot System 510(k) submission. We responded to that additional information request in February 2016. We anticipate that we will receive FDA clearance for the SurgiBot System by the end of the first ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.