TransEnterix (NYSE:TRXC) last week won the dismissal of a shareholders lawsuit brought over the collapse of its SurgiBot program, with a federal judge ruling that the company and its management and investors didn’t mislead shareholders about the robot-assisted surgery platform’s prospects with the FDA.
The case dates back to the spring of 2016, when Research Triangle Park, N.C.-based TransEnterix’s shares plunged after it revealed that the FDA denied its 510(k) application for SurgiBot, saying that the platform didn’t meet the criteria for substantial equivalence. The company soon shelved SurgiBot and turned to the already-CE-Marked ALF-X device it bought in a $100 million deal with Italy’s Sofar last year.
That prompted two sets of investors to file securities class actions seeking to cover investors who owned TRXC shares between Feb. 10 and May 10 last year. They alleged that TransEnterix and its management “made materially false and misleading statements” about SurgiBot’s prospects with the FDA in press releases, conference calls and SEC filings (the cases were later consolidated before Judge James Dever III of the U.S. District Court for Eastern North Carolina). Specifically, the suits claimed that TransEnterix failed to provide human-factors data to the FDA and kept that knowledge from investors.
“The amended complaint’s allegations do not support this theory,” Dever wrote in an Oct. 6 ruling. “The amended complaint alleges that the FDA’s public forum and guidance expressed the FDA’s expectation that 510(k) applications for products like SurgiBot would contain human-factors data. During SurgiBot’ s review process, the FDA communicated with TransEnterix in a manner consistent with the FDA’s public statements and guidance. The FDA’s request for additional information in August 2015 ‘focused on human factors testing and evaluation,’ and the TransEnterix defendants ‘attempted to satisfy the FDA’s requests concerning human-factors issues.’ The FDA ultimately denied SurgiBot’s 510(k) application because it ‘was insufficient for “substantial equivalence” findings.’ These allegations do not support an inference that SurgiBot’s 510(k) application lacked human-factors data and thus was unlikely to win approval.
“Plaintiffs do not claim that this determination turns solely on the existence or not of sufficient human-factors data. In short, the amended complaint’s allegations do not warrant the inference plaintiffs draw. Plaintiffs have alleged no specific facts to support their assertion that approval of SurgiBot’ s 510(k) application was ‘substantially unlikely’ in light of the fact TransEnterix had not provided human factors data,” he wrote in dismissing the case with prejudice, ordering each side to bear its own legal costs.
“We are pleased that the securities class action suit was dismissed,” TransEnterix president & CEO Todd Pope said in prepared remarks. “We remain confident in achieving FDA 510(k) clearance of the Senhance Surgical Robotic System and continue to focus on transitioning toward U.S. commercialization.”
TRXC shares were up 1.4% to $1.505 apiece today in mid-day trading.