A class action lawsuit was filed against Gritstone Bio, Inc. (GRTS) by Levi & Korsinsky on June 7, 2024. The plaintiffs (shareholders) alleged that they bought GRTS stock at artificially inflated prices between March 9, 2023 and February 29, 2024 (Class Period) and are now seeking compensation for their financial losses. Investors who bought Gritstone Bio stock during that period can click here to learn about joining the lawsuit.
Gritstone Bio is a clinical-stage biotechnology company focused on creating vaccines for treating cancer and other infectious diseases. The company is also investigating a potential vaccine (samRNA vaccine) candidate for the treatment and prevention of COVID-19 under a study called CORAL.
Gritstone’s Misleading Claims
According to the lawsuit, Gritstone and two of its senior officers (Individual Defendants) repeatedly made false and misleading public statements throughout the Class Period. Particularly, they are accused of omitting truthful information about Gritstone’s ability to launch the Phase 2b CORAL study, as indicated, and ancillary issues from SEC filings and related material.
During the Class Period, Gritstone consistently boasted about the potential improved outcome of its samRNA vaccine as against the traditional mRNA vaccines available in the market. For instance, the company noted in an annual report that “Unlike traditional mRNA, the RNA replicates once inside the cell, theoretically leading to high and durable antigen expression.”
In the same report, the company discussed its CORAL program and stated that it had received positive feedback from the pre-clinical trials of pharmacokinetic and toxicology studies. Further, the company mentioned that this feedback could be used to support the safety profile needed to begin the SARSCoV-2 clinical study.
Plaintiffs’ Arguments
The plaintiffs maintain that Gritstone and the Defendants deceived investors by lying and withholding important information about the company’s business practices and prospects during the Class Period. Importantly, the defendants are accused of misleading investors about the progress and prospects of its Phase 2b CORAL Study and associated challenges in maintaining its financial position.
The information became clear in a series of events that occurred in February 2024. On February 12, 2024, the company first announced that it was delaying the Phase 2b head-to-head trial of its next-generation COVID-19 vaccine to the fall of 2024 instead of beginning it in Q1 FY24. The company added that the extra time would allow it to procure fully GMP-grade raw materials for the vaccine to enhance its regulatory utility in the trial. The news sent GRTS shares down 7.6%.
Then on February 29, 2024, the company startled investors by announcing a 40% reduction in its workforce. The company also noted that the delay in launching the proposed Phase 2b CORAL Study caused the external funding that was expected to begin in the first quarter to stop. Unfortunately, the lack of short-term liquidity negatively impacted the company’s balance sheet and cash position and forced Gritstone to cut its workforce. The news triggered a 27.8% decline in GRTS shares.
Overall, Gritstone’s tall claims about the samRNA vaccine, the expected launch of the Phase 2b CORAL Study, and commercialization of the COVID-19 vaccine within the timeframe were short-lived. All these factors led to a 69% drop in GRTS shares so far in 2024.
