A class action lawsuit was filed against Metagenomi Inc. (MGX) by Levi & Korsinsky on September 26, 2024. The plaintiffs (shareholders) alleged that they bought MGX stock at artificially inflated prices during its IPO, which was on or about February 13, 2024, and are now seeking compensation for their financial losses. Investors who bought Metagenomi stock during that period can click here to learn about joining the lawsuit.
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California-based Metagenomi is a precision genetic medicines company, focused on developing novel therapies based on its proprietary and comprehensive metagenomics-derived genome editing toolbox.
Importantly, Metagenomi’s claims about its strategic partnership with pharma giant Moderna (MRNA) are at the heart of the current complaint.
Metagenomi’s Misleading Claims
According to the lawsuit, Metagenomi and two of its senior officers and four of its directors (defendants), who were involved in drafting, reviewing, and/or distributing the material in question, allegedly made false and misleading claims in the registration statement.
Particularly, they are accused of wrongful preparation of the registration statement and prospectus associated with the IPO. As a result, they contained untrue statements of important facts and lacked corrective statements required by law.
For instance, the registration statement and final prospectus referred to untrue statements about the duration of Metagenomi’s relation with Moderna. The final prospectus noted that the company and Moderna entered into a Strategic Collaboration and License Agreement in October 2021. The agreement focused on advancing new genome editing system for in vivo human therapeutic applications.
Furthermore, it stated that Moderna and Metagenomi had undertaken multi-year agreements on one or more programs in the RT and DT Fields. The prospectus also stated that the initial research term of the Moderna RT program was four years with the scope of extending it for another three years. Meanwhile, the term for the Moderna DT program was four years.
Moreover, the prospectus noted that the Moderna Agreement would continue on a “licensed product-by licensed product and country-by-country basis,” until the expiration of the applicable royalty term. The royalty terms were contingent on meeting certain criteria.
However, subsequent events (discussed below) revealed that Metagenomi allegedly misled investors about its relationship with Moderna, which could have been one of the biggest catalysts for commercial sales in the future.
Plaintiffs’ Arguments
The plaintiffs maintain that the Defendants deceived investors by lying and misrepresenting critical information about the company’s business collaboration with Moderna during the IPO period, which induced investors to buy the stock in the IPO.
The information became clear on May 1, 2024, just a few months after the IPO. Metagenomi announced that Moderna and the company had agreed to mutually terminate the collaboration agreement on April 26, 2024, without giving any specifics or reasons. The company stated that following the termination, Metagenomi will not receive any future payments from Moderna that were part of the earlier collaboration. MGX shares plunged 12.4% on the news on May 2.
To conclude, Metagenomi allegedly made misleading representations of its collaboration with Moderna, leading to investor excitement about its future growth prospects. Since its IPO, MGX shares have lost more than 80% of their value, causing massive damage to shareholder returns.
