Tetraphase Pharmaceuticals, Inc.

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Case Summary

Company Name
Tetraphase Pharmaceuticals, Inc.
Stock Symbol
Class Period
March 8, 2017 and February 13, 2018, including purchasers in connection with the July 27, 2017 secondary public offering
Motion Deadline
September 25, 2018
Southern District of New York

The complaint charges Tetraphase, certain of its officers and the underwriters of its July 2017 secondary public offering (“SPO”) with violations of the Securities Exchange Act of 1934 and/or Securities Act of 1933.  Tetraphase is a clinical-stage biopharmaceutical company that develops antibiotics for serious and life-threatening multi-drug-resistant inflections.  Tetraphase’s lead product candidate, eravacycline, is a fully synthetic antibiotic for use in the treatment of multi-drug-resistant infections, including gram-negative infections.  During the Class Period, eravacycline was in global phase 3 testing in the Company’s IGNITE3 trial, which was looking at the safety and efficacy of once daily intravenous eravacycline compared to ertapenem for the treatment of complicated urinary tract infections (“cUTIs”).

On July 26, 2017, Tetraphase announced that it had commenced the underwritten offering of 10 million shares of its common stock at $6.50 per share pursuant to a registration statement and prospectus supplement filed on July 27, 2017.  The net proceeds from the SPO, which amounted to approximately $70 million, were to be used to fund the IGNITE3 trial for eravacycline.

The complaint alleges that throughout the Class Period and in the SPO offering materials, defendants made materially false and misleading statements and/or failed to disclose material adverse information about the Company’s business and prospects. Specifically, defendants failed to disclose that Tetraphase was increasing the patient enrollment in its IGNITE3 trial from 1,000 patients to 1,200 patients to meet the trial’s primary endpoints (within the 10% non-inferiority margin), and that the enrollment of more patients in the trial indicated that the existing population was inadequate to meet the trial’s primary endpoints.  As a result of defendants’ false statements and/or omissions, Tetraphase securities traded at artificially inflated prices during the Class Period, with the price of Tetraphase stock reaching a high of more than $9 per share.

Then on February 13, 2018, at market close, Tetraphase announced the top-line results from the IGNITE3 trial of eravacycline for the treatment of cUTIs.  The Company announced that the drug did not achieve its co-primary endpoints in the trial of “responder rate (a combination of clinical cure and microbiological success) in the microbiologic intent-to-treat . . . population at the end-of-IV . . . treatment visit and at the test-of-cure . . . visit, which were evaluated using a 10% non-inferiority margin.”  On this news, the price of Tetraphase stock fell $3.28 per share, or more than 60%, to close at $2.15 per share on February 14, 2018.

On March 6, 2018, when Tetraphase announced its fourth quarter and year-end financial results, it stated that it did not plan to further evaluate eravacycline for the treatment of cUTIs and had ceased its development of an oral formulation of eravacycline.

Class Period: March 8, 2017 and February 13, 2018, including purchasers in connection with the July 27, 2017 secondary public offering -
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