||John Harvey Schneider, et al. v. Natera, Inc., et al.
||United States District Court for the Western District of Texas
||Honorable Lee Yeakel
British Airways Pension Trustees Limited (“BAPTL”) and Key West Police & Fire Pension Fund (“Key West P&F”)
||Natera, Inc., Steve Chapman, Michael Brophy, Matthew Rabinowitz, Paul R. Billings, Roy Baynes, Monica Bertagnolli, Roelof F. Botha, Rowan Chapman, Todd Cozzens, James I. Healy, Gail Marcus, Herm Rosenman, Jonathan Sheena, Morgan Stanley & Co. LLC, Goldman Sachs & Co. LLC, Cowen and Company, LLC, SVB Leerink LLC, Robert W. Baird & Co. Inc., BTIG, LLC, and Craig-Hallum Capital Group LLC
||February 26, 2020 to March 14, 2022, inclusive
This securities fraud class action arises out of Natera’s representations and omissions about the purported “superiority” of its kidney transplant rejection test, Prospera, compared to a competitor’s product, AlloSure, and the revenues and demand associated with the Company’s flagship non-invasive prenatal screening test, Panorama. During the Class Period, Defendants touted Prospera’s superiority over AlloSure based on what they represented as a head-to-head comparison of underlying study data. However, internal Natera emails revealed that Natera recognized that the comparisons were unsupported and misleading. Further, Defendants consistently highlighted the impressive revenue performance and seemingly organic demand for Panorama. However, the market was unaware that Natera employed several deceptive billing and sales practices that inflated these metrics. Meanwhile, Defendants, CEO Steve Chapman, CFO Matthew Brophy, and co-founder and Executive Chairman of the Board, Matthew Rabinowitz, sold more than $137 million worth of Natera common stock during the Class Period. Natera also cashed in, conducting two secondary public offerings, selling investors over $800 million of Natera common stock during the Class Period.
The truth regarding Prospera’s false claims of superiority and the Company’s deceptive billing and sales practices was disclosed to the public through disclosures on March 9, 2022, and March 14, 2022. Natera’s stock price fell significantly in response to each corrective disclosure, causing massive losses for investors.
On October 7, 2022, Plaintiffs filed an 89-page amended complaint on behalf of a putative class of investors alleging that Natera, Chapman, Brophy, Rabinowitz, and former Chief Medical Officer and Senior Vice President of Medical Affairs, Paul R. Billings, violated Sections 10(b) and 20(a) of the Securities Exchange Act. Plaintiffs also allege that Defendants Chapman, Brophy, and Rabinowitz violated Section 20A of the Exchange Act by selling personally held shares of Natera common stock, while aware of material nonpublic information concerning Prospera and Panorama. In addition, Plaintiffs claim that Defendants Chapman, Brophy, Rabinowitz, several Natera directors, and the underwriters associated with Natera’s July 2021 secondary public offering violated Sections 11, 12(a)(2), and 15 of the Securities Act.
On December 16, 2022, Defendants filed motions to the complaint, which Plaintiffs opposed on February 17, 2023. On September 11, 2023, the Court entered an Order granting in part and denying in part Defendants’ motions to dismiss the complaint. In the Order, the Court sustained all claims arising under Sections 10(b), 20(a), and 20(A) of the Exchange Act based on the complaint’s Panorama allegations. The Court also sustained Plaintiffs’ Securities Act claims based on the Panorama fraud that arose from Defendants’ disclosure violations under two SEC regulations (Item 105 and Item 303), both of which required the provision of certain material facts in the Company’s offering materials. The case will now proceed to fact discovery.
Read Amended Consolidated Class Action Complaint Here