In re BioAge Labs, Inc., Securities Litigation

Background

The Southeast Pennsylvania Transportation Authority (SEPTA), on behalf of itself and a proposed class of similarly situated investors, sued BioAge Labs and ten corporate officers. SEPTA asserted claims under Sections 11 and 15 of the Securities Act of 1933. Section 11 addresses materially false or misleading statements or omissions in offering documents. Section 15 provides derivative liability for controlling persons based on Securities Act violations.

BioAge’s lead drug candidate was azelaprag, which it was developing for metabolic diseases. Before BioAge’s initial public offering, azelaprag had been tested in mice and in eight Phase 1 clinical trials involving 265 human participants. The offering documents described azelaprag as well tolerated, stated that its adverse-event profile was generally comparable to placebo except for mild, self-limited headaches, and stated that no serious adverse events had been reported.

The documents also described potential risks to BioAge’s clinical trials, including unexpected adverse events and side effects that could require the company to abandon a trial or development program. BioAge began the STRIDES Phase 2 trial roughly two months before the offering. The trial tested azelaprag, alone and with tirzepatide, in obese individuals over age 55.

About nine weeks after the initial public offering, BioAge announced that it was discontinuing STRIDES after 11 participants dosed with azelaprag developed transaminitis, meaning elevated liver enzyme levels. BioAge later abandoned development of azelaprag. SEPTA alleged that transaminitis was a serious and already recognized risk that the offering documents should have disclosed.

Legal standard and analysis

The defendants moved to dismiss under Rule 12(b)(6), which tests whether a complaint states a legally sufficient claim. The court applied the rule that a complaint must contain enough factual allegations to make liability plausible, rather than merely possible.

The court rejected SEPTA’s legal theory that BioAge’s general discussion of unexpected or atypical side effects implied that expected or typical side effects did not pose a risk. Relying on Ninth Circuit precedent, the court explained that Section 11 does not require an issuer to disclose every piece of information on a subject merely because it disclosed some information about that subject. SEPTA did not allege that BioAge expressly disclosed transaminitis in a misleading way or selectively presented safety results. Instead, it argued that the risk disclosures were misleading because they omitted transaminitis, which the court found was not a viable theory under the cited precedent.

The court also found that the complaint did not plausibly allege that transaminitis was nearly certain to disrupt STRIDES. In one earlier Phase 1 trial, one participant experienced increases in liver enzymes, but the event required no treatment, resolved 22 days after the last dose, and did not disrupt the trial. The court found that this isolated observation did not establish a trend, a serious event, or a likely or inevitable impact on STRIDES.

The court likewise found that the mouse studies did not show that azelaprag caused transaminitis. The mice on a high-fat diet that received azelaprag had lower liver enzyme levels than high-fat-diet mice that did not receive azelaprag. The court stated that monitoring liver enzymes showed only that BioAge had once considered the risk meaningful; the study results did not make transaminitis in STRIDES inevitable.

SEPTA also identified features of the STRIDES design that could increase the likelihood of transaminitis, including participant health conditions, physical exercise, certain medications, alcohol use, the use of tirzepatide, and attempts to produce weight loss. The court concluded that these allegations showed an increased risk, not that transaminitis was inevitable. Finally, the court found conclusory SEPTA’s allegation that transaminitis had already appeared in STRIDES participants before the offering. The complaint did not provide enough detail about the timing of symptoms or the frequency of liver-enzyme testing to support that inference.

Disposition

The court held that the complaint failed plausibly to allege a Securities Act violation. It granted defendants’ motion to dismiss and granted SEPTA leave to amend its complaint to cure the deficiencies identified in the order. The court required any amended complaint to be filed within 21 days of the order. The opinion does not state that the dismissal was with or without prejudice.