In re BioAge Labs, Inc., Securities Litigation

Background

The Southeastern Pennsylvania Transportation Authority (SEPTA) brought a putative securities class action against BioAge Labs and certain corporate officers. SEPTA purchased BioAge common stock during BioAge’s initial public offering and held it until BioAge discontinued its STRIDES clinical trial for azelaprag. BioAge later abandoned further development of azelaprag.

The STRIDES trial involved obese participants over age 55 and tested azelaprag with tirzepatide. BioAge discontinued the trial after 11 participants developed transaminitis, a condition involving elevated liver enzymes that can indicate liver inflammation or injury. BioAge announced the discontinuation on December 6, 2024, and its stock price fell more than 76% the next day.

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 can impose liability on controlling persons for violations of the Securities Act.

SEPTA’s Two Theories

SEPTA’s first theory was that BioAge’s offering documents discussed severe, unexpected, or atypical risks in a way that implied ordinary or expected risks—such as transaminitis—did not threaten the STRIDES trial. SEPTA relied in part on statements about BioAge’s goal of improving the tolerability of weight-loss medicines and on disclosures about an earlier participant who developed transaminitis.

The court held that this theory depended on an impermissible negative inference. Discussing certain risks did not imply that BioAge had disclosed every possible side effect or that other side effects posed no risk. The court also found that the cited statements concerned BioAge’s goals or the characterization of earlier events and did not suggest that only serious adverse events could threaten azelaprag’s development.

SEPTA’s second theory was that BioAge misleadingly described side-effect risks in hypothetical terms even though transaminitis had already appeared among STRIDES participants when BioAge conducted its offering. The court found that SEPTA’s own allegations described transaminitis as a common, expected, and mild side effect rather than one “atypical of, or more severe than” known side effects. Because the cited risk disclosure was limited to serious, atypical, or more severe side effects, the court concluded that the hypothetical language did not apply to transaminitis. Whether transaminitis had appeared before the offering was therefore irrelevant to that theory.

The court added that, even if the timing were relevant, SEPTA had not plausibly alleged that transaminitis appeared in STRIDES participants before the initial public offering. Allegations about the timing of transaminitis in one earlier study, the frequency of participant medical visits, and the characteristics of the STRIDES participants did not establish that transaminitis typically appeared early enough to have been known before the offering.

Ruling

The court applied the standard for a motion to dismiss for failure to state a claim: the complaint had to allege facts that, if accepted as true, plausibly showed entitlement to relief. It concluded that SEPTA’s amended complaint did not meet that standard.

Richard Seeborg granted BioAge’s motion to dismiss with prejudice and without leave to amend. The order also denied BioAge’s request for judicial notice, finding that judicial notice was not needed to resolve the motion.