On March 24, 2026, Judge Eumi K. Lee of the Northern District of California sustained the core of Plaintiffs’ Securities Act claims in Vreeland v. Metagenomi, Inc., a Pomerantz-led class action for investors who purchased Metagenomi stock traceable to its February 2024 IPO.
The Court held that Plaintiffs plausibly alleged that Metagenomi’s registration statement misled investors by describing the expected progress of the company’s flagship Moderna collaboration while omitting the “breakdown” of that relationship, and by presenting in the risk disclosures that the collaboration’s abandonment was an “unrealized risk” when, as alleged, that risk had already materialized.
The Court’s order reaffirms that there are limits to relying on boilerplate risk disclosures when the issuer is aware of facts showing that the risks outlined are no longer merely hypothetical.
The Offering Documents Tout Metagenomi’s Moderna Collaboration, a Partnership Analysts Valued at $3 Billion.
Metagenomi is a genetic medicines company that mines a proprietary database of microbial genomes to discover new gene-editing tools. In February 2024, Metagenomi went public, offering investors the chance to get in on the ground floor of its “novel” gene-editing technology to target disease. At the time of its IPO, every program in its pipeline was preclinical, the company had no approved products, and all of its revenue was collaboration revenue. As the Court endorsed, collaborations with established biotechnology companies were “a critical feature of the company’s value proposition to investors.”
Critically, Metagenomi represented that its technology was backed by the resources and expertise of pharmaceutical titan Moderna, pursuant to a partnership collaboration analysts had valued at 3 billion dollars. Under a 2021 Strategic Collaboration and License Agreement, the two companies agreed to work together on three programs to develop in vivo gene-editing therapies, overseen by joint committees. The lead program was a co-development effort to treat primary hyperoxaluria type 1 (“PH1”), a rare metabolic disorder that can lead to kidney failure.
The IPO offering documents toute, that the collaboration was ongoing, productive and would continue. For instance, it asserted that the collaboration had generated groundbreaking data for treatment of PH1, and that the Metagenomi-Moderna PH1 project would yield more milestone data by the end of 2024. Specifically, the prospectus told investors that Metagenomi and Moderna had “achieved preclinical proof-of-concept” in the PH1 program, were “in the final stages of confirming the candidate to take into [non-human primate] studies,” and “expect[ed] to have NHP data in 2024 to support final development candidate selection.” Its risk factors warned, in general terms, that “disagreements with collaborators” might cause delays or terminations, that collaborators “may” delay, defund, or abandon programs, and that “collaborations may be terminated for the convenience of the collaborator.”
Investors were excited by the opportunity to support this Moderna-backed collaboration, and the IPO was a success: Metagenomi priced its IPO on February 9, 2024, selling 6.25 million shares at $15.00 per share and raising approximately $94 million.
That is why, less than three months after the IPO, on May 1, 2024, the market was shocked to learn that Metagenomi’s partnership with Moderna had been “mutually terminated.” Analysts wondered at the timing, so close to the IPO, given that Metagenomi framed this collaboration as “a critical part of [its] core thesis” and that Metagenomi’s “los[s] [of] a partner like Moderna at this early stage in development raises more questions than answers”—sending Metagenomi’s stock tumbling. The stock, already down to $7.04, fell to $6.17 the next trading day and kept falling–by the time this action was filed in September 2024, it traded at about $2.
The Alleged Reality Behind the Rosy Moderna Picture
As the complaint alleges, at the time of the IPO, however, this shock—and resulting financial losses to Plaintiffs—were knowable outcomes. Investigation showed that, behind the scenes at Metagenomi, former employees conveyed that the partnership between Moderna and Metagenomi began deteriorating in mid-2023 and was effectively over by the time of the IPO in February 2024. Drawing on those accounts, the complaint alleges the reality that collaboration was “falling apart,” the regular joint meetings had stopped, and communication between the companies had ceased. One former employee working on the PH1 project revealed that no meaningful work was being done on that program—let alone enough work that could support the IPO offering documents’ timeline for new milestone data.
The complaint, brought on behalf of IPO purchasers, asserts claims under Sections 11 and 15 of the Securities Act of 1933 against Metagenomi and the officers and directors who signed the registration statement. Defendants moved to dismiss, claiming the challenged statements accurately described the agreement, that the PH1 statements were forward-looking and protected by the safe harbor and that the risk factors warned of the precise risks and of Moderna’s right to terminate at any time.
The Court Sustains the PH1 and Risk Factor Statements
While the Court agreed with Defendants that general statements that Metagenomi “will collaborate” with Moderna on research programs were not actionable, as to the statements about the PH1 program, the Court held, those were “more detailed … about the expected future progress of the Moderna collaboration.” Crediting the former employees’ accounts that “no one from either side” was attending the joint meetings and that communication had “stopped” altogether, the Court held: “If these allegations are true, it was misleading to state that Metagenomi expected the collaboration to progress further toward NHP studies and the selection of a final development candidate while omitting the total breakdown of its relationship with Moderna.”
In so holding, the Court relied on Glazer Capital Management, L.P. v. Forescout Technologies, Inc., in which the Ninth Circuit held it was misleading for a company to say it expected a merger to close while omitting that the counterparty was considering not closing. The Court then rejected the Defendants’ argument that the statements about the future of the PH1 program were protected by the safe harbor. Under Forescout, cautionary language protects a projection only if it is meaningful, and the registration statement “did not meaningfully disclose the alleged breakdown in the Moderna collaboration.” [Pomerantz, as Lead Counsel in the Forescout securities litigation, secured this precedential decision in the Ninth Circuit.]
As to the risk factors, the Court held those were independently actionable because they “discussed the abandonment of collaboration efforts as an unrealized risk, but the risk had ‘already materialized’ with respect to Moderna.” As Judge Lee reasoned, “[t]he registration statement warned generally about ‘disagreements with collaborators’; the possibility that collaborators may ‘delay,’ ‘provide insufficient funding for,’ or ‘abandon’ clinical trials and product candidates; and the fact that ‘collaborations may be terminated for the convenience of the collaborator,’” but the risk as alleged in the complaint was not merely hypothetical at the time of the IPO.
The complaint also alleged a risk-factor theory as a freestanding violation of Item 105 of Regulation S-K, which requires a registrant to disclose the material factors that make an offering speculative or risky. While the motion was pending, the Ninth Circuit held in Sodha v. Golubowski that “mischaracterizing a past harm as a future risk cannot, standing alone, violate Item 105.” After supplemental briefing on Sodha, Judge Lee applied that holding to dismiss the Item 105 theory, but it did not alter the Court’s conclusion that the risk disclosures violated Section 11.
The Court also rejected any suggestion that the complaint had to satisfy the heightened pleading standard of Rule 9(b). Because Plaintiffs expressly disclaim fraud and plead allegations “consistent with negligence,” the Section 11 claims are not “grounded in fraud,” and ordinary notice pleading under Rule 8 governs. The Court also refused to resolve loss causation on the pleadings, reaffirming loss causation is not an element of a Section 11 claim but an affirmative defense of “negative causation” on which Defendants bear a “heavy burden.” Here, Defendants could not carry that burden where the registration statement “gave investors the impression that the Moderna relationship was productive” and the stock fell when the termination was disclosed.
A RoadMap for Addressing Known Risks in IPOs
This case provides an example where a court applied Forescout’s wavering-counterparty principle outside the merger context. A statement of expected progress in a collaboration, partnership or supply relationship carries an implicit representation that the counterparty is still on board. The Court’s ruling confirms that where the complaint alleges facts showing the issuer knows otherwise, the statement is misleading and labeling it as “forward-looking” will not save it.
Judge Lee’s order also reaffirms that risk factors are actionable statements, not shields. Since Berson v. Applied Signal Technology and Alphabet, the Ninth Circuit has held that a company may not present as hypothetical a risk that has already come to pass, and here, Metagenomi’s risk factors were misleading because of contrary facts known or knowable to the company when it published them. Under Sodha, which Defendants had hoped would narrow the risk-disclosure theory, the omission is nonetheless actionable under Section 11 whether or not it also violates Item 105.
As Judge Lee held, in pure Section 11 cases like this, “Plaintiffs do not allege that Defendants acted knowingly or intentionally.” No scienter is required, and loss causation is Defendants’ burden to disprove. The issuer’s liability is “virtually absolute.” For investors in a preclinical biotechnology IPO, where the prospectus is the only window into a company’s partnerships, those protections are what Congress intended.
The case is now in discovery.