Pomerantz Secures Important Win in Case Against B. Riley Financial
On June 16, 2025, the United States District Court for the Southern District of California granted final approval of a $10.5 million settlement secured by Pomerantz in a class action against San Diego-based biotechnology startup ImmunityBio, Inc. (“ImmunityBio”).
The suit alleged that ImmunityBio’s senior executives concealed a series of pervasive manufacturing issues at the site used to manufacture its leading drug candidate, Anktiva, that began at the formation of the company in March 2021 and continued through May 2023, when the FDA denied approval of the drug. Partner Justin D. D’Aloia led the litigation, captioned In re ImmunityBio, Inc. Securities Litigation, No. 23-cv-01216 (S.D. Cal.).
ImmunityBio was formed through a merger between several clinical-stage biopharmaceutical companies in March 2021. At the time, ImmunityBio had no approved drugs, and its only product candidate close to gaining FDA approval, and beginning to generate income, was its cell fusion therapy, Anktiva, which was designed to treat bladder cancer. Accordingly, ImmunityBio’s near-term viability depended entirely on the success of Anktiva and, unsurprisingly, it received substantial attention from both ImmunityBio’s executives and the investment community.
At the time ImmunityBio was formed in March 2021, interim data from the pivotal Phase 3 trial showed that Anktiva had already achieved its primary endpoint before the study even concluded. Over the next year, ImmunityBio announced that complete data from the Phase 3 study confirmed those results and, on the basis of those results, it decided to apply for FDA approval to sell Anktiva commercially in the United States. By all accounts, Anktiva appeared to present a rare opportunity for significant growth for the company.
Notably, the FDA is prohibited from approving any new drug unless the facility where it is manufactured complies with its minimum standards for well-controlled drug manufacturing, codified in voluminous FDA regulations that are known as current good manufacturing practices (“CGMP”). Unlike for other compounds in its pipeline, however, ImmunityBio contracted with an external manufacturing firm—referred to as a contract manufacturing organization (“CMO”)—to produce Anktiva. Between its formation in March 2021 and March 2023, ImmunityBio and its senior executives assured in SEC filings and other public disclosures that the manufacturing facilities it used to make its products adhered to CGMP and that the CMO it used to manufacture Anktiva operated CGMP-compliant facilities with robust quality control. Thus, while there is never any guarantee that the FDA will agree with a pharmaceutical company’s interpretation of clinical trial data, ImmunityBio investors had no reason to believe that manufacturing issues posed a potential approval risk for Anktiva.
However, as alleged in the complaint filed by Pomerantz on behalf of aggrieved investors, the site where Anktiva was manufactured suffered from rampant and myriad CGMP violations. As alleged, ImmunityBio’s senior leaders were notified about each of these ongoing problems and repeatedly attempted to address the issues, but they remained unresolved by the time ImmunityBio submitted its application for FDA approval of Anktiva. This was noteworthy because the FDA application, by regulation, is required to include all data generated in connection with any prior manufacturing runs. Pomerantz’s investigation into the matter uncovered that this led the FDA to hold an unusually intensive mid-review pre-approval inspection, which resulted in a scathing 15-page report documenting the past and present substandard conditions at the site. ImmunityBio’s executives were fully aware of this new inspection, as they either flew overnight to attend it in person or demanded “real-time” updates and daily debriefs from relevant personnel. Nevertheless, they continued to inform investors that the CMO used to manufacture Anktiva operated CGMP-compliant facilities after the inspection concluded and made no mention of the FDA’s report, as companies typically do.
Investors did not learn about the manufacturing problems until it was too late. On May 11, 2023, ImmunityBio announced that the FDA rejected its application for Anktiva, not because of its risk-benefit profile or concerns with the clinical studies used to support the application but rather, because of deficiencies revealed at the FDA’s pre-approval inspection at the company’s CMO. On this news, the stock crashed, shedding over 55% of its market value in a single day.
In June 2024, the district court largely denied the defendants’ motion to dismiss, rejecting their challenge to 51 of the 62 alleged misstatements. In doing so, the Court swiftly dispensed with the defendants’ arguments that investors demand that every company involved in the pursuit of highly technical biopharmaceutical innovation must achieve manufacturing perfection at all times, stating “Defendants were entitled to their optimism; but they were not entitled to peddle that optimism to investors in a manner that materially misrepresented the facts.”
Following the decision, the parties proceeded to engage in discovery, during which Pomerantz continued to discuss the possibility of an early resolution. After several months of hard-fought discovery proceedings, but before incurring the significant costs of continued merits litigation, the parties agreed to settle the action for an all-cash settlement of $10.5 million. This represents a highly favorable recovery for the class and avoids the costs and uncertainty of continued litigation.