Salzman v. ImmunityBio: Court Allows FDA Disclosure Suit to Proceed

In Salzman v. ImmunityBio, Inc., the U.S. District Court for the Southern District of California ruled on a motion to dismiss securities fraud claims concerning alleged misstatements about manufacturing compliance for a biologic drug under FDA review. The court allowed claims based on misleading statements about manufacturing capabilities to proceed, but dismissed others tied solely to regulatory approval.

Allegations of Noncompliance with Manufacturing Standards

The case centered on ImmunityBio's lead product candidate, Anktiva, a biologic drug subject to current good manufacturing practices (cGMP). Plaintiff Zachary Salzman alleged that ImmunityBio and its executives misled investors by touting robust manufacturing capabilities despite being repeatedly informed of manufacturing deficiencies at their contract manufacturer, AGC Biologics.

Between 2021 and 2023, FDA inspections resulted in multiple Form 483 reports outlining serious issues such as inadequate deviation management, recordkeeping failures, sanitation lapses, and quality control concerns. Although ImmunityBio was repeatedly notified of these findings through its quality agreement with AGC, it continued to promote its readiness for commercial-scale production and its use of cGMP-compliant facilities.

The company submitted a Biologics License Application (BLA) in 2022, and the FDA rejected it in 2023 based on the deficiencies noted in a pre-approval inspection. The company's stock price dropped over 55% following the rejection.

Court Evaluates Scope and Impact of Alleged Misstatements

The court examined two categories of statements: non-risk-factor statements that affirmatively promoted ImmunityBio's cGMP manufacturing capacity, and risk-factor statements that warned of hypothetical production risks.

For the first category, the court found that several statements went beyond mere corporate optimism. These included declarations that the company had "established GMP manufacturing capacity at scale" and had contracted with a multinational biologics manufacturer with "multiple cGMP-compliant facilities." When read in context—especially alongside discussions of Anktiva's clinical trials and regulatory progress—the court found these statements were plausibly misleading. ImmunityBio's leadership knew about ongoing cGMP violations and took steps to address them, including mock inspections and regular meetings with AGC. The court concluded that the company had a duty to disclose this information if it chose to speak positively about its manufacturing readiness.

Conversely, the court granted dismissal for statements that described future plans or generalized goals, such as those about the company "adopting a strategy" to build capabilities. These were not found to affirm current compliance.

Risk Disclosures Found Potentially Misleading

The court also allowed claims based on risk-factor statements to proceed. It held that ImmunityBio warned of manufacturing risks as if they were hypothetical when the company already knew of concrete and ongoing problems. According to the court, such framing could mislead investors into believing that cGMP compliance issues were only a future possibility.

However, it dismissed claims against statements regarding the uncertainty of FDA approval itself, such as those suggesting the timing of approval was unclear. These were found to be cautious and forward-looking, and not affirmatively misleading in the absence of stronger evidence that approval was not viable.

Court Finds Strong Inference of Scienter

The court concluded that the complaint raised a strong inference that ImmunityBio's executives acted with scienter. Evidence included repeated FDA citations, internal knowledge of deficiencies, executive involvement in mock inspections, and the strategic importance of Anktiva to the company’s business. The court also rejected arguments that executives' failure to sell stock or the CEO's additional investment negated the inference.

Regulatory Compliance Counsel

Whitcomb, Selinsky, PC provides support for organizations facing regulatory challenges. Learn how our regulatory compliance attorneys can assist with internal oversight and corporate disclosures.