According to the law firm press release, Enzymotec develops, manufactures and markets bio-active lipid ingredients used in the production of various nutritional products. The Company’s primary source of revenue is through its baby formula business, including the popular InFat line of products.
The Complaint alleges that the Registration Statement and Prospectus contained materially false and misleading statements and omitted material information, and that defendants misrepresented and/or failed to disclose throughout the Class Period that: Enzymotec’s Chinese business was subject to material and readily identifiable compliance regulations from the Chinese government; the Company’s baby formula business in China was jeopardized and subject to increased volatility and decreased revenues; the Company’s joint venture with AarhusKarlshamn AB, which marketed the popular InFat product, was crumbling and subjected the Company to liability and decreased revenues; and Defendants’ positive statements about the Company’s business, operations, and prospects were materially false and misleading and/or lacked a reasonable basis at all relevant times.
On May 14, 2014, the Company disclosed for the first time that “Chinese regulations require infant formula manufacturers to make certain changes to their production chain,” and as a result the Company’s revenues were lower. Then, on August 5, 2014, the Company further disclosed the increased impact of the Chinese regulations on its sales of infant formula, and announced financial results that were significantly lower than the prior year in almost all respects. As a result of this news, Enzymotec shares declined $5.85 per share, or nearly 40%, to close on August 5, 2014, at $9.11 per share, on volume of more than 1 million shares.
On December 15, 2015, the Court issued an Order granting in part and denying in part Defendants' Motion to Dismiss.