According to the Complaint, PolarityTE, Inc. ("PolarityTE" or the "Company") (NASDAQ: COOL) purports to be a commercial-stage biotechnology and regenerative biomaterials company focused on discovering, designing and developing a range of regenerative tissue products and biomaterials for the fields of medicine, biomedical engineering and material sciences. The Company’s key development is SkinTE, which is intended to be used by physicians or other appropriate healthcare providers for homologous uses of skin tissues/integument. Patients who have suffered from an event, disease, process or acquired deficit that results in the functional loss or void of skin/integument systems can receive SkinTE as an adjunct and/or in place of split-thickness skin grafting, full-thickness grafting, temporizing skin coverage and/or skin substitute products.
On June 27, 2018, Plaintiff's law firm issued a press release announcing the law suit. According to the press release, on June 25, 2018, Citron Research ("Citron") issued a report in which Citron detailed the Company's track record of material misrepresentations, misstatements, and omissions pertaining to the status of a key patent application. The Citron report noted that as far back as March 31, 2017, the USPTO notified the Company of its non-final rejection of patent #14/954,335. Citron's report continued to highlight the Company's subsequent failure to disclose the patent's non-final rejection status and its continued behavior of representing the technology linked to the patent in a positive light. The report also pointed to the USPTO's final rejection of the patent on June 4, 2018 – information that the Company also failed to disclose. On this news, COOL stock plunged more than 34%.
The Complaint alleges that between March 31, 2017 and June 25, 2018, inclusive (the "Class Period"), Defendants made false and/or misleading statements, as well as failed to disclose material adverse facts about the Company's business, operations, and prospects. Specifically, Defendants made false and/or misleading statements and/or failures to disclose pertaining to a number of topics, including (i) the status of Patent #14/954,335 at the time it was acquired by the Company on April 7, 2017 and the months following; (ii) the updated status of Patent #14/954,335 after its June 4, 2018 final rejection by the USPTO; and (iii) that as a result of the foregoing, PolarityTE's publicly disseminated financial statements were materially false and misleading.