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Court dismisses securities fraud class action against Elanco

The suit was filed on behalf of investors in 2020, in the United States District Court for the Southern District of Indiana.

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Jason Morrison | Freeimages.com

Suit filed on behalf of investors in 2020

A federal court has dismissed all claims against Elanco Animal Health, its executives and board members in relation to a securities fraud class action lawsuit filed in May 2020.

The suit was filed on behalf of investors that purchased Elanco securities between January 10 and May 6, 2020, in the United States District Court for the Southern District of Indiana.

The complaint alleged that Elanco made materially false and/or misleading statements and failed to disclose material adverse facts about its business, operations, and prospects. Specifically, it said Elanco failed to disclose to investors that, after consolidating its distributors from eight to four, the company increased the amount of inventory, including companion animal products, held by each distributor; that Elanco’s distributors were not experiencing sufficient demand to sell through the inventory; that, as a result, the company’s revenue was reasonably likely to decline; that, as a result of the foregoing, Elanco would reduce its channel inventory with respect to companion animal products; and that, as a result of the foregoing, defendants’ positive statements about the company’s business, operations and prospects were materially misleading and/or lacked a reasonable basis.

In a 58-page order granting the defendants’ motion to dismiss, the court agreed with the defendants’ arguments that, among other things, the plaintiffs failed to allege that any of the statements at issue were false or misleading and that the complaint failed to adequately plead intent or knowledge of wrongdoing or loss causation. In particular, the court held that there are “many contradictions between plaintiffs’ theory of channel stuffing and the facts plead” in the complaint and Elanco’s extensive disclosures about its sales practices and distribution partners is “the opposite of an undisclosed scheme to defraud shareholders.”

An Elanco spokesperson told Feed Strategy the company does not comment on litigation issues.

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