Stanley Yedlowski, et al. v. Roka Bioscience, Inc., et al...

Case 3:14-cv-08020+LWJJB Document 23 fled 06123/15 of 41 PageHD: 189

THE ROSEN LAW FIRM, P.A. Laurence Rosen (LR-5733) 609 W. South Orange Avenue, Suite 2P South Orange, NJ 07079 Tel: (973) 313-1887 Fax: (973) 833-0399 Email: lrosenrosenlegal. com

Counsel for Plaintiffs

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY

STANLEY YEDLOWSKI AND PRATIK PITRODA, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED,

Plaintiffs,

ROKA BIOSCIENCE, INC., PAUL G. THOMAS, AND STEVEN T. SOBIESKI,

Defendants,

Case No.: 14-cv-8020-FLW-TJB

AMENDED CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS

JURY TRIAL DEMANDED


TABLE OF CONTENTS

I. NATURE OF THE ACTION ................................................................................................3

II. JURISDICTION AND VENUE ........................................................................................8

III. PARTIES ............................................................................................................................9

IV. CONFIDENTIAL WITNESSES ....................................................................................10

V. BACKGROUND ..............................................................................................................10

A. The marketplace for foodborne pathogen detection tests is modest and crowded . ........... 10

i. The market for foodborne pathogen testing is modest . .................................................. 10

ii. The market for foodborne pathogen tests is crowded . ................................................... 11

B. Roka 's upfront costs are substantial, and it can only recover them by selling a huge volume oftests . ....................................................................................................................................... 13

i. The Atlas system ............................................................................................................13

ii. Purported advantages of the Atlas system......................................................................14

C. Roka must quickly and explosively increase sales . ............................................................ 15

VI. DEFENDANTS' MISCONDUCT ..................................................................................16

A. The IPO. ............................................................................................................................. 16

B. Roka 's false positive problem . ........................................................................................... 16

i. Testing labs are contaminated with Listeria resulting in contamination of testing samples leading to false positives . ....................................................................................................... 16

ii. When run in lab conditions, the Tests are prone to false Listeria positives...................18

iii. Roka discovers that its tests are prone to false positives............................................21

iv. Before the IPO, Roka discovers that its superficial workflow solution was not working. 22

V. The Instruments themselves became contaminated . ...................................................... 23

vi. The failure of Roka's modified workflow left it with no choice but to redesign its Listeria Test. 24

vii. Because of the false positives issue, Roka's growth stalls . ........................................ 25

C. The market learns the truth, and calls Roka 'sfuture into question . .................................. 26

D. Roka had a duty to disclose the Listeria Test's false positives problem............................ 30

i. Item 303 of Regulation S-K requires disclosure of known trends and uncertainties..... 30

ii. Roka had an obligation to disclose that its new workflow was not resolving the problem. 32

VII. PLAINTIFFS' CLASS ACTION ALLEGATIONS .....................................................35

VIII. FIRST CLAIM .............................................................................................................36

IX. SECOND CLAIM ............................................................................................................37

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Court-appointed Lead Plaintiff Stanley Yedlowski and Plaintiff Pratik Pitroda

("Plaintiffs"), by and through their attorneys, for their Amended Class Action Complaint (the

"Complaint") against Roka Bioscience, Inc. ("Roka"), Paul G. Thomas, and Steven T. Sobieski,

allege the following based upon personal knowledge as to themselves and their own acts, and

information and belief as to all other matters.

I. NATURE OF THE ACTION

1. This is a securities class action on behalf of all persons and entities who purchased

or otherwise acquired Roka securities pursuant or traceable to the Company's Registration

Statement issued in connection with the Company's Initial Public Offering ("IPO"), dated July 17,

2014, " including those who purchased or otherwise acquired Roka common stock between July

17, 2014 and March 26, 2015, inclusive (the "Class Period"), pursuing remedies under the

Securities Act of 1933 (the "Securities Act").

2. Roka, a biotechnology company, marketed itself to investors as a small company

with a revolutionary product on the cusp of achieving tremendous financial success.

3. Roka makes and sells tests used to detect foodborne pathogens (dangerous bacteria

that contaminate food and cause illnesses). Roka's tests must be run on Roka's large proprietary

machines. Roka places the machines to customers for free, and then earns its revenues from selling

individual use tests to its customers, which the customers run on Roka's proprietary machines.

Roka earns substantially all of it revenues from selling its tests in the United States.

4. 98% of Roka's market consists of tests to detect just three pathogens. LEster/a is one

of the three. More than 95% of Roka's 2013 revenues derived from selling its LEster/a and

Salmonella tests.

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5. Listeria is the leading cause of Listeriosis, a potentially fatal disease. Food

producers rightly consider detecting Listeria an absolute necessity. But there are already more than

a hundred other tests that do that, and the worldwide market for all foodborne pathogen tests is

only about $700 million per year.

6. Thus, Roka is a new entrant in a crowded field.

7. Roka's pathogen detection tests are part of a broad family of so-called molecular

detection tests. Instead of detecting bacteria in a testing sample directly, these tests detect the

bacteria's RNA or DNA. These test have two key steps that are relevant here: first, enriching the

bacteria in the sample by placing it in a nutrient rich solution that allows bacteria to reproduce; and

second, amplifying the RNA or DNA of the bacteria in the sample by repeatedly doubling it. Both

enrichment and amplification are designed to increase the quantity of bacterial RNA or DNA so

that it can be detected. Enrichment increases RNA or DNA because there are more bacteria in the

sample from which to extract RNA or DNA; amplification increases the quantity of RNA or DNA

directly.

8. Pathogen tests take a day or more to produce results - a significant issue given that

they are run on perishable food. Roka markets its Listeria test to its customers by claiming the test

will provide results more quickly than other molecular detection tests. The test achieves this time

saving by drastically shortening the enrichment step. Roka's Listeria test, however, must still

detect minute quantities of Listeria. Roka makes up the difference in detecting power by

increasing the amplification at the amplification step. It takes less time to get to detectable levels

of RNA or DNA by amplification than by enrichment; thus, Roka's tests take less time to get to

results.

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9. In Spring 2014, Roka discovered that its Listeria test did not work in the real world.

10. The labs that run Roka's tests are pervasively contaminated with Lister/a.

Surprisingly, and known to Roka but not investors, many of Roka's customers' labs are staffed

with uneducated employees with no training, little or no lab experience, and paid between

minimum wage and $10/hour - a wage too low to attract skilled workers. Asked to run Roka's

complex testing protocol, called a "workflow", these lab technicians regularly contaminated the

samples with LEster/a from their lab. And, further, the proprietary machines Roka supplied to its

customers to run Roka's tests themselves routinely became contaminated with Lister/a.

11. In Spring 2014, Roka learned that many of its customers were regularly receiving

false positives' for LEster/a. Roka quickly determined that the cause was contamination in the lab.

The contamination occurred after the enrichment step, but before the amplification step.

12. The problem was that Roka's LEster/a test was unforgiving of human error or

contamination from the machine. A more balanced molecular detection test might not detect the

contamination, if it was relatively minimal. But because Roka's test amplified the bacteria's RNA

to such a great extent, even a tiny LEster/a contamination resulted in a positive test result - that is,

a false positive. Roka's test was just too sensitive.

13. Instead of designing a new test to address the problem, however, Roka tried a

superficial solution: a new workflow designed to prevent inadvertent contamination.

14. By June 2014, Roka knew that its superficial solution was not working. Many of

the customers who ran the new workflow still returned false positives, in part because lab

technicians still contaminated samples when they ran Listeria tests. The customers included

several of Roka's largest customers.

1 A false positive is a test result that states that a foodborne pathogen is present when it is not.

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15. But even worse, Roka's machines would themselves become contaminated. Roka

instructed customers to run vinegar through the machines. The vinegar would temporarily reduce

the false positives, but the false positive rate would inevitably return to what it had been. Vinegar

is a disinfectant; the fact that it worked shows that the machines were contaminated, and the fact

that Roka asked customers to run it shows that it knew as much. Because of the false positive issue,

in May-June 2014 alone, 20% of the machines Roka had placed with customers were returned to it,

disinfected, and placed in storage.

16. Roka thus knew it would have to redesign its LEster/a test to fix the problem of false

positives caused by contamination. Roka's customers insist that their foodborne pathogen tests be

commercially certified, a process that takes 6-9 months. In the meantime, customers who

experienced difficulties would be interested in neither Roka's old LEster/a tests, because they

resulted in false positives, nor in Roka's new tests, because they were not certified - imperiling

Roka's financial performance and growth.

17. Prior to its IPO, Roka was in a precarious financial condition, and needed to grow

its sales explosively, or it would fail. In 2013, it lost $29.6 million on revenues of just $2.2 million.

That year, its auditor stated that there was substantial doubt that Roka had enough cash to continue

as a going concern through the end of 2014. Even with the IPO proceeds, Roka estimated that it

had only enough cash to make it through the middle of 2016. Roka has very little time to succeed.

It 'does not have the time or money needed to redesign and seek accreditation of the new LEster/a

test. But that is exactly what it knew it would have to do, because its LEster/a tests malfunctioned,

and would have to be redesigned, and its customers would demand that the redesigned test be

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accredited - resulting in a multi-year setback in revenue and income growth and jeopardizing

Roka's ability to succeed.

18. Roka held its IPO in July 2014, selling its stock at $12/share, and raising about

$55.8 million. It did not disclose that its attempted solution to the LEster/a false positive problem

had failed. Nor did Roka disclose that its customers' workforce was unqualified, which would

have informed investors that any attempt to resolve the problem through a new workflow probably

'would not succeed.

19. On November 6, 2014, Roka announced its Q3 2014 financial results. The results

were disastrous - revenues had not grown at all from the previous quarter. In a conference call that

day, Roka disclosed why. It had not placed any new machines with customers, and had thus not

sold any more tests than the previous quarter. Roka explained that new customers and some of its

existing customers had no interest in the machines because they continued to return too many

LEster/a false positives and customers could not rely on the LEster/a test results.

20. And in the November 6, 2014 earnings announcement, Roka acknowledged that its

superficial solution did not work. Rather than design a new workflow, Roka announced that it

needed to design a new test. The new test would be launched in Q2 2015, later pushed back to the

second half of 2015. At that time, Roka would have only slightly more than a year's worth of cash.

21. The market immediately understood that the announcement spelled disaster. On

November 7, Roka's stock price fell from $8.94/share to $3.00/share. A mere five months after the

IPO, investors had lost 75% of their investment, about 50% of it in one day.

22. Roka, however, misleadingly suggested that one reason it had placed no new

machines was that several large transactions that were being or had been negotiated had not closed

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as expected in Q3 2014, suggesting that they were likely to close in the following quarters. The

announcement held out hope to the markets, as it suggested that Roka would still manage to

significantly grow revenues despite the LEster/a false positive issue.

23. The market learned that Roka's claim on November 6 had been false when it

announced its Q4 2014 financial results on March 26, 2015. That day, Roka disclosed that

revenues were again flat, because it had placed only 5% more machines that quarter. On the

conference call taking place that same day, Roka finally acknowledged that its revenues would not

significantly increase until it had resolved the LEster/a false positives issue. The market thus

learned the full impact of the problem.

24. Between March 27 and March 30 (two trading days), Roka's stock price fell from

$4.01/share to $3.13/share, or about 21.9%.

25. The securities laws demand that companies seeking to raise funds in a public

offering disclose all known material trends. Roka knew its superficial solution for the LEster/a test

'was not working; it was obligated to disclose it to investors. Because it did not, investors lost most

of their investment.

II. JURISDICTION AND VENUE

26. The claims asserted herein arise under and pursuant to Sections 11 and 15 of the

Securities Act, 15 U.S.C. §§ 77k and 77(o). Section 22 of the Securities Act provides for

jurisdiction over Securities Act claims in this Court.

27. This Court has jurisdiction over the subject matter of this action pursuant to 28

U.S.C. §§ 1331 and Section 22(a) of the Securities Act, 15 U.S.C. §77v(a).


28. Venue is proper in this District pursuant to 28 U.S.C. § 1391(b) and Section 22(a)

of the Securities Act, 15 U.S.C. § 77v(a). Defendants maintain their principal executive offices in

this District and many of the acts, practices and transactions complained of herein occurred in

substantial part in this District.

29. In connection with the acts, conduct, and other wrongs alleged in this Complaint,

Defendants, directly or indirectly, used the means and instrumentalities of interstate commerce,

including but not limited to, the United States mails, interstate telephone communications and the

facilities of the national securities exchange.

III. PARTIES

30. Lead Plaintiff Stanley Yedlowki purchased Roka securities pursuant or traceable to

the Registration Statement at artificially inflated prices during the Class Period and has been

damaged thereby. His PSLRA certification was previously filed on this Court's docket and is

incorporated by reference.

31. Plaintiff Pratik Pitroda, as set forth in his PSLRA certification attached as Exhibit 1

to this Complaint and incorporated by reference, purchased Roka securities pursuant or traceable

to the Registration Statement at artificially inflated prices during the Class Period and has been

damaged thereby.

32. Defendant Roka is incorporated in Delaware and headquartered in Warren, New

Jersey. During the Class Period, the Company's stock was listed on the NASDAQ under ticker

"ROKA." Roka is a small company. At the time of the IPO, it had 121 full-time employees, 44 of

whom were engaged in sales, marketing, and commercial operations. Roka's entire revenues

derive from, and in the future will derive from, selling foodborne pathogen tests.

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Case 3:14-cv-08020-FLW-TJB Document 23 Filed 06/23/15 of 41 PagifiD: 198

33. Defendant Paul G. Thomas ("Thomas"), one of Roka's founders, has been Roka's

president and CEO, and one of its directors, since Roka's founding in September 2009, and he

continues in these positions today.

34. Defendant Steven T. Sobieski ("Sobieski") has been Roka's CFO, senior vice

president, and treasurer, since Roka's founding in September 2009, and he continues in these

positions today.

35. Defendants Thomas and Sobieski are collectively the "Individual Defendants."

36. Defendants Roka, Thomas, and Sobieski are collectively "Defendants."

IV. CONFIDENTIAL WITNESSES

37. CW 1 was a Technical Sales Specialist for Roka from March 2013 until March

2015. He reported to a Roka Regional Sales Manager. His sales area was seven states.

38. CW 2 was a quality assurance manager employed by Roka between May 2014 and

June 2014. She holds a graduate degree. She managed Roka's twenty-four hour call center, and

headed Roka's customer response team. She reported directly to Roka's Senior Technical

Director.

V. BACKGROUND

A. The marketplace for foodborne pathogen detection tests is modest and crowded.

i. The market for foodborne pathogen testing is modest.

39. In the United States and around the world, food production is a highly regulated

business. Between July 2012 and 2013, there were 610 food recalls in the United States, primarily

resulting from pathogen contamination. Ensuring that the food customers buy is safe for them to

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eat requires extensive testing. According to Roka, the size of the food testing market was $2 billion

in 2013.

40. Foodborne pathogen testing is the largest and fastest-growing segment of the food

testing market. Roka estimates that it amounted to $730 million in 2013.

41. Foodborne pathogen tests are cheap and routinely conducted. According to Roka,

approximately 167 million foodborne pathogen tests were conducted in 2013, 67.8 million of them

in North America.

42. According to Roka, testing forjust three pathogens accounts for 98% of the market.

These pathogens are Salmonella, E. colt 0157:H7, and ListertaMonocytogenes ("Lister/a").

ii. The market for foodborne pathogen tests is crowded.

43. A company in the market for foodborne pathogen tests has many options. Various

non-governmental organizations accredit commercial foodborne pathogen tests. The United States

Department of Agriculture Food Safety and Inspection Service ("USDA FSIS") maintains a list of

commercially-available tests that have been accredited. The list runs to 126 tests to detect

Salmonella, 69 tests to detect E. colt, and 122 tests to detect Lister/a. 2 Many of these tests are

available from large, well-respected companies like 3M, DuPont, Thermo Fisher Scientific, and

bioMérieux. Id.

44. According to Roka, foodborne pathogen tests fall into three broad families, one of

which is molecular detection tests. All of Roka's tests are molecular detection tests. According to

Roka, in 2013, about 26.6 million of the 67.8 million North American pathogen tests were

molecular detection tests.

2USDA FSIS, Foodborne Pathogen Test Kits Validated by Independent Organizations, available at <http ://www.fsis.usda. gov/wps/wcm/connect/f97532f4-9c28-4ecc-9aee-Oe 1 e6cde 1a89/Validated -Test-Kit- Spreadsheet. pdf?MOD=AJPERES> (last visited June 23, 2015).

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45. Molecular detection tests do not attempt to detect the pathogens themselves.

Rather, they detect the pathogens' DNA or RNA. They have four steps.

46. First, a sample is enriched by being left in a nutrient-rich solution (the "Enrichment

Step") for some time. When placed in a nutrient solution, the pathogens reproduce. Thus, though

foodborne pathogen tests must detect minute quantities of bacteria, by the end of the Enrichment

Step, these minute quantities will have grown by orders of magnitude.

47. Second, DNA or RNA is extracted from all the cells in the sample.

48. Third, the DNA or RNA - and not the pathogens themselves - is amplified (the

"Amplification Step"). DNA and RNA are both composed of double helixes of complementary

pairs. At the Amplification Step, the double helixes are separated into two single strands. Each of

the two single strands then forms a new double helix identical to the initial double helix. The

process is repeated; each repetition doubles the amount of RNA or DNA. Eventually, the

exponential growth makes the pathogens' DNA or RNA directly detectable. Roka's tests rely

relatively more on Amplification, and relatively less on Enrichment.

49. And fourth, the target DNA or RNA is directly detected.

50. Molecular detection technologies have several advantages. First, molecular

detection technologies tend to increase test accuracy and reduce wait times.

51. An additional advantage of molecular detection tests is that because of high

automation, many labs believe the tests can be run accurately by relatively unskilled and untrained

staff— crucial in a volume business. And since molecular detection technologies have become so

prevalent in high volume testing labs like Roka's customers, these labs in fact have come to

relatively unskilled and untrained staff.

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B. Roka 's upfront costs are substantial, and it can only recover them by selling a huge

volume of tests.

i. The Atlas system

52. Roka's Atlas instruments (the "Instruments") are large stand-alone machines. The

Instruments are placed at the client's site. They are used to run all of Roka's Tests, including the

Listeria Tests.

53. Atlas Detection Assays (i.e., tests) (the "Tests") are single-use disposable tests for

foodborne pathogens. According to CW 1, Roka sells each test for $15, at most. In addition to the

Listeria Tests, Roka also sells Tests designed to detect E. coli 0157:H7 and Salmonella. About

95% of Roka's 2013 revenues derived from selling Listeria and Salmonella Tests. Registration

Statement, at 58.

54. The Instruments are single-purpose instruments designed to run the Tests. The

Atlas system is a closed system, meaning that the Tests only work when they are run on the Atlas

Instruments, and the Instruments can only run the Tests sold by Roka.

55. Roka does not earn its revenues from selling the Instruments. Roka typically places

its Instruments through reagent rental agreements, which typically provide the Instruments free of

charge to the customer. Rather, Roka makes its money from selling the Tests.

56. Thus, the more Instruments Roka has placed, and the more the customers use the

Instruments, the more money Roka makes. If a customer leases a machine, but returns it or does

not use it, Roka does not earn any money from its contract. And the reagent agreements typically

do not have minimum purchase requirements. According to CW 1, customers could return

Instruments to Roka with "no questions asked."

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57. For the three months ended March 31, 2014, Roka earned an average of $25,000

per Instrument it had placed. Registration Statement, at 56. As of March 31, 2014, Roka had

placed 32 Instruments. Id. Revenues from those instruments ($800,000) accounted for nearly all of

Roka's $828,000 in revenues that quarter.

58. The Instruments require a large upfront commitment from the customer. First,

according to Roka, customers must commit significant time and resources to evaluate Roka's

technology. Registration Statement, at 54. Further, running the Tests is a complicated 16-step

process.

59. Because of this large upfront commitment, Roka earns nearly all its revenues from

large clients. In Qi 2014, Roka earned 82% of its revenues from just four customers, PrimusLabs,

Marshfield Food Safety, LLC, MVTL Laboratories, and Silliker, Inc., each of which accounted for

more than 10% of Roka's revenues. Registration Statement, at 15. Roka specifically described

Silliker as a "leading contract testing lab[]". Registration Statement, at 77.

ii. Purported advantages of the Atlas system.

60. Molecular detection tests differ principally in how they amplify the DNA or RNA

they have extracted at the Amplification Step. Most of Roka's molecular detection competitors

employ Polymerase Chain Reaction ("PCR") to amplify DNA. Roka, along with a few

competitors, employ similar tools to amplify bacterial ribosomal RNA ("rRNA").

61. According to Roka, Atlas has two main advantages over its competitors.

62. First, according to Roka, the Atlas system is simple to use. The Atlas system

purportedly has three steps: (a) the client places the food sample in a nutrient solution to enrich it;

(b) the client places the enriched sample in a sample tube, and then places the sample tube in the

Defined below at ¶70.

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Instrument; and (c) the Instrument runs all remaining steps (steps two through four) of the Tests,

and provides results.

63. PCR-based tests can also be run by unskilled lab technicians, but properly running

PCR-based tests involves several additional steps. And according to Roka, the Atlas system

simplifies foodborne pathogen testing. According to Roka, running a PCR test takes about 11

minutes of unskilled labor, while running an Atlas test takes 6.1 minutes of unskilled labor.

Registration Statement, at 88.

64. Molecular detection tests take at least a day from sample collection to results. Time

to results does not depend on administrative resources - the process is largely automated. Rather, it

takes time to obtain results just because each of the steps takes real world time.

65. According to Roka, the second advantage of the Tests is that they take less time to

return results than their competitors.

C. Roka must quickly and explosively increase sales.

66. Roka has incurred continuous substantial losses. As of March 31, 2014, its

accumulated deficit was $109.1 million, and its net loss in 2013 was $29.6 million. Its net loss for

Qi 2014 was greater than its net loss in Q1 2013. Registration Statement, at F-3-4.

67. Roka has not been successful in commercializing the Instrument. Its 2013 revenues

were $2.2 million, on sales of 205,000 Tests, or less than 0.3% of the worldwide market. Roka

acknowledges it must significantly increase the number of customers that use its product, or it will

fail. Registration Statement, at 14.

68. As of December 31, 2013, Roka had about $32.7 million in cash and cash

equivalents - about enough for one year's losses. Roka's auditor issued a going concern opinion

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for the year ended December 31, 2013, indicating that there was substantial doubt about its ability

to continue as a going concern into 2014. Registration Statement, at F-2.

VI. DEFENDANTS' MISCONDUCT

69. In late 2013, Roka began planning for its IPO. It filed its first Draft Registration

Statement on January 23, 2014.

A. The IPO.

70. On July 7, 2014, Roka filed its amended Registration Statement on Form 5-1/A.

Roka subsequently filed an amendment on July 11, 2014. Collectively, the documents referenced

in this Paragraph are the "Registration Statement". The Individual Defendants and Roka each

signed the Registration Statement.

71. The Registration Statement was declared effective on July 16, 2014.

72. On July 17, 2014, pursuant to the Registration Statement, Roka filed a Prospectus

to sell 5,000,000 shares of its stock for total proceeds of $60.0 million and net proceeds to it of

$55.8 million.

73. As it stated in its Q3 2014 conference call on November 6, 2014, even with the IPO

proceeds, Roka's cash is only sufficient to sustain its operations until mid-2016.

B. Roka 's false positive problem.

i. Testing labs are contaminated with LEster/a resulting in contamination of

testing samples leading to false positives.

74. False positives are costly for food businesses. They may result in extensive

additional testing, disassembly and cleaning of processing equipment for the affected product,

diversion, treatment, or destruction of the potentially contaminated product, and, if the product has

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already entered the distribution channel, withdrawal or recall. According to Roka, a positive test

result for E. colt 0157:H7 in ground beef typically results in the diversion of up to a 10,000 pound

lot of the ground beef to cooking for pathogen destruction, which could result in a reduction of

40% or greater in the value of the beef. Roka claims that because customers' products are

perishable, they will usually act on a positive test result immediately rather than wait a day or more

for confirmation, due to the perishability of their product. Registration Statement, at 81-82.

75. LEster/a is the leading cause of Listeriosis, a life-threatening infection that is

especially dangerous for pregnant women, newborns, and people with impaired immune systems.

The Center for Disease Control estimates that Listeriosis annually causes approximately 1,600

illnesses and 260 deaths. 4

76. LEster/a can survive in extreme conditions. For example, LEster/a can survive in

freezing temperatures, tolerates heat, and can form films of bacteria that attach to surfaces, such as

lab surfaces. 5 LEster/a is also ideally suited to lab contamination, because LEster/a clusters can

survive for long periods even without any food sources. Because LEster/a is so rugged, most labs

are contaminated with it.

77. Some of the lab contamination consists of dead LEster/a cells. Most foodborne

pathogen tests do not return a false positive if they are contaminated with dead lab LEster/a

bacteria. That is because dead LEster/a bacteria would not reproduce in a nutrient solution, and thus

would never create the LEster/a colonies that are used to detect foodborne pathogens in most tests.

Center for Disease Control, LEster/a - Statistics, available at < http://www.cdc.gov/listeria/statistics.html > (last visited June 23, 2015).

HIS Compliance Guideline: Controlling LEster/a nionocytogenes in Post-lethality Exposed Ready-to-Eat Meat and Poultry Products, September 2012, at vii (available at <http://www.fsis.usda.gov/shared/PDF/Controlling LM RTE guideline 091 2.pdf>) (last visited June 23, 2015) ("FSIS Guidelines").

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But molecular detection tests amplify DNA or RNA, whether it comes from living or dead cells.

Thus, a molecular diagnosis test would amplify the dead cells' DNA or RNA and return a false

positive result. Molecular diagnosis tests are thus especially prone to contamination from the

laboratories.

ii. When run in lab conditions, the Tests are prone to false LEster/a positives.

78. The Atlas system involves 16 steps and 13 manual touches of the sample.

79. According to CW 1, lab technicians that run Roka's tests at many of its customers

are unskilled laborers, who typically make less than $10/hour, and sometimes make minimum

wage. According to CW 1, the lab technicians would routinely make clerical/labeling errors, and

could not follow complex lab procedures without making errors.

80. In fact, as Roka's CFO later publicly admitted to investors in a conference call to

discuss Q3 2014 earnings taking place November 6, 2014 that many of Roka's customers' lab

technicians are "untrained" and "have no laboratory experience".

81. Thus, according to CW 1, for example, lab personnel would place the sample

collection bags containing samples on contaminated tables. The sample collection bags would then

become contaminated. The contamination would spread to the sample tubes when the lab

personnel ran the Tests.

82. Roka stated in the Registration Statement that the primary source of contamination

was when lab technicians transferred the samples from the enrichment bag to the sample tube, just

before placing the Tests in the Instrument to run steps two through four. Registration Statement, at

17.

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Contamination occurs at this point (Image: Registration Statement, at 5)

83. Roka has boasted that its tests reduce the time it takes to receive results.

84. Roka relies on the same four-part process as its competitors - i.e., the Enrichment

Step, purifying the sample, the Amplification Step, and direct detection of DNA or RNA. See

¶J46-49, above.

85. But according to Roka, the time-consuming Enrichment Step is a large limiting

factor in the time to results. To reduce time to results, Roka's tests simply spend less time

enriching the sample. Registration Statement, at 5.

86. Pathogen tests must detect even small numbers of pathogens. In fact, the USDA

FSIS's policy is that there is no permissible amount of Listeria in certain foods. HIS Guidelines,

at vii. Similarly, Roka acknowledges that it must be able to detect a single pathogenic bacteria cell

in a food sample of from 25 to 375 grams. Registration Statement, at 3.

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87. But the purpose of the Enrichment Step is to allow pathogens to reproduce so that

they are easier to detect. Thus, if all Roka did was reduce Enrichment time, pathogens would be

more difficult to detect through Roka's Test than through its competitors' tests. This is clearly

unacceptable.

88. Roka, however, maintained detection power by increasing amplification power at

the Amplification Step - i.e., more greatly multiplying the sample's rRNA. Thus, even though

there are fewer pathogens whose rRNA is amplified, there is as much rRNA to detect.

89. Roka's Tests still purportedly take less time to run than the competition, because it

takes much less time to improve detection by increasing Amplification than by increasing

Enrichment. That is because each duplication at the Amplification Step takes much less time than

each reproduction at the Enrichment Step. Each reproduction or duplication doubles the amount of

rRNA to be detected; thus, increasing Amplification while decreasing Enrichment reduces the

time to results.

90. But reducing time to results by favoring Amplification over Enrichment makes the

Tests much more susceptible to false positives from contamination from lab Lister/a. Roka's

samples were contaminated after the Enrichment Step. Thus, only bacteria found in the sample

reproduce in the Enrichment Step, but the Amplification Step amplifies lab LEster/a as much as it

amplifies LEster/a that was in the food from which the sample was taken. Thus, it takes much fewer

lab bacteria to contaminate a Roka Test than it takes to contaminate a competitor's test.

91. Thus, Roka's LEster/a Test is defective because it is particularly susceptible to lab

contamination-caused false positives, even compared to other molecular detection methods. For

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the same reason, Roka's test is also particularly susceptible to contamination from the Instrument

itself.

92. In fact, after the IPO, Roka redesigned the LEster/a Test to reduce the amplification.

As Defendant Thomas stated in Roka's conference call to discuss Q3 2014 earnings, taking place

November 6, 2014:

So what we're doing is, we undertook an initiative that commenced in October to create what we refer to as a more user-friendly version of our LEster/a [Test]. And this is relatively straightforward. What we're able to do is actually decrease the efficiency of our amplification reagents while increasing the sample volume that we bring into the [Test] and we retain the same sensitivity, the same time to results, but we reduced the potential for sample contamination by two orders of a magnitude [i.e., by a factor of 100].

(Emphasis added).

93. Roka thus acknowledged that the false positives occurred because its LEster/a test

relied too heavily on Amplification.

iii. Roka discovers that its tests are prone to false positives.

94. Roka offers two tests to detect Lister/a. One, aimed at detecting the entire LEster/a

genus, was offered beginning January 2012 (the "2012 LEster/a Test"). The second, aimed

specifically at LEster/a Monocytogenes (i.e., the species of LEster/a that causes Listeriosis) was

launched in November 2013 (the "2013 LEster/a Test"). Letter from Roka to the SEC dated May

21, 2014, at 2.

95. In Spring 2014, Roka discovered that its Tests were systematically being

contaminated with laboratory Lister/a. The Tests were, in turn, systematically returning false

positives for Lister/a.

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Case 3:14-cv-08020-FLWJJB Document 23 Filed 06/23/15 of 41 PagifiD: 210

96. The trend worried Roka. In fact, in response, in Spring 2014, Roka developed and

communicated to its customers a modified sample LEster/a workflow (the series of steps its clients

should follow in running a LEster/a Test). The sole purpose of the workflow modification was to

prevent contamination from Lister/a. Changing the workflow was a superficial solution because it

did not address the root cause of why Roka's tests in particular were susceptible to contamination:

the tests simply relied too much on Amplification. Further, because Roka's customers' workforce

was so unskilled, which Roka knew but investors did not, the workflow solution was unlikely to

succeed because it required skilled lab technicians.

iv. Before the IPO, Roka discovers that its superficial workflow solution was

not working.

97. Roka's IPO took place in July 2014. At the time of the IPO, Roka had determined

that its clients, including Silliker and Hillshire Farms, Inc., were unable to successfully implement

the new workflow and reduce false positives. Silliker is one of Roka's largest customers and

accounts for more than 10% of its revenues. These two customers then, prior to the IPO, stopped

using Roka's LEster/a Test, and Hillshire Farms stopped using Roka's Instruments altogether.

98. CW 1 reports that the new workflow was complex, and if it was not performed

properly, it often returned a false positive. Further, CW 1 reports that the new workflow 'did not

address many of the causes of false positives. For example, the new protocol required that tools

and lab facilities be sterilized. But the sterilization process varied widely in the industry. Some

tools came with sterilization protocols, but some did not, and individuals were taught to sterilize in

widely different ways; some were effective, some were not. According to CW 1, different

sterilization protocols led to "not killing Lister/a."

-22-


99. CW 2 reports that Roka's Listeria false positives were a substantial problem;

throughout her tenure of May-June 2014, she received daily complaints from customers of LEster/a

false positives.

100. To Roka's customers, the false positive rate was unacceptably high.

101. CW 2 reports that because of the false positives, in May-June 2014, the months

immediately before the IPO, 5 Instruments (about 20% of the Instruments that had been placed)

were returned to Roka. Rather than shipping the Instruments to new customers, Roka cleaned them

and placed them in storage.

102. CW 1 corroborates CW 2's report by reporting that prior to the IPO, a large client

of Roka's, Hillshire Farms, stopped using the Instruments altogether because it could not trust the

test results.

103. CW 1 further corroborates CW 2's report, because CW 1 reports that Roka was

receiving regular complaints from, among others, Silliker and Hillshire Farms.

104. Finally, CW 2 corroborates CW l's report, because he reports that Silliker stopped

using Roka's LEster/a Test altogether.

v. The Instruments themselves became contaminated.

105. CW 2 further reports that during her tenure of May-June 2014, shortly before

Roka's July 2014 IPO, customers reported false positives because the Instruments themselves

were contaminated. Throughout CW 2's tenure, Roka would receive regular complaints of LEster/a

false positives. Roka instructed the customers to clean the Instruments by running vinegar through

them. The vinegar cleaning temporarily reduced the false positive rate.

-23-


106. Vinegar is a disinfectant. The vinegar cleaning would only have had an impact if

the Instruments themselves were contaminated. Since vinegar provided a temporary solution, the

Instruments were contaminated. But CW 2 remembers that during her tenure, the solution was

always temporary - the false positive rate would inevitably return to its previous level.

107. That the Instruments themselves were contaminated suggests that false positives

did not arise only from inadvertent lab contamination, but from contamination of the Instruments

themselves. This contamination of the Instruments themselves might not have caused false

positives in ordinary molecular detection tests, but Roka's overreliance on Amplification over

Enrichment made false positives more likely in its Tests - even if contamination was minute. And,

indeed, to resolve its false positives problem, Roka was required to redesign the LEster/a Test in

October 2014 to reduce the amplification level. See ¶92. Reducing the amplification level made it

less likely that contamination of the Instruments would result in a false positive.

vi. The failure of Roka's modified workflow left it with no choice but to

redesign its LEster/a Test.

108. The root cause of Roka's false positives problems was its overreliance on

Amplification. Because Silliker, Hillshire, and others had not been able to run the modified

workflow, at the time of the IPO, Roka knew that the only solution was to redesign the LEster/a

Test to reduce the level of Amplification. See ¶J 87-92, above.

109. But redesigning the LEster/a Test was not a simple matter. Roka knew at the time of

its IPO that its customers would only buy the Tests if they were accredited by a third party.

Registration Statement, at 21. Accreditation is expensive and time-consuming, requiring internal

-24-


and external studies to validate its claims. Accreditation also takes a longtime. According to Roka,

it takes six to nine months to obtain accreditation. Registration Statement, at 83.

110. While Roka sought accreditation of a new LEster/a Test, its customers would not

use the redesigned Test, because it had not been accredited. And Silliker, Hillshire Farms, and

other customers who had found that the Listeria Tests resulted in too many false positives, would

not use the existing LEster/a Test, either. For a company like Roka that was rapidly burning

through its cash and needed to grow explosively, the 9 month delay could be a death sentence.

vii. Because of the false positives issue, Roka's growth stalls.

111. Because of the false positives issue, Roka's campaign to increase its market share

slowed down, and then stopped entirely:

Instruments in place as of December December March 31, June 30, September December March 31, 31,2012 31,2013 2014 2014 30, 2014 31, 2014 2015 9 25 32 36 36 38 41 112. Similarly, Roka's revenues stopped growing as it stopped placing new machines:

Revenues for the quarter ending September December March 31, June 30, September December March 30,2013 31,2013 2014 2014 30,2014 31,2014 31,2015 $0.6 $0.7 $0.8 $1.4 $1.5 $1.4 $1.5 million million million million million million million 113. In its 2014 10-K, (after its IPO) tiled March 27, 2015, Roka would admit that the

stalled growth was caused by its customers' refusing to use the Tests because they returned too

many LEster/a false positives:

During the second half of 2014, we only placed two instruments with customers. In late 2014, we commenced an initiative to modify our LEster/a [Test] to make it less susceptible to inadvertent sample contamination. We expect to have our modified LEster/a [Test] available to customers in the second half of 2015. As a result, we do not expect our revenue to increase significantly in the near term until we place additional instruments and successfully commercialize the modified LEster/a [Test].

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Case 3:14-cv-08020-FLW-TJB Document 23 Filed 06/23/15 of 41 PageD: 214

2014 10-K, at 48.

C. The market learns the truth, and calls Roka 'sfuture into question.

114. On November 6, 2014, after close of trading, Roka issued a press release

announcing its Q3 2014 financial results, showing (a) that the number of Roka Instruments in

place had not increased, and (b) that revenues had not materially increased from Q2 2014.

115. Also after close of trading on November 6, 2014, Roka held a conference call to

discuss earnings in which it revealed that the primary cause was false Listeria positives:

Our installed base of Atlas instrument with either current or prospective customers did not increase in the third quarter primarily as a result of two challenges in particular. fl And second, a current high volume contract testing lab customer has experienced sporadic false-positive test results with our Listeria [Test].

[... And in the spring of 2014, we had several existing or prospective customers experienced sporadic false-positive test results with our Listeria [Tests] either during their evaluation or implementation phase of testing. We therefore modified our recommended sample workflow and training protocols to minimize the potential for inadvertent sample contamination with our Listeria [Test]. The vast majority of our customers have now adopted our modified sample workflow protocol and have successfully implemented our Listeria [Test]. However, in late August, we became aware that one of our high-volume contract testing lab customers was having difficulty consistently deploying our recommended sample workflow protocols for Listeria, which negatively impacted both [Test] and additional [l]nstrument placements in this particular account. So in total, we commenced an initiative to develop a more user friendly version of our Listeria [Test], which we expect will be significantly less susceptible to sample contamination while continuing to deliver a faster time to results. We expect to have this more user-friendly version of our Listeria [Test] available in the second quarter of 2015. In the meantime, we will devote additional resources to the training of existing as well as new customers on the recommended sample workflow protocols for our Listeria [Test]. We think that the potential for sample contamination event is unique to Listeria and this is due to the ubiquitous presence of Listeria in the environment, high levels of Listeria we've observed on some incoming sample collection bags, and the high sensitivity of our current Listeria [Test].

-26-


116. Roka's statement that it only became aware that its customers were not able to

implement its solution in August (after the IPO) was a false exculpatory statement. In fact, five

Instruments had been returned between May and June 2014, just before the IPO. These five

Instruments amounted to about 20% of the total number of Instruments that had been placed. And

before the IPO, one major customer, Hillshire, had told Roka it was no longer interested in

purchasing its Tests because of the frequency of false positives. Another customer, Silliker,

regularly complained to Roka that its LEster/a Tests would return false positives, and stopped using

the LEster/a Tests altogether because of the false positives issue.

117. In the November 6, 2014 conference call, Roka also disclosed that its customers'

workforces were very unskilled:

Right. So what we have is we did a couple of things. So we took an untrained operator, so basically someone without any laboratory experience, which in many cases have similar profile with some of the lab techs in our customers' laboratories and we had them run the [Tests] side-by-side. And when we saw false-positives with our current [LEster/a Test], I mean, we could generate a false-positive, which is positive, which is good, because that's what we wanted to see [from inadvertent contamination]. And with our modified version, we weren't seeing any false-positive test results. So what we believe is that by reducing susceptibility to contamination by several orders of magnitude, we really should make this [Test] a lot less susceptible to any kind of inadvertent sample contamination coming from the sample collection bags.

118. Because its customers' workforce was unskilled, Roka admitted that it had had to

jettison its plan to create a simpler workflow. Instead, Roka redesigned its LEster/a Test to address

the defect its trading enrichment for amplification had caused. See ¶ 92, above.

119. Roka stated that it could not immediately market and sell the new LEster/a Test,

because its customers required it to obtain a certification from a third-party. Roka also repeatedly

-27-


stated that it expected to launch the new LEster/a Test in the second quarter of 2015, after receiving

this certification.

120. On November 7, Roka's stock price fell from its previous close of $8.34 to close at

$3.00 - one quarter of the IPO price just four months before. Trading volume on November 7 was

higher than on the day of Roka's IPO.

121. However, Roka made false reassurances to investors that minimized the impact of

the LEster/a false positive issue had had and would continue to have on its sales. Specifically, Roka

stated that it had been unable to place Instruments in Q3 2014 for two reasons. In addition to the

false positives, Roka claimed it had not placed any new machines because "the timing of closing

several major strategic account customers has been delayed beyond our original estimates." Roka

thereby suggested that the LEster/a false positives problem had not stalled its revenue growth - that

its Instruments were still in great demand. Roka also stated that only one customer was unable to

implement its workflow solution, and that the "vast majority" of its customers had successfully

implemented it. In fact, both Hillshire Farms and Silliker had stopped using Roka's LEster/a Test,

and Roka later revealed on March 26, 2015, that several customers had similarly reduced overall

purchases of Roka's Tests because the LEster/a Tests were prone to false positives. Because of

these false reassurances, the market did not completely appreciate the devastation the LEster/a false

positives issue had on Roka's revenue growth.

122. Since then, Roka's stock price has not traded above $4.80 per share. See Exhibit 2.

123. On March 26, 2015, Roka reported its financial results for the quarter and year

ended December 31, 2014. Roka announced that despite its previous representation that the timing

of closing transactions for the leasing of Instruments had caused it not to place any new

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Instruments in Q3 2014, (a) it had only placed two more instruments in Q4 2014, and (b) revenues

were flat compared to Q2 and Q3 2014.

124. In a conference call taking place the same day, Roka disclosed that the

The second challenge we are focused on relates to all LEster/a [Tests]. As discussed on our call last quarter, some of our customers have had difficulty in implementing the workflow required to successfully use our current LEster/a [Test]. We believe that may have caused some existing and potential customers to either slowdown or postpone the adoption of our Atlas solution.

In October, we commenced development of a more user friendly version of all LEster/a [Tests], which we expect we'll make the workflow much easier to successfully implement by our customers while continuing to deliver at the same rapid time to results we achieve with our current [Tests]. We expect to launch the revised [Test] in the second half of this year and we have been devoting considerable resources for the training of our existing as well as new customers on the recommended sample workflow protocols for our current LEster/a [Test].

(Emphasis added).

125. Roka thereby admitted that, contrary to its prior representation on the Q3 2014

earnings call, several customers had been unable to implement Roka's workflow.

126. Roka also finally admitted that its financial performance would not improve until it

resolved the LEster/a issue, with Sobieski stating "[w]e do not expect our quarterly revenue to

increase significantly in the near term until we place additional instruments and successfully

commercialize our revised LEster/a [Test]."

127. That day, Roka also made clear that (a) its poor financial performance in Q3 and Q4

2014 was caused by the LEster/a Test's false positive issue and (b) many customers, rather than just

the one announced on November 6, 2014, had had the same issue:

Derek de Bruin Great, I guess - are the customers that had problems with the LEster/a [Test], did they accelerate usage of their E. colE and Salmonella testing assuming that they were running multiple tests on the platforms. I am just wondering is the delays with

-29-


LEster/a - issues with the LEster/a have had - is that tampered as some of the labs potentially accelerating some of their transfer from older methods on to the... Defendant Sobieski Yes, I understand the question. It's really quite customer dependent. We have some customers who - so first of all if they're running Salmonella and E. colt, they've had no issues, they've really had a very positive experience. And some of our customers are actually quite successfully running our current LEster/a [Test]. So, we've really seen a mix. We've seen acceleration in some customers and you know a flattening or even decline in some customers, who have struggled with our Listeria [Test]. So, 4fyou look at our revenues, Ithink our revenue were about $1.5 million in Q4, which is largely flat with Q3. And we really think is some of the customers be the flatter declining and some customers actually continuing to grow and obviously the customers that are growing are those that have not had challenges in particular with the Listeria [Test].

128. Finally, Roka stated that it expected to launch the new LEster/a test in the second

half of 2015. When an analyst asked why Roka had fallen behind schedule, Defendant Thomas

falsely stated that it had not:

<Analyst> Thank you. First a clarifying question on the Listeria [Test]. Is this [Test] launch being delayed, I believe you previously said it was midyear 2015 and now you're saying in second half? <Paul Thomas> Yes, hi Dan. No, it's not being delayed. We believe that we should have the [Test] approved around the middle of the year. So, I would anticipate that we're looking at the Q3 launch, so about mid year, we're still on track. 129. From its closing price of $4.01 on March 26, Roka's stock price fell to $3.51 on

March 27, and $3.13 on March 20 (the next trading day), or about 21.9%, damaging investors.

D. Roka had a duty to disclose the Listeria Test's false positives problem.

i. Item 303 of Regulation S-K requires disclosure of known trends and

uncertainties.

130. SEC regulations require that registration statements such as the one filed by Roka

on Form 5-1 comply with Item 303 of Regulation S-K (17 C.F.R. 229.303).

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131. SEC Regulation S-K (27 CFR 229.10) requires that every registration statement,

annual report or quarterly report "Management's Discussion and Analysis of Financial Condition

and Results of Operations" ("MD&A"), drafted in compliance with Item 303 of Regulation S-K.

The MD&A requirements are intended to provide material historical and prospective textual

disclosures which enable investors and other users to assess the financial condition and results of

operations of the company, with particular emphasis on the historical facts that have an impact on

the company's prospects for the future

132. Item 303 of SEC Regulation S-K (17 C.F.R. 229.303) together with SEC Staff

Accounting Bulletin No. 101 required Defendants to disclose in the MD&A section of its

Registration Statement "unusual or infrequent transactions, known trends, or uncertainties that

have had, or might reasonably be expected to have, a[n] [ .. 1 unfavorable material effect on

revenue, operating income or net income and the relationship between revenue and the costs of the

revenue."

133. To determine if a transaction, known trend, or uncertainty must be included in the

MD&A, the SEC has stated that companies should determine whether a trend, demand,

commitment, event, or uncertainty is presently known to management, and whether it is

reasonably likely to have a material effect on the registrant's financial condition or results of

operations.

134. In an 1989 Interpretive Release, the SEC described the purposes of MD&A:

The Commission has long recognized the need for a narrative explanation of the financial statements, because a numerical presentation and brief accompanying footnotes alone may be insufficient for an investor to judge the quality of earnings and the likelihood that past performance is indicative of future performance. MD&A is intended to give investors an opportunity to look at the registrant through the eyes of management by providing a historical and prospective analysis of the

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registrant's financial condition and results of operations, with a particular emphasis on the registrant's prospects for the future.

Managements Discussion & Analysis ofFin. Condition & Results of Operations; Certain Inv. Co. Disclosures, Release No. 6835 (May 18, 1989) available at 1989 WL 1092885.

135. The Instructions to Item 303 state that MD&A "shall focus specifically on material

events and uncertainties known to management that would cause reported financial information

not to be necessarily indicative of future operating results or of future financial condition." 17 CFR

229.303(a), Instruction 3.

136. The Interpretive Release provides that "companies should provide not only

disclosure of information responsive to MD&A's requirements, but also an analysis that is

responsive to those requirements that explains management's view of the implications and

significance of that information and that satisfies the objectives of MD&A." 1989 Interpretive

Release, at *3

137. Required disclosure under Item 303 includes the likely non-renewal of a material

contract. Id. at *4

138. Accordingly, Roka was required to disclose: (a) that its customers were

experiencing rampant Listeria false positives; (b) that the Instruments themselves were being

contaminated with Listeria; (c) that one of Roka's large customers had returned S Instruments and

had stopped using the Instruments altogether because of the false positives issue; (d) that the

proposed solution it had implemented in Spring 2014 was not working; (e) that Silliker had

stopped using the Listeria Test, and that Hillshire had stopped using the Instruments entirely.

ii. Roka had an obligation to disclose that its new workflow was not resolving

the problem.

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139. The Registration Statement provided:

We are in the early stages of commercialization and our Atlas Detection [Tests] and Atlas instrument may never achieve significant commercial market acceptance. Our success depends on our ability to develop and market products that are recognized in the food safety testing market as accurate, rapid and cost-effective. Most of our potential customers currently use molecular or immunochemical testing methods and may be reluctant to change those methods to a new technology. Market acceptance will depend on many factors, including our ability to convince potential customers that our Atlas solution is an attractive alternative to existing molecular and immunochemical testing systems. We will need to demonstrate that our products provide accurate, time saving and cost-effective alternatives to existing testing methods. Compared to most competing technologies, our molecular technology is relatively new, and most potential customers have limited knowledge of, or experience with, our products. Prior to adopting our solution, potential customers are required to devote significant time and effort to testing and validating our Atlas Detection [Tests] and Atlas instrument. In addition, during the implementation phase, customers may be required to devote significant time and effort to training their personnel on appropriate laboratory practices to ensure accurate results due to the highly sensitive nature of our [Tests], such as our LEster/a [Test]. Although customers have successfully implemented our Listeria [Test] without experiencing false positives, particularly when sufficient resources have been allocated to training personnel and good laboratory practices and our recommended processes have been appropriately implemented, customers or prospects who may not have properly modified their processes as recommended by us, or may not follow good laboratory practices required of the workflow prior to using our Atlas solution, have experienced false positives during implementation. Any failure of our Atlas solution to meet customer benchmarks or expectations could result in customers choosing to retain their existing testing methods or to adopt systems other than ours.

III

If our products do not perform as expected, whether as a result of operator error or otherwise, it would impair our operating results and reputation. Our success depends on the food safety market's confidence that we can provide reliable, high-quality molecular food safety testing products. There is no guarantee our customers or potential customers will achieve the accuracy that we have demonstrated in our performance studies, particularly as the number of customers using our [Tests] increases and as the number of different [Tests] in our test menu expands. We believe that our customers are likely to be particularly sensitive to product defects and operator errors, including if our [Tests] fail to accurately detect pathogens in food samples or if the failure to detect pathogens leads to a product recall. In addition, our reputation and the reputation of our

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products can be adversely affected if our [Tests] fail to perform as expected, which performance could be negatively impacted by failure to adopt or modify laboratory practices and processes to support the adoption of our solution, errors made by operators of the Atlas instrument, or if such operators improperly prepare their testing samples or fail to properly enrich them. For example, while we have many customers who have adopted our [Tests] without incident, when customers have failed to properly train personnel, modify processes, or follow good laboratory practices, customers have experienced false positives using our highly sensitive Listeria [Test]. Based on data provided to us by such customers and observations by our personnel of their implementation of our Atlas solution in their laboratory operations, operators have contaminated samples with Listeria, which generally exists in the laboratory environment, when transferring samples from the enrichment bag to the sample transfer tube, ultimately leading to afalse positive result. We have worked, and continue to work, with these customers to allocate appropriate resources to training and implementation of limited process changes and good laboratory practices to resolve these issues. However, if our customers or potential customers fail to implement appropriate laboratory practices or process steps as suggested by us, they may continue to see unsatisfactory test results using our Atlas solution. As a result, the failure or perceived failure of our products to perform as expected, which could have a material adverse effect on our revenue, results of operations and business.

(Bold and italicized emphasis added)

140. The emphasized statements were false and misleading because: (a) Roka was no

longer working with at least two of its major customers - it had lost the customers - because the

new workflow was ineffective in preventing false positives; (b) Roka's customers had returned 5

Instruments because of the false positives issue; (c) Roka's false positives problem could arise

even if customers followed its workflow to the letter, since its oversensitive test could return a

false positive based on contamination of the Instrument itself.

141. Further, Roka had not disclosed that its customers' workforce was surprisingly

inexperienced and untrained, ¶117, and that they were poorly paid and unskilled ¶79. Instead,

Roka had described Silliker as a leading contract testing lab. ¶59. Even according to Roka,

inexperienced, untrained employees are likely to generate false positives when they try to follow

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complex workflows. ¶117. Thus, omitting to disclose the customers' employees' lack of

qualifications left investors with the materially misleading impression that the new workflow

would likely be successfully implemented.

VII. PLAINTIFFS' CLASS ACTION ALLEGATIONS

142. Plaintiffs bring this action as a class action pursuant to Federal Rules of Civil

Procedure 23(a) and (b)(3) on behalf of a Class, consisting of all persons who purchased the

common stock of Roka during the Class Period and who were damaged thereby. Excluded from

the Class are Defendants, the officers and directors of the Company at all relevant times, members

of their immediate families and their legal representatives, heirs, successors or assigns and any

entity in which Defendants have or had a controlling interest.

143. The members of the Class are so numerous that joinder of all members is

impracticable. Throughout the Class Period, Roka securities were actively traded on the

NASDAQ. While the exact number of Class members is unknown to Plaintiffs at this time and can

only be ascertained through appropriate discovery, Plaintiffs believe that there are at least

hundreds of members in the proposed Class. Members of the Class may be identified from records

maintained by Roka or its transfer agent and may be notified of the pendency of this action by

mail, using a form of notice customarily used in securities class actions.

144. Plaintiffs' claims are typical of the claims of the members of the Class, as all

members of the Class are similarly affected by Defendants' wrongful conduct in violation of

federal law that is complained of herein.

145. Plaintiffs will fairly and adequately protect the interests of the members of the

Class and has retained counsel competent and experienced in class and securities litigation.

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146. Common questions of law and fact exist as to all members of the Class and

predominate over any questions solely affecting individual members of the Class. Among the

questions of law and fact common to the Class are:

(a) whether the federal securities laws were violated by Defendants' acts as alleged

herein;

(b) whether statements made by Defendants to the investing public during the

Class Period misrepresented material facts about the business, operations and management of

Roka; and

(c) to what extent the members of the Class have sustained damages and the proper

measure of damages.

147. A class action is superior to all other available methods for the fair and efficient

adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the

damages suffered by individual Class members may be relatively small, the expense and burden of

individual litigation make it impossible for members of the Class to redress individually the

wrongs done to them. There will be no difficulty in the management of this action as a class

action.

VIII. FIRST CLAIM

Violation Of Section 11 Of The Securities Act Against All Defendants

148. Plaintiffs repeat and reallege each and every allegation contained above. This

Count is asserted against all Defendants.

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149. This count is predicated upon Roka's strict liability for making false or misleading

statements of material fact in the Registration Statement.

150. Defendants were sellers, offerors, and/or solicitors of the purchasers of the

common stock offered pursuant to the Registration Statement. Defendants issued or caused to be

issued the Registration Statement in connection with the Offering.

151. The Registration Statement contained untrue statements of material fact or omitted

to disclose information necessary to make the statements made therein not misleading.

Defendants' actions included soliciting Plaintiffs and the Class by means of these Defendants'

participation in the preparation of the false Registration Statement. Roka is the registrant for the

Offering.

152. Plaintiffs and the other members of the Class did not know, nor could they have

known, of the untruths or omissions contained in the Registration Statement.

153. This suit was brought within one year after discovery of the untrue statements and

omissions in the Registration Statement and within three years of the effective date of the

Registration Statement.

154. By virtue of the foregoing, Plaintiffs and the other members of the Class are entitled

to damages from Defendants.

IX. SECOND CLAIM

Violations Of Section 15 Of The Securities Act Against Individual Defendants

155. Plaintiffs repeat and re-allege each and every allegation contained above.

156. This count is asserted against the Individual Defendants, each of whom was a

control person of Roka at the time of the Offering.

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157. For the reasons set forth above in the First Count, Roka is liable to Plaintiffs and the

members of Class who purchased Roka securities in the Offering based on the untrue statements of

material fact and material omissions contained in the Registration Statement and Prospectus,

pursuant to Section 11 of the Securities Act, and were damaged thereby.

158. The Individual Defendants were control persons of Roka by virtue of, among other

things, their power and influence and exercised the same to cause Roka to engage in the acts

described herein; their positions as senior officers of the Company; their day-to-day control of

Roka's business affairs; their responsibility or control over the contents of the Registration

Statement; and/or their control over the inaccurate statements of material fact contained in the

Registration Statement.

159. None of the Individual Defendants made reasonable investigation or possessed

reasonable grounds for the belief that the statements contained in the Registration Statement were

accurate and complete in all material respects. Had they exercised reasonable care, they could

have known of the material misstatements alleged herein.

160. This claim was brought within one year after the discovery of the untrue statements

and omissions in the Registration Statement and within three years after Roka securities were sold

to the Class in connection with the Offering.

161. By reason of the misconduct alleged herein for which Roka is primarily liable, as

set forth above, the Individual Defendants are jointly and severally liable with and to the same

extent as Roka pursuant to Section 15 of the Securities Act.

WHEREFORE, Plaintiffs pray for relief and judgment, as follows:

(A) Determining that this action is a proper class action, certifying Plaintiffs as class

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representatives under Rule 23 of the Federal Rules of Civil Procedure and Plaintiffs' counsel as

Lead Counsel;

(B) Awarding compensatory damages in favor of Plaintiffs and the other Class

members against all Defendants, jointly and severally, for all damages sustained as a result of

defendants' wrongdoing, in an amount to be proven at trial, including interest thereon;

(C) Awarding Plaintiffs and the Class their reasonable costs and expenses incurred in

this action, including counsel fees and expert fees; and

(D) Such other and further relief as the Court may deem just and proper.

JURY TRIAL DEMANDED

Plaintiffs hereby demand a trial by jury.

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Dated: June 23, 2015 Respectfully submitted,

THE ROSEN LAW FIRM, P.A.

/5/ Laurence Rosen Laurence Rosen (LR-5733) 609 W. South Orange Avenue, Suite 2P South Orange, NJ 07079 Tel: (973) 313-1887 Fax: (973) 833-0399 Email: lrosenrosenlegal. com

Counsel for Plaintiffs

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CERTIFICATE OF SERVICE

I hereby certify that on June 23, 2015, a true and correct copy of the foregoing document was served by CM/ECF to the parties registered to the Court's CM/ECF system.

/5/ Laurence Rosen

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