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Medical research services provider Inotiv Inc. and its shareholders have asked an Indiana federal judge to sign off on an $8.75 million settlement, a deal aimed at resolving claims that the company misled investors about federal investigations into its subsidiaries’ alleged animal welfare and smuggling violations.

Settlement Outpaces Typical Recoveries

According to court filings Thursday, the fund represents 13.5% of total alleged damages—a recovery percentage that surpasses the median in similar securities class actions. Lead counsel for the investor class plans to seek 25% of the settlement, roughly $2.2 million, in attorneys’ fees.

The agreement followed a full-day mediation and subsequent negotiations earlier this month. Without a settlement, the filing warns, the case could drag on for years, burning court resources and escalating costs with no guarantee of a better outcome.

Alleged Concealment of Federal Probes

The Oklahoma Police Pension and Retirement System, leading the investor class, claims that Inotiv and top executives failed to disclose critical information about ongoing investigations when acquiring Envigo RMS Holding Corp. and Orient Bio Resource Center (OBRC).

The omissions allegedly painted the deals as positive expansions while concealing disturbing facts: Envigo was later accused of operating a puppy mill, and an OBRC executive pled guilty to lying about ties to an illegal primate smuggling operation.

Fallout for Investors

As these facts surfaced through corrective disclosures, Inotiv’s stock price collapsed—plummeting from $55.55 in September 2021 to $6.82 in November 2022, according to the complaint.

By 2024, Envigo subsidiaries pled guilty to Animal Welfare Act and Clean Water Act violations, cementing the DOJ’s case. In addition, federal prosecutors charged executives tied to Inotiv’s primate supplier, along with Cambodian officials, for conspiring to illegally import monkeys between 2017 and 2022.

Court’s Earlier Ruling and Proxy Statement Claims

U.S. District Judge Philip P. Simon previously declined to dismiss the case, finding that the investors had plausibly alleged Inotiv withheld critical facts. The suit also argues the company issued a misleading proxy statement during the merger, failing to note that Envigo was already under multiple government probes tied to animal welfare at its Cumberland, Virginia, facility.

Timeline of Disclosures

• June 2021: DOJ subpoenas hit Envigo and OBRC; an OBRC executive faced criminal charges soon after.

• May 2022: Inotiv disclosed the DOJ’s lawsuit against Envigo for mistreating thousands of beagles.

• November 2022: Inotiv revealed the primate-smuggling indictment tied to its supplier and Cambodian officials.

Despite knowing of these investigations months earlier, investors argue, Inotiv stayed silent, depriving shareholders of vital information.