On August 30, 2021, Saxena White was appointed Lead Counsel in this securities fraud class action against FibroGen, Inc., and certain of its senior executives, for violations of the Securities Act of 1934. The complaint alleges, among other things, that throughout the class period, Defendants engaged in a fraudulent scheme to artificially inflate FibroGen’s stock price by making materially false and misleading statements and omissions regarding the efficacy and safety of the Company’s single-most important drug, Roxadustat.
FibroGen, Inc. is a biopharmaceutical company whose flagship drug, Roxadustat, is an experimental pill designed to treat anemia in patients with chronic kidney disease. The current standard of care to treat anemia in CKD patients is only used in severe cases because of an increased risk of major adverse cardiac events. As a result, if FibroGen was able to demonstrate that Roxadustat was at least as effective as the current standard of care without the significant safety issues, analysts estimated a potential $3.5 billion market for the drug—20 times FibroGen’s total revenue for 2020.
Throughout the relevant time period, FibroGen repeatedly assured investors that Roxadustat’s “robust,” “outstanding,” and “extremely clean” Phase 3 clinical trial data showed that the drug had in fact met specified objectives, and that on the strength of this very data, Roxadustat’s prospects for receiving FDA approval were “highly compelling.” However, as Defendants themselves would ultimately be forced to admit, these statements were demonstrably false and materially misleading.
FibroGen’s fraud began to unravel on March 1, 2021, when the Company shocked investors by announcing that the FDA planned to hold an Advisory Committee meeting to review Roxadustat’s new-drug-application—a surprising setback so late in the FDA approval process. On this news, FibroGen’s stock price plunged over 32%, from $50.53 to close at $34.35 per share on March 2, 2021.
Just weeks later, on April 6, 2021, FibroGen was forced to admit, for the first time, that the Company had in fact engaged in blatant data manipulation by making “post-hoc changes to the stratification factors” in Roxadustat’s Phase 3 trial results. These changes were so significant that FibroGen needed to promptly “clarify this issue with the FDA” to “make sure that it was clear which analyses used which factors, prespecified and post-hoc.” FibroGen confirmed that investors had been completely unaware of this highly material information, as Roxadustat’s true FDA-prespecified data “[had] not been previously publicly reported.” In response, FibroGen’s share price was cut virtually in half in just two trading days, from $34.64 per share on April 6, 2021 to $18.81 per share on April 8, 2021.
On July 15, 2021, the FDA’s Advisory Committee met to review Roxadustat’s new-drug application and revealed that the drug’s issues were even worse than Defendants had previously represented. The Committee voted virtually unanimously against approval for Roxadustat for any patient population, even with a “Black Box” warning. On this news, trading in FibroGen stock was halted on July 15, 2021, and the following day, the Company’s stock price plummeted over 42%, from $24.84 per share to $14.35 per share on July 16, 2021. All told, the revelations about FibroGen’s fraud eviscerated the Company’s stock price by over 75% from its class period high, wiping out billions in market capitalization.
On August 30, 2021, the Court consolidated multiple related actions into one case and appointed the Employees’ Retirement System of the City of Baltimore, the City of Philadelphia Board of Pensions and Retirement, and the Plymouth County Retirement Association as Lead Plaintiffs and Saxena White as Lead Counsel.. The Court specifically noted that “Saxena White has recovered hundreds of millions of dollars for plaintiffs in securities cases over the past decade,” and noted its “diverse makeup” as a federally certified woman- and minority-owned firm. Moreover, the Court determined that the Retirement Systems’ sophistication, litigation experience, fiduciary responsibilities to their beneficiaries, and rigorous vetting process for counsel strongly implied that they were “capable of overseeing the litigation and their proposed lead counsel in an independent manner.”
Lead Plaintiffs filed their consolidated complaint on October 29, 2021. On January 14, 2022, Defendants filed motions to dismiss the consolidated complaint.
On July 15, 2022, the Court, in a lengthy opinion, denied Defendants’ motions to dismiss—a major victory for the Plaintiffs at this stage of the litigation. The Court found that many of the Defendants’ statements about Roxadustat’s prospects for approval and its safety, efficacy, and market potential were made in reliance on purportedly existing or established clinical data, rendering FibroGen liable for the accuracy of those statements. Further, the Court agreed with the Plaintiffs that the Defendants’ statements were not mere “puffery,” promotional statements, or opinions, that investors should not have relied on because they were made in the context of discussing the safety analyses of existing data. The Court specifically referenced arguments that Lead Plaintiffs’ counsel made at oral argument in finding that “efficacy and safety are inevitably intertwined because the key to efficacy is safe dosing,” causing many of FibroGen’s claims about Roxadustat’s efficacy to be false or misleading.
Further, the Court also held that Lead Plaintiffs sufficiently alleged, through several avenues, that all Defendants acted with the intent to deceive investors. First, the Court found that because the “Defendants manipulated data in order to conceal known safety issues,” they could not reasonably argue that they believed their statements to have been made in good faith. Second, confidential witnesses developed through Saxena White’s extensive investigation process also established “that post-hoc changes to the data were made by FibroGen’s most senior officers,” and that Defendants knew the FDA would require a “Black Box” warning label while, at the same time, they told investors “the exact opposite.” Third, the Defendants’ own admissions about data manipulation and attempts to soften the impact by falsely implying they were supported by the FDA also indicated that they intended to deceive investors.. Fourth, executive compensation packages tied to Roxadustat approval milestones “expressly tie[d]” Defendants to the manipulation of the data. Finally, Defendants themselves admitted they had personal involvement in Roxadustat’s new-drug application submission and knowledge of the safety data, as well as the “critical” nature of the viability of FibroGen’s flagship product, thus making it absurd to suggest that they were unaware of the rampant and blatant fraud related to the drug’s Phase 3 trial results. Finally, the Defendants themselves conceded loss causation, the connection between the alleged disclosures of fraud and the decline in the stock price and damages to investors. As a result, there is nothing in the Court’s ruling that could be understood to reduce the investor class’s damages, a resounding victory for the Plaintiffs.
After successfully defeating Defendants’ motion to dismiss, Lead Plaintiffs filed their motion for class certification on January 27, 2023. Briefing on that motion has concluded and the Court set a hearing for August 31, 2023.
At the same time, Lead Plaintiffs have now embarked on a monumental discovery undertaking in order to reveal the full depth of FibroGen’s fraud. Lead Plaintiffs have requested hundreds of thousands of documents from FibroGen and intend to depose many of FibroGen’s top leaders.
However, the litigation took a shocking turn when Lead Plaintiffs learned that one of the Defendants, FibroGen’s former Chief Medical Officer who oversaw Roxadustat’s critical Phase 3 clinical trial data, intentionally physically destroyed the hard drive on her Company-issued laptop less than two weeks before FibroGen admitted to post-hoc data manipulation.
In response to this blatant misconduct, Lead Plaintiffs have asked the Court to enter a default judgment in their favor due to the fact that one of the Defendants destroyed irreplaceable evidence critical to the case. The Court heard arguments on this issue at the August 31, 2023, hearing but has yet to make a ruling.