On July 15, 2022, Saxena White achieved an outstanding decision for the Class issued by Judge Edward M. Chen of the Northern District of California in In re FibroGen, Inc., Securities Litigation, Case No. 3:21-cv-02623-EMC (N.D. Cal.), where Judge Chen denied defendants’ motions to dismiss the amended consolidated class action complaint for violations of the federal securities laws (the “Complaint”), upholding the class period in full.
In his order, Judge Chen found that Defendants’ general arguments exempting their statements as inactionable failed. Statements regarding the prospects of the Company’s Roxadustat drug for approval and its safety, efficacy, and market potential were not forward-looking because they relied on purportedly existing or established clinical data. Similarly, Defendants’ claims that their statements were merely “puffery,” promotional statements, or opinions that should not be relied upon by investors also failed. Here, Judge Chen referenced our argument at the hearing in noting that “efficacy and safety are inevitably intertwined because the key to efficacy is safe dosing,” which made FibroGen’s claims of Roxadustat’s efficacy false as it was only established at “unreasonably high dosing levels.”
Regarding scienter, Judge Chen held that the Complaint established several avenues to sufficiently allege that all Defendants acted with the intent to deceive investors. First, scienter could be inferred from the fact that “Defendants manipulated data in order to conceal known safety issues,” and therefore could not reasonably argue they believed their statements to be in good faith. Second, confidential witnesses developed through our extensive investigation 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 they told investors “the exact opposite.” Third, Defendants’ own admissions of data manipulation and attempts to soften the impact by falsely implying they were supported by the FDA also supported scienter. Fourth, executive compensation packages tied to Roxadustat approval milestones “expressly ties” Defendants to manipulation of data. Finally, Defendants admitted personal involvement in the NDA submission and knowledge of the safety data, as well as the “critical” nature of the viability of FibroGen’s flagship product, also contributed to Judge Chen’s holding.
Finally, Defendants conceded loss causation, the connection between the alleged disclosures of fraud and the decline in the stock price and damages to investors, so that element was not addressed in Judge Chen’s opinion. As a result, there is nothing in Judge Chen’s opinion that could be understood to reduce the Class’s damages.
The case will now proceed to the discovery phase.
