According to the press release dated September 21, 2010, the defendants made several statements during the Class Period about the Company's weight loss drug lorcaserin which were false and misleading because they omitted and failed to disclose that tests for lorcaserin indicated that the drug caused cancer in lab rats. When the results of the rat carcinogenicity studies became public on September 14, 2010, the Company's stock fell from a closing price of $6.85 on September 13, 2010, to a closing price of $4.13 on September 14, 2010, a one day drop of $2.72 or roughly 40%, according to the complaint. On September 16, 2010, the FDA's advisory committee held a meeting to review lorcaserin and, according to the complaint, rejected the drug in light of the concern that the potential risks of long-term use, including the risk of cancer, outweighed its benefit. As a result of this news, the Company's stock fell from a closing price of $3.74 on September 16, 2010 to a closing price of $1.99 on September 17, 2010, a one day drop of $1.75 or roughly 46%, according to the complaint.
As summarized by the Company's FORM 10-Q for the quarterly period ended June 30, 2011, beginning on September 20, 2010, a number of complaints were filed in the US District Court for the Southern District of California against us and certain of our current and former employees and directors on behalf of certain purchasers of our common stock. The complaints have been brought as purported stockholder class actions, and, in general, include allegations that we and certain of our current and former employees and directors violated federal securities laws by making materially false and misleading statements regarding our lorcaserin program, thereby artificially inflating the price of our common stock. The plaintiffs are seeking unspecified monetary damages and other relief. On November 19, 2010, eight prospective lead plaintiffs filed motions to consolidate, appoint a lead plaintiff, and appoint lead counsel. The Court took the motions to consolidate under submission on January 14, 2011. On August 8, 2011, the Court consolidated the actions and appointed a lead plaintiff and lead counsel. We expect the lead plaintiff to file a consolidated complaint. In addition to the class actions, a complaint involving similar legal and factual issues has been brought by at least one individual stockholder.
The lead plaintiff filed a Consolidated Class Action Complaint on November 1, 2011. The defendants responded by filing a motion to dismiss on December 30, 2011.
On March 28, 2013, the Court issued an Order granting the Defendants' Motion to Dismiss without prejudice. Plaintiffs were given leave to file an amended complaint. On May 13, the Plaintiffs filed their amended complaint.
On November 4, 2013, the Court issued an Order granting without prejudice Defendants' Motion to Dismiss. A certain individual defendant was dismissed with prejudice. The Court ultimately ruled amendment would be futile, and thus dismissed this case with prejudice. This decision was appealed on April 18, 2014. The Court of Appeals reversed the decision of the District Court and remanded.
The parties entered into a Stipulation of Settlement on November 7, 2017. The Court issued an Order Preliminarily Approving Settlement on November 30. On April 12, 2018, the Court granted Final Approval of the Class Settlement and awarded Lead Counsel a fee award in the amount of 15 percent of the Settlement Fund. Lead Counsel filed a Motion for Reconsideration of the fee award on May 7. On May 11, the Court issued an Order denying Lead Counsel's Motion for Reconsideration. Lead Counsel filed a Notice appealing the Court's decision on May 11. On December 6, 2019, the Court of Appeals affirmed the District Court's decision in part, vacated it in part, and remanded. Also on December 6, the District Court issued an Order clarifying the Class Representative award. On June 12, 2020, the Court granted final approval of the Settlement and entered Final Judgment.