According to the law firm press release, the lawsuit alleges that Defendants made misleading misrepresentations about thrombotic adverse events in previous clinical trials of its leading drug candidate beloranib. Until October 16, 2015, Zafgen had only ever disclosed two thrombotic adverse events in one prior clinical trial.
On October 12 and October 13, 2015, however, Zafgen shares dropped sharply. Between the opening of trading on October 12, 2015 and the close of trading on October 13, 2015, Zafgen shares dropped from $34.76/share to $15.75/share—a 54.7% drop. The drop was fueled by rumors in the marketplace that a patient had died in an ongoing Phase 3 clinical trial of beloranib.
On October 14, 2015, Zafgen confirmed that a patient in its Phase 3 trial of beloranib had died. Zafgen failed to disclose, however, that the patient was receiving beloranib—i.e., not a placebo—and failed to disclose anything about thrombotic events in prior clinical trials.
Late in the day on October 15, 2015, the Food and Drug Administration (“FDA”) informed Zafgen that beloranib has been placed on partial clinical hold. This forced Zafgen to make additional disclosures on October 16, 2015, including that: (i) the patient who died was receiving beloranib; and (ii) there had been four thrombotic adverse events in prior clinical studies of beloranib—two more than previously reported—as well as two additional, previously undisclosed thrombotic events in ongoing studies, for a total of six thrombotic events out of 400 patients receiving beloranib compared to zero thrombotic events in the approximately 150 patients treated with a placebo.
The Company’s stock dropped sharply on this news. After closing at $21.02/share on October 15, 2015, Zafgen stock closed at $10.36/share on October 16, 2015—a 50.7% drop.
Plaintiffs filed an amended complaint on February 22, 2016.
On August 9, 2016, the Court issued an Order granting Defendants' Motion to Dismiss with prejudice. Plaintiffs filed a Notice of Appeal of this Order on August 12. On April 7, 2017, the Court of Appeals issued an Opinion affirming the decision of the District Court.