According to the law firm press release, the complaint charges Novan, certain of its officers and directors, and the underwriters of its IPO with violations of the Securities Act of 1933. It also charges Novan and its former CEO and CFO with violations of the Securities Exchange Act of 1934. Novan is a clinical-stage drug development company that focuses on the development and commercialization of nitric oxide-based therapies in dermatology. At all relevant times, Novan's lead product candidate was SB204, a once-daily topical gel for the treatment of acne vulgaris.
The complaint alleges that in the IPO Registration Statement and Prospectus, and throughout the Class Period, defendants made materially false and misleading statements regarding Novan's business and outlook, specifically regarding SB204. For example, defendants repeatedly stated that Novan had commenced and performed two identically designed Phase 3 clinical trials for SB204. Defendants' statements falsely stated that the two Phase 3 clinical trials were identical and omitted specific facts as to why the two critical trials were, in fact, not identical. As a result of these false statements, the Company's outlook and expected financial performance were not accurately represented to the market at all relevant times. As a result of defendants' false statements during the Class Period, the price of Novan stock climbed significantly above the IPO price of $11.00 per share, reaching as high as $29.09 per share on December 7, 2016.
Before the market opened on January 27, 2017, Novan announced the top-line results of its two Phase 3 clinical trials of SB204. Although the drug hit all of its goals in one of the trials, it failed to beat a placebo in the other trial. On this news, the price of Novan stock dropped from a close of $18.70 per share on January 26, 2017, to a close of $4.86 per share on January 27, 2017, a decline of 74%.
Subsequent disclosures regarding SB204 demonstrated that the two Phase 3 clinical trials of SB204 were not identical. Following these disclosures, several executives left the Company. Then, on June 5, 2017, Novan announced that it was replacing its CEO and co-founder and that it was laying off 20% of its workforce. As a result, the price of Novan stock fell on June 6, 2017. Additional disclosures on August 2, 2017, revealed that Novan was retreating further from SB204, signaling a shift in Novan's primary focus and causing the stock to drop more than 17% to close at $4.54 that day.
Plaintiff seeks to recover damages on behalf of all purchasers of Novan stock during the Class Period, including those who purchased Novan stock in connection with the Company's IPO (the "Class").
On March 15, 2018, the Court issued an Order consolidating cases. The consolidated cases shall be identified as "In Re Novan Inc. Securities Litigation." On April 6, the Court issued an Order consolidating cases and appointing Lead Plaintiff and Counsel. Lead Plaintiff filed a consolidated amended Complaint on April 30. Defendants filed a Motion to Dismiss the conslidated amended Complaint on June 14. On November 30, the recommendation of the U.S. Magistrate Judge to dismiss the case was filed and served on the parties. On January 28, 2019, the Court granted Defendants' Motion to Dismiss the case. The case was dismissed with prejudice.