A First Circuit panel rejected an appeal to revive a securities lawsuit filed by investors against pharmaceuticals company Karyopharm. The panel affirmed the district court’s dismissal of the securities complaint but rejected the claims on different grounds; while the district court said the plaintiffs failed to allege scienter, the appellate court found that the plaintiff has not alleged an actionable statement to begin with.
Core to the case is Karyopharm’s candidate drug selinexor, a cancer treatment. The opinion recalls that Karyopharm’s stock price dropped precipitously on February 22, 2019, after the Food and Drug Administration (FDA) publicly revealed its concerns over granting the drug’s pending New Drug Application.
In the eventual class-action complaint, the plaintiffs alleged that Karyopharm made false and misleading statements concerning the STORM trial and recounted criminal allegations of incomplete reporting of study investigated by the FDA; a hold was placed on the study for one month while issued were corrected, the opinion says.
The district court found that the plaintiff had plausibly alleged materially misleading statements, particularly incomplete disclosures of adverse events in the trial and the way the company described the outcome of the trial. However, the court found that the defendant lacked the necessary intent to defraud.
The appellate court went further in its opinion, finding that the statements at issue themselves were not materially misleading. The press statements at issue, the opinion said, were actionable puffery, while there was no omission of adverse events during the STORM trial because said negative events had already been disclosed to the market in public filings.