Athira Pharma, Inc. and its CEO, Leen Kawas, were sued by two groups of stockholder plaintiffs Friday. The first suit, by plaintiffs Fan Wang and Hang Gao, was brought over claims that the company violated federal securities laws and defrauded its investors through misleading statements about the status of the company.
The plaintiffs have requested class certification for all investors who held stock in Athira between September 2020 and June 17, 2021. The plaintiffs are demanding a trial by jury, and ultimately seeking punitive and compensatory damages, litigation costs, as well as any other relief the court may deem just and proper. The case was filed Friday in the Western District of Washington.
Athira is a “clinical-stage biopharmaceutical company focused on developing small molecules to restore neuronal health and stop neurodegeneration for those suffering from devastating neurological diseases.” One of the diseases Athira specializes in is Alzheimer’s disease. Their goal is to pioneer new treatment for neurological diseases by providing care that causes significant and rapid cognitive improvement, the complaint said.
On June 17, Athira announced that Leen Kawas, its CEO, would be placed on temporary leave due to questions regarding time Kawas spent at Washington State University doing doctoral research as a graduate student. The plaintiffs contended that Kawas altered images in four separate medical papers regarding her research, specifically manipulating the presentation of the hepatocyte growth factor (HGF). HGF is “a protein with the potential to treat Alzheimer’s disease.” The shared interest Kawas and Athira had in Alzheimer’s disease led to Athira applying a lot of Kawas’ research to its own research.
The link between Athira and Kawas, the complaint argued, risks that “whatever comes out of this investigation could have clear negative implications for how investors view the asset, and/or management credibility.” The plaintiffs argued that the defendants made “materially false and misleading statement[s]” and “omitted to material adverse facts,” regarding Athira’s business. Athira failed to disclose to investors that their business was tainted by Kawas’ scientific misconduct, and because of this any positive statement Athira made about themselves was materially misleading and absent of the important facts necessary to make the statements not misleading.
Because of Athira’s dissemination of information “which they knew or deliberately disregarded were misleading,” the plaintiffs asserted that they have violated the Securities Exchange Act of 1934. Wang and Gao explain that they ultimately paid inflated prices for the company’s securities due to the violations of the exchange act. If they had been aware of the true state of the company, they claimed they would not have purchased or would have paid much less for the securities. They are seeking class certification, punitive and compensatory damages, litigation costs, and any other relief deemed just and proper by the court.
The plaintiffs are represented by Tousley Brain Stephens.
In another case, Timothy and Tai Slyne filed suit against Athira and other individuals and entities for allegedly misleading statements in the company’s registration statement. The plaintiffs in that case, also a putative class action, said the registration statement explained that Kawas was “essential in creating our innovating translational development strategy.” The company went on to detail their belief that Kawas’s “scientific and professional training, her instrumental role in building Athira Pharma, Inc., and her extensive understanding of our business, operations, and strategy qualify her to serve on our board of directors.” The Slynes said the statement was false and misleading, because Kawas’ dissertation had been questioned since 2016.
According to that lawsuit, the stock price for Athira dropped to $11.15, a decrease of 39%.
Timothy and Tai Slyne are represented by Keller Rohrback LLP.
