Latham Wins Dismissal With Prejudice for Pioneering Liver-Disease Drug Company Akero Therapeutics
On August 15, Latham secured dismissal with prejudice in a securities class action against Akero Therapeutics, Inc. and certain of its executives in the Northern District of California. Akero is a pioneering leader in developing a new drug to treat patients with cirrhosis and MASH — significant liver diseases with to-date unmet medical therapies.
In October 2023, Akero announced interim results for a Phase 2b study of its drug that did not meet the study’s primary endpoint, which caused Akero’s stock price to drop. Plaintiffs quickly filed suit alleging that Akero misled investors in dozens of statements describing the patient population of the Phase 2b study as including patients who had “biopsy-confirmed” or “biopsy-proven” cirrhosis due to MASH. The Phase 2b study included patients both with definitive, biopsy-proven MASH, as well as those with presumed MASH, after other causes of cirrhosis were ruled out. Akero publicly announced the two subgroups for the first time in the October 2023 interim results announcement.
Latham moved to dismiss arguing plaintiffs had not adequately alleged any false statement because even the presumed MASH patients were determined to have cirrhosis due to MASH. Latham also argued that plaintiffs did not allege any inference of scienter with no motive allegations and no former employee allegations. And we moved on loss causation grounds given the interim results announcement did not “correct” any challenged statement. Following oral argument by Jamie Wine, Judge Gonzalez Rogers granted defendants’ motion to dismiss on scienter grounds. While the court found the dozens of statements were adequately alleged to be misleading, plaintiffs had not alleged any plausible theory why defendants would intentionally conceal information that would eventually need to be disclosed, only to voluntarily disclose it before that disclosure was required. Judge Gonzalez Rogers quoted extensively from Jamie’s oral argument in her order. Plaintiffs then filed a motion for reconsideration arguing the court got the law wrong, including by relying on argument from defendants’ counsel. Judge Gonzalez Rogers promptly rejected Plaintiffs’ motion without even requesting briefing from defendants.
Plaintiffs filed a second amended complaint adding two new theories based on Akero’s study protocol submitted to the FDA and on the idea that the interim results were actually intended to be final results. Latham again moved to dismiss on behalf of defendants arguing that plaintiffs still had not alleged a strong inference of scienter. About two weeks before the motion hearing, Judge Gonzalez Rogers ordered a 45-minutes-per-side “technical tutorial” in addition to argument on the motion. Ben Harris presented Akero’s technical tutorial and Jamie Wine again argued the motion to dismiss.
Within 10 days of the hearing, on August 15, Judge Gonzalez Rogers granted Akero’s motion to dismiss with prejudice. Again quoting extensively from Latham’s briefing and oral argument, the court held that plaintiffs had not adequately alleged scienter. The court held that “knowledge alone” is not enough absent particularized facts of an intent to defraud, and plaintiffs still had not filled in the “logical gaps” the court had previously identified.
The Latham team was led by partner Jamie Wine, along with partner Susan Engel, and associates Daniel Gherardi and Nikita Kansra, with assistance from Ben Harris.