The law firm of Girard Gibbs LLP (
) has filed a class action lawsuit on behalf of investors of Arena Pharmaceuticals, Inc. (“Arena”) (NASDAQ: ARNA) who purchased Arena common stock between December 8, 2008, and September 16, 2010. The complaint charges Arena Pharmaceuticals with violations of federal securities laws for issuing false and misleading statements regarding its principal drug in development, Lorcaserin (lorcaserin hydrochloride), an experimental weight loss drug.
The lawsuit, captioned
Velasquez v. Arena Pharmaceuticals, Inc. et al
., 10-cv-2026, is pending in the United States District Court for the Southern District of California. The defendants are Arena Pharmaceuticals, Inc. and certain of its officers and directors.
The complaint alleges that Defendants violated the Securities Exchange Act of 1934 by issuing a series of misrepresentations and omissions that actively concealed and failed to disclose certain health risks associated with Lorcaserin. Throughout the class period, Defendants promoted Lorcaserin as an effective and safe weight loss treatment option, without disclosing certain health risks associated with the drug. As a result of Defendants’ false statements, Arena’s stock traded at artificially inflated prices during the Class Period, reaching a high of $7.95 per share on July 30, 2010.
On September 14, 2010, the Food and Drug Administration (“FDA”) issued a briefing document in advance of its advisory panel meeting in which the agency questioned both the safety and efficacy of Lorcaserin. The market price of Arena common stock fell $2.72 per share on this news to close at $4.13 per share on September 14, 2010 – a one-day decline of 40% on high volume. Then, on September 16, 2010, the FDA advisory panel voted 9 to 5 to reject Lorcaserin, in large part because of the results of rat carcinogenicity studies which revealed, among other things, that Lorcaserin caused cancer in rats in certain preclinical studies and that the drug provided modest therapeutic benefits. On this news, Arena’s stock fell another $1.75 per share to close at $1.99 per share on September 17, 2010 – a one-day decline of over 46% and a 75% decline from the stock’s Class Period high. That same day, in a conference call with analysts, Defendants admitted that they were aware of the test results, but chose not to disclose them to the investing public.