PASADENA, Calif. (CN) — A Ninth Circuit panel on Wednesday resurrected claims that a pharmaceutical firm hid concerns from investors that its weight-loss drug caused cancer in rats prior to approval by the FDA.
Lead plaintiff Carl Schwartz sued San Diego-based Arena Pharmaceuticals in 2010, claiming the firm's CEO Jack Lief publicly touted the impending FDA approval of its weight-loss drug Lorcaserin without disclosing studies that found the drug may have caused cancer in rats.
After testing the drug on both animals and humans in 2006 and 2007, Arena reported to the FDA in May 2007 that Lorcaserin caused cancer in the brains, skin, mammary glands and nervous systems of rats.
The FDA asked Arena to conduct follow-up studies to test the company's hypothesis that the cancer was caused by prolactin, a hormone that has been linked to cancer in rats, and that it did not pose the same risk to humans, according to the Ninth Circuit ruling.
In February 2009, Arena completed its final report stating that its follow-up studies confirmed a connection between prolactin and the rat cancer.
Before Arena submitted its final application for FDA approval in December 2009, Lief told investors he was "confident" about Lorcaserin's imminent approval and that the drug's "long-term safety" had been demonstrated in part by preclinical trials, including the rat study.
In September 2010, the FDA published a briefing document on its website, revealing publicly for the first time the FDA's concerns about the rat study and the drug's potential to cause cancer in rats and humans.
Schwartz claimed investors were "caught off guard," "surprised," and "completely blindsided" by the revelation, leading Arena's stock price to plummet 40 percent in one day.
The FDA Advisory Committee declined to approve the drug in a 9-5 vote, before an independent panel of pathologists found Arena had overreported incidents of tumors in rats. The FDA later approved Lorcaserin in June 2012, and the drug remains on the market today.
But Schwartz claims the company misled investors about the rat study and about the FDA's likeliness to approve the drug in 2009 and 2010.
Writing for a three-judge panel, Circuit Judge Jay Bybee found a federal judge wrongly dismissed the class action in November 2013 by concluding that the firm merely had a "difference of scientific opinion" with the FDA and that it did not intentionally mislead investors.
"Arena did more than just express its confidence in Lorcaserin's future," Bybee wrote. "It affirmatively represented that 'all the animal studies that [had] been completed' supported Arena's case for approval. And at the time these statements were made by various Arena officials in 2009, Arena knew that the animal studies were the sticking point with the FDA."
Unlike the 2008 dismissal of a securities class action against AstraZeneca over its new drug application for the blood thinner Exanta, Bybee said this went beyond a mere "good-faith scientific disagreement" between a pharmaceutical firm and the FDA.
"Arena could have remained silent about the dispute or it could have addressed its discussions with the FDA head-on," Bybee wrote in the 23-page opinion. "But it could not represent that there was no controversy here because all the data was favorable."
The panel reversed the dismissal of the securities class action against Arena and remanded the case to the Southern District of California.
Arena did not immediately respond to a phone call seeking comment on the ruling Wednesday afternoon.
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