(CN) – Stockholders can move ahead with a class action alleging that the biotechnology company Amgen inflated its stock price by misstating and withholding safety information about its anemia drugs, the 9th Circuit ruled Tuesday.
While Amgen promoted its products, the U.S. Food and Drug Administration had concerns, according to the consolidated securities-fraud action filed by Connecticut Retirement Plans and Trust Funds and other investors. Amgen allegedly hid the true nature of these concerns and “concealed details about a clinical trial that was canceled over concerns that Amgen’s product exacerbated tumor growth in a small number of patients,” according to the court’s description of the case.
Investors also claim that Amgen misrepresented the on-label safety of the drugs and “promoted significant off-label usage, in violation of federal drug branding statutes.”
The investors moved for federal class status in Los Angeles, arguing that Amgen’s alleged misstatements and omissions had inflated the company’s stock price and cost them money.
U.S. District Judge Philip Gutierrez found the allegations sufficient, and the plaintiffs sufficiently linked, to certify the class. Specifically, he found that the plaintiffs had reliance in common based on the “fraud-on-the-market” presumption: “the principle that the market price of a security traded in an efficient market reflects all public information and therefore that a buyer of the security is presumed to have relied on the truthfulness of that information in purchasing the security,” according to the ruling.
The 9th Circuit agreed in an interlocutory appeal, affirming the lower court and rejecting Amgen’s call for proof of materiality rather than mere plausible allegations among the class.
“Plaintiffs need not prove materiality to avail themselves of the fraud-on-the-market presumption of reliance at the class certification stage,” Judge Barry Silverman wrote for the unanimous, three-judge panel in Pasadena. “They need only allege materiality with sufficient plausibility”
Silverman added that the proposed class had “plausibly alleged that several of the defendants’ public statements about Amgen’s pharmaceutical products were false and material.”
“Coupled with the concession that Amgen’s stock traded in an efficient market,” he wrote, “this was sufficient to invoke the fraud-on-the-market presumption of reliance.”