Pardi v. Tricida, Inc.

Background

Tricida developed veverimer, a drug intended to slow the progression of chronic kidney disease. After Tricida submitted its application for Food and Drug Administration approval, the company disclosed developments involving the FDA’s concerns about the drug’s clinical-trial data and approval prospects.

The case originally asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act and Securities and Exchange Commission Rule 10b-5. After earlier rulings on motions to dismiss, the case proceeded only against Defendant Klaerner and involved two alleged misstatements from a May 7, 2020 earnings call. The plaintiff alleged that Klaerner failed to disclose substantive FDA concerns discussed at a May 1, 2020 meeting, including concerns about the treatment effect, the applicability of trial data to the U.S. population, and the influence of a single Bulgarian trial site. The plaintiff also alleged that Klaerner wrongly attributed cancellation of an advisory committee meeting partly to logistical challenges caused by COVID-19.

On April 30, 2024, the plaintiff moved to certify a class under Federal Rule of Civil Procedure 23(a) and Rule 23(b)(3). The proposed class included people and entities that purchased or otherwise acquired Tricida common stock from May 8, 2020, through February 25, 2021, subject to stated exclusions.

Rule 23(a) Requirements

The court held that the proposed class satisfied Rule 23(a)’s requirements.

- Typicality: Defendant argued that the lead plaintiff was atypical because he purchased shares after a July 15, 2020 disclosure and had testified about his knowledge of the challenged statements and publicly available information. The court rejected those arguments, finding that the plaintiff alleged the same type of injury as other class members and that his claims were sufficiently aligned with theirs. - Numerosity: Trading volume and institutional holdings showed that many investors purchased Tricida stock during the class period, satisfying the requirement that joining all class members individually would be impractical. - Commonality: The court identified common questions about whether Klaerner made materially misleading statements or omissions, acted knowingly or recklessly, whether the statements were material, and whether the alleged misconduct caused investor losses. - Adequacy: The plaintiff and lead counsel stated that they had no conflicts with other class members and had worked diligently. Defendant did not dispute their adequacy.

Rule 23(b)(3) Requirements

The court also found that the proposed class satisfied Rule 23(b)(3), which requires common questions to predominate over individual questions and a class action to be superior to other methods of resolving the dispute.

The court found that a class action was superior because the proposed class members were dispersed, individual litigation costs could exceed likely individual recoveries, and concentrating the litigation in the court would promote efficiency and avoid inconsistent results. The court did not identify anticipated management difficulties.

Predominance mainly depended on whether reliance could be established for the class as a whole. The court applied the “fraud-on-the-market” presumption, under which investors in an efficient market may be presumed to have relied on a public, material misstatement reflected in the stock price. Defendant did not dispute the basic conditions for applying that presumption, so the burden shifted to Defendant to show that the alleged misstatements did not affect the stock price.

The court concluded that Defendant did not meet that burden. It found that the July 15, August 6, August 24, and October 29, 2020 disclosures did not fully reveal the specific FDA concerns alleged in the case. The court found that the February 25, 2021 disclosure first revealed the omitted information, including concerns about the influence of a single site and the predominance of Eastern European sites. Tricida’s stock price fell 30.57% after that disclosure, and both parties’ experts found the decline statistically significant. The court therefore found that Defendant failed to sever the connection between the alleged misstatements and the price paid by investors.

Disposition

The court GRANTED Plaintiff’s motion for class certification. It certified this class:

“All persons or entities who purchased or otherwise acquired common stock of Tricida, Inc. during the period from May 8, 2020 to February 25, 2021, inclusive,” excluding Defendant, Tricida, Inc., specified family members, officers, directors, affiliates, legal representatives, heirs, successors, assigns, and entities in which Defendant or Tricida had or had had a controlling interest.

The court further ORDERED that Lead Plaintiff Jeffrey M. Fiore serve as class representative and that Block & Leviton LLP serve as class counsel. It also set a telephonic case management conference for October 22, 2024, and directed the parties to meet and confer and submit a joint case management statement. The court stated that any factual findings in the decision were limited to the class-certification analysis.