In re Axsome Therapeutics, Inc. Securities Litigation

Background

The action was brought under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5. The allegations concern statements by Axsome Therapeutics, Inc. and certain of its officers that allegedly inflated the price of Axsome common stock and caused losses to investors.

Evy Gru originally brought the action. Gru and Santoshanand Thakkar were appointed co-lead plaintiffs, and Pomerantz LLP and The Rosen Law Firm, P.A. were appointed co-lead counsel. Thakkar later withdrew, leaving Gru as lead plaintiff. The defendants moved to dismiss the operative complaint, and the court granted that motion and dismissed the case because Gru could not state a sufficient claim. The court then reopened the process for appointing a lead plaintiff.

Appointment of Lead Plaintiffs

The Private Securities Litigation Reform Act requires the court to presume that the most adequate plaintiff is the person or group that timely responds to the required notice, has the largest financial interest in the relief sought by the class, and preliminarily satisfies the relevant requirements of Rule 23 of the Federal Rules of Civil Procedure. At this stage, the opinion explained, the proposed lead plaintiff must show typicality and adequacy. Typicality means that the plaintiff’s claims arise from the same events and rely on similar legal arguments as the class members’ claims. Adequacy means that the plaintiff has no conflicting interests and has counsel capable of representing the class.

The required notice was published on November 16, 2023. Thomas Giblin, Paul Berger, and Paul Sutherland timely moved for appointment on December 7, 2023. They had purchased more than 1,662 Axsome shares during the proposed class period and suffered approximately $23,385 in losses. The court was not advised of any competing motion or any person with a larger financial interest.

The court also found that the Investor Group’s claims were typical because, like other proposed class members, the group alleged that false or misleading statements inflated Axsome’s stock price and caused investor losses. Nothing in the record suggested conflicts of interest, unique defenses, or another problem affecting the group’s ability to represent the class. No evidence or opposition rebutted the statutory presumption.

Approval of Lead Counsel

Under the Act, the most adequate plaintiff selects counsel subject to court approval. The Investor Group selected Pomerantz and Rosen Law. The court found that both firms had substantial experience handling securities-fraud class actions and were capable of serving as lead counsel. The court approved their selection as co-lead counsel.

Disposition and Further Steps

The court appointed Thomas Giblin, Paul Berger, and Paul Sutherland as lead plaintiffs and Pomerantz LLP and The Rosen Law Firm, P.A. as co-lead counsel. Plaintiffs were directed to file by January 26, 2024, any revised letter seeking permission to file a Second Amended Complaint, together with a marked proposed complaint. Defendants were directed to respond by February 2, 2024. The Clerk was directed to amend the caption, remove Evy Gru and Santoshanand Thakkar as parties on the docket, designate Giblin, Berger, and Sutherland as lead plaintiffs, and close the specified motions.