Latham & Watkins Secures Dismissal with Prejudice in Securities Class Action Against Liver Disease Drug Developer Akero Therapeutics
In a significant victory for life sciences clients, global law firm Latham & Watkins LLP has obtained a complete dismissal with prejudice of a securities class action lawsuit against Akero Therapeutics, Inc., a clinical-stage biopharmaceutical company focused on developing treatments for metabolic dysfunction-associated steatohepatitis (MASH), a severe form of liver disease. The case, filed in the U.S. District Court for the Northern District of California, alleged that Akero and its executives misled investors regarding the patient population in a Phase 2b clinical study of its lead drug candidate, EFX (efruxifermin), leading to a stock price drop. Latham’s cross-office litigation team successfully argued that the plaintiffs failed to establish a strong inference of scienter, resulting in a swift ruling in favor of the defendants just 10 days after the motion to dismiss hearing.
Background on Akero Therapeutics and the Allegations
Akero Therapeutics, headquartered in South San Francisco, California, is a pioneering biotech firm dedicated to addressing unmet needs in liver diseases, particularly MASH, which affects millions worldwide and can progress to cirrhosis, liver failure, or cancer. The company’s lead asset, EFX, is an investigational therapy designed to mimic the effects of fibroblast growth factor 21 (FGF21), a hormone that regulates metabolism and inflammation in the liver. Akero went public in 2020 and has been advancing EFX through clinical trials, including the Phase 2b HARMONY study, which evaluates its efficacy and safety in patients with advanced fibrosis due to MASH.
The securities class action, initiated by lead plaintiffs in early 2024, stemmed from disclosures related to the HARMONY study’s patient enrollment criteria. Investors claimed that Akero overstated the study’s potential by including patients who did not fully meet the intended profile for advanced MASH, allegedly inflating expectations and causing a sharp decline in the company’s stock price when the issue surfaced. The complaint accused the company and certain executives of violations under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, seeking damages for alleged losses. This case highlights the high-stakes scrutiny faced by biotech firms during clinical development, where regulatory and scientific disclosures can significantly impact market valuation.
Latham’s Winning Arguments and Court Ruling
Latham’s litigation team, drawing on expertise in securities law and life sciences, filed a motion to dismiss arguing that the plaintiffs’ allegations lacked the requisite strong inference of scienter—intentional or reckless misconduct—required under the Private Securities Litigation Reform Act (PSLRA). The firm contended that the supposed misrepresentations were not material omissions but rather standard clinical trial design choices, and that no logical motive existed for the defendants to conceal information they would inevitably disclose voluntarily, as Akero did prior to any regulatory mandate.
U.S. District Judge William H. Orrick, presiding over the case, agreed with Latham’s position in a detailed opinion issued in late January 2025. The court extensively quoted from the firm’s briefing, emphasizing that the plaintiffs had failed to “fill in the logical gaps” explaining why Akero would risk misleading investors only to reveal the information proactively. The dismissal with prejudice means the plaintiffs cannot refile the same claims, providing Akero with finality and shielding it from further litigation on these grounds. This outcome underscores Latham’s strategic approach in securities defense, particularly in biotech contexts where scientific nuances often intersect with legal standards.
The Latham team was led by partners with deep experience in securities litigation, including those from the firm’s San Francisco and New York offices, known for handling complex, industry-specific disputes. This win aligns with Latham’s strong track record in the life sciences sector, where the firm has secured numerous dismissals and victories in high-profile cases involving drug developers.
Implications for Biotech Companies and Securities Litigation
This dismissal serves as a positive precedent for biopharmaceutical companies navigating securities class actions, especially those involving clinical trial disclosures. In the volatile biotech market, where stock prices can swing based on trial data interpretations, courts’ willingness to apply rigorous PSLRA standards offers protection against speculative claims. For Akero, the ruling allows the company to refocus on advancing EFX toward Phase 3 trials without the overhang of litigation, potentially boosting investor confidence amid ongoing MASH research.
The case also reflects broader trends in securities litigation against life sciences firms, where plaintiffs increasingly target drug development milestones. Latham’s success here reinforces the firm’s position as a go-to defender in such matters, contributing to its repeated recognition as a top life sciences practice by outlets like Law360 and Chambers USA. As Akero continues its pipeline development, this victory highlights the importance of robust disclosure practices and experienced counsel in mitigating legal risks in the competitive biotech arena.