In 2005, drugmaker Sanofi, which later became Sanofi-Aventis, began touting a new obesity drug called rimonabant under brand names Zimulti in the United States and Acomplia in Europe. Rimonabant was different from all other obesity drugs because it directly affected the brain’s hunger signal, reducing food cravings, rather than acting as a stimulant. Sanofi called it a “magic pill” because it was supposed to have fewer side effects than previous drugs like Fen-Phen.
Before it began hyping rimonabant, Sanofi had conducted several clinical trials, collectively called the Rimonabant In Obesity (RIO) studies. The trials found that rimonabant tripled the risk of suicidal ideation compared to a placebo and doubled the rate of adverse psychiatric events like depression. Many depression cases occurred in people who had not suffered mood disorders previously. There was also a six-fold increase in aggression compared to placebo users, and participants treated with rimonabant were twice as likely to suffer memory loss or disorientation. Between 23 percent and 60 percent of participants withdrew from trials, many after suffering adverse psychiatric events.
Sanofi did not tell European and U.S. shareholders about the increased risks, nor did it disclose that there was a significant chance the FDA would not approve the drug based on the RIO studies because only about 1,100 people participated in the RIO studies, fewer than the 1,500 patients usually required. Instead, Sanofi executives said Acomplia and Zimulti were “en route to mega-blockbuster status” and had a “clear path to becoming one of the world’s largest drugs.” They also said rimonabant had proven to be safe, with only mild side effects and no increase in depression or suicidality cases.
In February 2006, the FDA sent Sanofi an approvable letter, asking for more data to address its concerns that rimonabant use caused suicidality and depression. Sanofi informed investors that it had received an FDA approvable letter but did not tell them what information the FDA wanted.
In June 2007, an FDA advisory committee evaluated the data and voted unanimously to recommend against FDA approval because of the causal connection between rimonabant and the heightened risks. After that announcement, the price of Sanofi’s American Depository Shares (ADSs), as well as shares sold in the European market, dropped sharply.
Several investors filed class actions against Sanofi-Aventis and multiple executives, alleging the defendants issued misleading statements to artificially inflate the stock price in violation of Securities and Exchange Act §§10(b) and (20)(a) as promulgated by the Securities Exchange Commission’s Rule 10b-5. The plaintiffs originally included shareholders who bought European shares over a longer class period, but the certified class was U.S. purchasers of ADRs between Feb. 20, 2006, and June 13, 2007, which comprises about 108 million shares. All of the executives except the CEO and vice president of pharmaceutical operations were dismissed.
The defendants settled for $40 million. The gross value for each share is about $0.37. The court has granted preliminary approval.
Citation: In re Sanofi-Aventis Secs. Litig., No. 1:07-cv-10279 (S.D.N.Y. Sept. 23, 2013).
Plaintiff lead counsel: Tor Gronborg, Ellen Gusikoff Stewart, Trig R. Smith, Laurie L. Largent, L. Dana Martindale, Susannah R. Conn, and Caroline M. Robert, all of San Diego; and AAJ member Samuel H. Rudman, Melville, N.Y.