Medivation Class Action Has Questionable Roots

In checking up on the company, I have discovered that a complaint seeking class action status has been issued against Medivation in regard to the events leading up to that same phase 3 drug trial. I tracked down the complaint and the demand for jury trial (PDF file). I read it in its entirety. Even when given my usually cynical nature, and my usual dislike for big pharmaceutical interests, I still take issue with this potential class action lawsuit.

The plaintiff alleges that the defendants used lies, deception and the omission of facts in a contrived plan to defraud investors. The plaintiff declares that the defendants successfully pursued this villainous ruse for approximately two years. And the plaintiff alleges that the defendants artificially inflated Medivation's share value. However, the plaintiffs seem to place more weight on successful marketing than on due diligence.

The plaintiff class has to cross a significant threshold of proof in order to prevail in this case. Based on my reading of the original complaint, plaintiffs fail to establish intent, fail to reveal purposeful omission of fact, and fail to establish that the actions of the defendants were the true overt cause of any artificial inflation of Medivation's stock value. Furthermore, the plaintiff's complaint seems to disregard that Medivation has had broad yet cautious support from within the Alzheimer's treatment community. Was it all wishful thinking? Perhaps it was, but that support came from many well-educated minds experienced in the field.

To me, this potential class action smacks of sour grapes. Some may be bitter because they neglected to short sell what they saw as questionable data. Some may be bitter because they sold out at the bottom of the curve. In either case, I'd still be tempted to increase my hypothetical position in Medivation. I believe that Medivation and its experimental drug dimebon have not yet hit the end of the trail.

Gary Sattler does not knowingly hold positions in the companies he writes about.