Case Overview
Melucci v. Corcept Therapeutics Incorporated is a putative securities class action filed in the United States District Court for the Northern District of California. The case, captioned as Melucci v. Corcept Therapeutics Incorporated, et al., Case No. 19-CV-01372-LHK, involves allegations of securities fraud against Corcept Therapeutics Incorporated and several of its executives.
Background of Corcept Therapeutics
Corcept Therapeutics is a pharmaceutical company focused on developing medications to treat severe metabolic, oncologic, and psychiatric disorders by modulating the effect of cortisol. The company's primary drug, Korlym, is used to treat Cushing's Syndrome, a condition caused by excess cortisol levels[1][2][4].
Allegations Against Corcept Therapeutics
The plaintiffs in this case allege that Corcept Therapeutics and its executives made false and misleading public statements during the class period, which spanned from August 2, 2017, to February 5, 2019. Key allegations include:
- Improper Payments to Doctors: Corcept allegedly paid doctors to prescribe Korlym for off-label uses, which is prohibited by the FDA[2][4].
- Aggressive Off-Label Promotion: The company aggressively promoted Korlym for uses not approved by the FDA, including treating conditions such as diabetes or obesity[2][4].
- Related Party Transactions: Corcept's sole specialty pharmacy, Optime Care, was an undisclosed related party, which allegedly allowed the company to artificially inflate its revenue and sales[2][4].
- Regulatory Scrutiny: These practices were likely to lead to regulatory scrutiny, which could negatively impact the company's financial performance[1][2][4].
Events Leading to the Revelation of Alleged Misconduct
The truth about Corcept's alleged misconduct came to light through several key events:
- On January 25, 2019, a report by SIRF alleged that Corcept paid doctors to prescribe Korlym for off-label uses.
- On January 31, 2019, Corcept forecast a sharp slowdown in Korlym sales.
- On February 5, 2019, Blue Orca Capital published a report revealing that Optime Care, Corcept's sole specialty pharmacy, was an undisclosed related party[2].
Impact on Stock Price and Market Capitalization
The revelations led to a significant drop in Corcept's stock price, causing financial losses to investors who had acquired the stock at artificially inflated prices during the class period[2].
Court Proceedings and Rulings
Appointment of Lead Plaintiff and Lead Counsel
The court appointed the Ferraro Group as the lead plaintiff due to their largest financial interest in the relief sought by the class. The court used a "last-in-first-out" (LIFO) method to calculate total losses, which favored the Ferraro Group[1].
Motion to Dismiss
Defendants filed a motion to dismiss the third amended complaint, which the court granted in part and denied in part. The court found that some of the plaintiffs' allegations were sufficient to proceed, while others were dismissed for lack of specificity or failure to state a claim[4].
Key Allegations and Evidence
Plaintiffs rely on several pieces of evidence, including:
- Physician Confidential Witnesses: Ten physician witnesses and four former Corcept employees testified that Corcept aggressively marketed Korlym for off-label uses and used unreliable diagnostic tests to screen for Cushing's Syndrome[4].
- SEC Filings: Corcept's SEC filings were alleged to be misleading, as they did not disclose the true nature of the company's relationship with Optime Care or the off-label promotion of Korlym[2][4].
Legal Framework
The case is governed by the Private Securities Litigation Reform Act (PSLRA) and Rule 23 of the Federal Rules of Civil Procedure, which outline the procedures for class actions and the requirements for lead plaintiffs and counsel[1][4].
Conclusion and Ongoing Litigation
The case remains ongoing, with the court having partially denied the defendants' motion to dismiss. The plaintiffs continue to seek compensation for financial losses incurred due to the alleged misconduct by Corcept Therapeutics and its executives.
Key Takeaways
- Securities Fraud Allegations: The case involves significant allegations of securities fraud, including improper payments to doctors and aggressive off-label promotion of a drug.
- Impact on Investors: The alleged misconduct led to a substantial drop in Corcept's stock price, causing financial losses to investors.
- Legal Proceedings: The court has appointed a lead plaintiff and partially denied the defendants' motion to dismiss, allowing some allegations to proceed.
- Evidence and Witnesses: The case relies on testimony from physician witnesses and former employees, as well as analysis of SEC filings.
Frequently Asked Questions (FAQs)
What is the main allegation against Corcept Therapeutics in the Melucci case?
The main allegation is that Corcept Therapeutics and its executives made false and misleading public statements regarding the promotion and sales practices of their drug Korlym, leading to artificially inflated stock prices.
Who is the lead plaintiff in the Melucci v. Corcept Therapeutics case?
The Ferraro Group was appointed as the lead plaintiff due to their largest financial interest in the relief sought by the class.
What events led to the revelation of Corcept's alleged misconduct?
Key events include a report by SIRF alleging off-label payments, Corcept's forecast of a sharp slowdown in Korlym sales, and a report by Blue Orca Capital revealing the relationship between Corcept and its specialty pharmacy, Optime Care.
How did the alleged misconduct affect Corcept's stock price?
The revelations led to a significant drop in Corcept's stock price, causing financial losses to investors who had acquired the stock at artificially inflated prices.
What is the current status of the litigation?
The case is ongoing, with the court having partially denied the defendants' motion to dismiss, allowing some of the plaintiffs' allegations to proceed.
Cited Sources:
- Melucci v. Corcept Therapeutics Inc. - Casetext
- Levi & Korsinsky Announce CORT Lawsuit; CORT Class Action - Levi & Korsinsky
- Melucci v. Corcept Therapeutics Incorporated, 3:19-cv-01372 - Midpage
- Case 5:19-cv-01372-LHK Document 145 Filed 08/24/21 - GovInfo
- Melucci v. Corcept Therapeutics Incorporated et al - Law360
