(CN) - The 9th Circuit Appeals Court ruled that a California district court judge properly certified a class of shareholders who say they were damaged after Amgen failed to disclose safety concerns related to two of its anemia products.
     Connecticut Retirement Plans and Trust Funds accused Amgen of violating federal securities laws after it emerged that the biotechnology company had made misstatements in connection with its treatments for anemia, a red blood cell deficiency. The class claimed Amgen glossed over FDA safety concerns and a clinical trial that showed Amgen's product promoted tumor growth. The company was also accused of promoting its products for so-called off-label uses.
     Connecticut Retirement claimed that it bought overvalued stock and was also damaged when the previous misstatements and omissions were revealed to the market and stock in Amgen nosedived.
     A district court judge certified the class under the "fraud-on-the-market" presumption. The 9th Circuit in Pasadena, Calif. upheld Judge Philip Gutierrez's ruling, rejecting Amgen's arguments on appeal.
     "In this case, the plaintiff plausibly alleged that several of the defendants' public statements about Amgen's pharmaceutical products were false and material. Coupled with the concession that Amgen's stock traded in an efficient market, this was sufficient to invoke the fraud-on-the-market presumption of reliance. The district court did not abuse its discretion in certifying the class," Judge Barry Silverman wrote for the three-judge panel.
     Amgen argued that Connecticut Retirement failed to prove that alleged misstatements affected Amgen's stock price in an "efficient" market. If Connecticut Retirement could not prove the statements were "material," Amgen argued, each member of the class of shareholders had to show reliance, requiring reversal of class certification.
     Silverman disagreed, finding that "proof of materiality is not necessary to ensure that the question of reliance is common among all prospective class members' securities fraud claims."
     "We hold that plaintiffs need not prove materiality to avail themselves of the fraud-on-the-market presumption of reliance at the class certification stage," the judge wrote.
     Amgen also claimed it was prevented from presenting evidence that FDA's publicized concerns over the safety of Amgen drugs acted as a counterweight to its misstatements.
     "As the Supreme Court and 9th Circuit have explained, the truth-on-the-market defense is a method of refuting an alleged misrepresentation's materiality ... As explained above, a plaintiff need not prove materiality at the class certification stage to invoke the presumption; materiality is a merits issue to be reached at trial or by summary judgment motion if the facts are uncontested. The only elements a plaintiff must prove at the class certification stage are whether the market for the stock was efficient and whether the alleged misrepresentations were public - issues that Amgen does not contest here," Silverman concluded.