Case 2:21-cv-00861 Document 1 Filed 06/25/21 Page 1 of 22
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`FAN WANG and HANG GAO, Individually
`and on Behalf of All Others Similarly
`Situated,
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`
`
`
`
`
`
`
`
`
`Plaintiff,
`
`v.
`
`
`
`
`
`
`
`
`
`
`UNITED STATES DISTRICT COURT
`WESTERN DISTRICT OF WASHINGTON
`AT SEATTLE
`
`Case No.:
`
`CLASS ACTION COMPLAINT FOR
`VIOLATIONS OF THE FEDERAL
`SECURITIES LAWS
`
`Jury Trial Demanded
`
`
`ATHIRA PHARMA, INC., a Delaware
`Corporation, and LEEN KAWAS,
`
`
`
`
`
`
`
`
`Defendants.
`
`
`
`
`
`Plaintiffs Fan Wang and Hang Gao (“Plaintiffs”), individually and on behalf of all others
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`similarly situated, by and through their attorneys, allege upon personal knowledge as to their own
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`acts, and upon information and belief as to all other matters, based upon the investigation
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`conducted by and through their attorneys, which included, among other things, a review of
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`documents filed by Defendants (as defined below) with the United States Securities and Exchange
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`Commission (the “SEC”), news reports, press releases issued by Defendants, and other publicly
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`available documents as follows:
`
`CLASS ACTION COMPLAINT - 1
`
`TOUSLEY BRAIN STEPHENS PLLC
`1700 Seventh Avenue, Suite 2200
`Seattle, Washington 98101
`TEL. 206.682.5600 • FAX 206.682.2992
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`Case 2:21-cv-00861 Document 1 Filed 06/25/21 Page 2 of 22
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`NATURE AND SUMMARY OF THE ACTION
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`1.
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`This is a federal securities class action on behalf of all investors who purchased or
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`otherwise acquired Athira Pharma, Inc. (“Athira” or the “Company”) securities between
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`September 18, 2020 and June 17, 2021, inclusive (the “Class Period”). This action is brought on
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`behalf of the Class for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of
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`1934 (the “Exchange Act”), 15 U.S.C. §§ 78j(b) and 78t(a) and Rule 10b-5 promulgated
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`thereunder by the SEC, 17 C.F.R. § 240.10b-5.
`
`2.
`
`Athira is a clinical-stage biopharmaceutical company focused on developing small
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`molecules to restore neuronal health and stop neurodegeneration for those suffering from
`
`devastating neurological diseases, including Alzheimer’s disease. The Company’s product
`
`candidates aim to provide rapid cognitive improvement and alter the course of neurological
`
`diseases with their novel mechanism of action.
`
`3.
`
`On June 17, 2021, after the market closed, Athira issued a press release announcing
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`that the Company’s Board of Directors had placed Leen Kawas, Athira’s President and Chief
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`Executive Officer, on temporary leave pending a review of actions stemming from doctoral
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`research Kawas conducted while at Washington State University.
`
`4.
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`An article published in STAT News later that day revealed that the investigation of
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`Kawas relates to allegations that she altered images in four separate papers relating to her research
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`on hepatocyte growth factor (HGF), a protein with the potential to treat Alzheimer’s disease and
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`other neurological disorders. The article noted that although Athira “has since moved on to a
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`different molecule than the one Kawas was working on, it still aims to target HGF. And so Kawas’
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`doctoral work laid the biological groundwork that Athira continues to use in their approach to
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`treating Alzheimer’s.”
`
`CLASS ACTION COMPLAINT - 2
`
`TOUSLEY BRAIN STEPHENS PLLC
`1700 Seventh Avenue, Suite 2200
`Seattle, Washington 98101
`TEL. 206.682.5600 • FAX 206.682.2992
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`Case 2:21-cv-00861 Document 1 Filed 06/25/21 Page 3 of 22
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`5.
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`Paul Matteis, a securities analyst at Stifel, highlighted the significance of the
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`allegations, writing in a note that “The scientific hypothesis behind Athira came out of the work
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`[that] Dr. Kawas did in graduate school so there is risk here that whatever comes out of this
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`investigation could have clear negative implications for how we/investors view the asset, and/or
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`management credibility.”
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`6.
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`On this news, Athira’s stock price fell $7.09 per share, or nearly 39%, to close at
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`$11.15 per share on June 18, 2021, on unusually heavy trading volume.
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`7.
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`Throughout the Class Period, Defendants made materially false and misleading
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`statements and omitted to material adverse facts regarding the Company’s business. Specifically,
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`Defendants failed to disclose to investors: (1) that the research conducted by Kawas, which formed
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`the foundation for Athira’s product candidates and intellectual property, was tainted by Kawas’
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`scientific misconduct, including the manipulation of key data; and (2) that, as a result of the
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`foregoing, Defendants’ positive statements about the Company’s business, operations, and
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`prospects were materially misleading and omitted material facts necessary in order to make the
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`statements made not misleading.
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`JURISDICTION AND VENUE
`
`8.
`
`The federal law claims asserted herein arise under §§10(b) and 20(a) of the
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`Exchange Act, 15 U.S.C. §§ 78j(b) and 78t(a), and Rule 10b-5 promulgated thereunder by the
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`SEC, 17 C.F.R. §240.10b-5, as well as under the common law.
`
`9.
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`This Court has subject matter jurisdiction over this action pursuant to 28 U.S.C.
`
`§ 1331, and § 27 of the Exchange Act, 15 U.S.C. § 78aa.
`
`10.
`
`This Court has jurisdiction over each Defendant named herein because each
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`Defendant is an individual or corporation who has sufficient minimum contacts with this District
`
`CLASS ACTION COMPLAINT - 3
`
`TOUSLEY BRAIN STEPHENS PLLC
`1700 Seventh Avenue, Suite 2200
`Seattle, Washington 98101
`TEL. 206.682.5600 • FAX 206.682.2992
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`Case 2:21-cv-00861 Document 1 Filed 06/25/21 Page 4 of 22
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`so as to render the exercise of jurisdiction by the District Court permissible under traditional
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`notions of fair play and substantial justice.
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`11.
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`Venue is proper in this District pursuant to § 27 of the Exchange Act, 15 U.S.C.
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`§ 78aa and 28 U.S.C. § 1391(b), because Defendants maintain their principal office in this District,
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`and many of the acts and omissions complained of herein occurred in substantial part in this
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`District.
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`12.
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`In connection with the acts, omissions, conduct and other wrongs alleged in this
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`Complaint, Defendants, directly or indirectly, used the means and instrumentalities of interstate
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`commerce, including but not limited to, the United States mail, interstate telephone
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`communications and the facilities of a national securities exchange.
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`PARTIES
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`13.
`
`Plaintiffs Fan Wang and Hang Gao, as set forth in the attached Certifications,
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`acquired and held shares of Athira at artificially inflated prices during the Class Period, and have
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`been damaged by the revelation of the Company’s material misrepresentations and material
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`omissions.
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`14.
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`Defendant Athira is a Delaware corporation with principal executive offices located
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`at 18706 North Creek Parkway, Suite 104, Bothell, Washington 98011. Athira’s common stock
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`trades on the NASDAQ Stock Market (“NASDAQ”) under the ticker symbol “ATHA.”
`
`15.
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`Defendant Leen Kawas, Ph.D. (“Kawas”) has served as Athira’s President, Chief
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`Executive Officer and a member of the Company’s Board of Directors at all relevant times. On
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`June 17, 2021, the Company announced that Kawas had been placed on temporary leave pending
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`an investigation by the Board of Directors, but would remain a Director of the Company.
`
`CLASS ACTION COMPLAINT - 4
`
`TOUSLEY BRAIN STEPHENS PLLC
`1700 Seventh Avenue, Suite 2200
`Seattle, Washington 98101
`TEL. 206.682.5600 • FAX 206.682.2992
`
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`Case 2:21-cv-00861 Document 1 Filed 06/25/21 Page 5 of 22
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`16.
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`Kawas, because of her positions at the Company, possessed the power and authority
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`to control the content and form of the Company’s annual reports, quarterly reports, press releases,
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`investor presentations, and other materials provided to the SEC, securities analysts, money and
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`portfolio managers and investors, i.e., the market. Kawas authorized the publication of the
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`documents, presentations, and materials alleged herein to be misleading prior to its issuance and
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`had the ability and opportunity to prevent the issuance of these false statements or to cause them
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`to be corrected. Because of her position with the Company and access to material non-public
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`information available to her but not to the public, Kawas knew that the adverse facts specified
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`herein had not been disclosed to and were being concealed from the public and that the positive
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`representations being made were false and misleading. Kawas is liable for the false statements
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`pleaded herein.
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`SUBSTANTIVE ALLEGATIONS
`
`17.
`
`Athira describes itself as a late clinical-stage biopharmaceutical company focused
`
`on developing small molecules to restore neuronal health and stop neurodegeneration for those
`
`suffering from devastating neurological diseases, including Alzheimer’s disease. The Company’s
`
`product candidates aim to provide rapid cognitive improvement and alter the course of
`
`neurological diseases with their novel mechanism of action.
`
`
`
`
`
`CLASS ACTION COMPLAINT - 5
`
`TOUSLEY BRAIN STEPHENS PLLC
`1700 Seventh Avenue, Suite 2200
`Seattle, Washington 98101
`TEL. 206.682.5600 • FAX 206.682.2992
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`Case 2:21-cv-00861 Document 1 Filed 06/25/21 Page 6 of 22
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`MATERIALLY FALSE AND MISLEADING STATEMENTS
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`18.
`
`On September 18, 2020, Athira filed its Prospectus Supplement on Form 424B4
`
`with the SEC. The Company emphasized the central role of HGF—the focus of Kawas’ doctoral
`
`research—in Athira’s product candidates:
`
`We are a late clinical-stage biopharmaceutical company focused on
`developing small molecules to restore neuronal health and stop
`neurodegeneration. With our product candidates, we aim to provide
`rapid cognitive improvement and alter the course of neurological
`diseases, with our novel mechanism of action. Our approach is
`designed to augment neuronal growth factor signaling through
`the HGF/MET, a naturally occurring regenerative system. We
`believe enhancing HGF/MET signaling has the potential to
`protect existing neurons from damage, reduce inflammation,
`promote regeneration, and positively modulate brain activity. We
`anticipate that all of these characteristics may improve neuronal
`health and translate into clinical benefits. Our pipeline is built from
`our proprietary drug discovery platform, or ATH platform, and
`consists of a series of small molecules that are designed to target
`either (1) the central nervous system, or CNS, by crossing the blood
`brain barrier, or BBB, or (2) the peripheral nervous system. Our lead
`candidate, ATH-1017, is a subcutaneous administered, BBB-
`penetrating, small molecule HGF/MET activator. . . .
`
`*
`
`*
`
`*
`
`We are pioneering the use of small molecules that are designed to
`promote the hepatocyte growth factor/MET, or HGF/MET, a
`naturally occurring regenerative system, in neurological disorders.
`While discovered in the liver, HGF is a critical growth factor across
`multiple organs, including in the brain. HGF/MET has long been
`known as a promising therapeutic target for CNS disorders,
`however, delivery of large proteins or gene therapy to the CNS to
`augment HGF/MET is challenging due to the invasive methods
`needed for them to bypass the BBB and the risk of potential adverse
`immune response. Our novel BBB-penetrating small molecules are
`designed to overcome many of these hurdles, allowing us to
`efficiently tap into the regenerative potential of HGF/MET. For
`therapeutic applications in CNS disorders, particularly AD,
`treatments that target neuronal growth factors can potentially
`accomplish several therapeutic goals, including rapid cognitive
`improvement and sustained neuroprotective effects.
`
`CLASS ACTION COMPLAINT - 6
`
`TOUSLEY BRAIN STEPHENS PLLC
`1700 Seventh Avenue, Suite 2200
`Seattle, Washington 98101
`TEL. 206.682.5600 • FAX 206.682.2992
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`Case 2:21-cv-00861 Document 1 Filed 06/25/21 Page 7 of 22
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`
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`(Emphasis added).
`
`19.
`
`Athira also touted Kawas’ key role in the Company’s development strategy: “Dr.
`
`Leen Kawas, our founder and chief executive officer, has been essential in creating our
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`innovative translational development strategy.”
`
`20.
`
`Under the section titled “Intellectual Property,” Athira told investors::
`
`We own or have in-licensed numerous patents and patent
`applications and possess substantial know-how and trade secrets
`relating to the development and commercialization of our product
`candidates,
`including
`related manufacturing processes and
`technologies.
`
`As of June 20, 2020, our patent portfolio consisted of nine owned or
`in-licensed U.S. issued patents, . . . . Our solely-owned and in-
`licensed patents and patent applications include, among others,
`claims directed to:
`
`• ATH-1017 and related compounds;
`
`• methods of using ATH-1017; and
`
`• methods of using related compounds
`
`We intend to pursue, when possible, further composition, method of
`use, dosing, formulation, and device patent protection directed to the
`neurogenerative products and processes we develop. We may also
`pursue patent protection with respect to manufacturing and drug
`development processes and technology.
`
`(Emphasis added).
`
`21.
`
`On November 12, 2020, Athira issued a press release announcing the Company’s
`
`third quarter 2020 financial results. The press release provided in part:
`
`“At Athira, we are continuing to execute on our mission to restore
`neuronal health for those suffering from neurological diseases,
`including Alzheimer’s, and we have successfully begun enrollment
`in our Phase 2/3 clinical study, LIFT-AD, evaluating our lead
`product candidate ATH-1017 in individuals with mild-to-moderate
`Alzheimer’s disease,” said Leen Kawas, Ph.D., President and Chief
`Executive Officer at Athira. “Supported by a strong cash investment
`
`CLASS ACTION COMPLAINT - 7
`
`TOUSLEY BRAIN STEPHENS PLLC
`1700 Seventh Avenue, Suite 2200
`Seattle, Washington 98101
`TEL. 206.682.5600 • FAX 206.682.2992
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`Case 2:21-cv-00861 Document 1 Filed 06/25/21 Page 8 of 22
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`
`
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`from our Series B financing in June and our initial public offering
`in September, we remain focuses on advancing the development of
`ATH-1017 and our other pipeline programs.”
`
`22.
`
`Also on November 12, 2020, Athira filed its third quarter 2020 financial results on
`
`Form 10-Q with SEC. Under the section entitled “Management’s Discussion and Analysis of
`
`Financial Condition and Results of Operations,” Defendants stated:
`
`We are a late clinical-stage biopharmaceutical company focused on
`developing small molecules to restore neuronal health and stop
`neurodegeneration. With our product candidates, we aim to
`potentially provide cognitive improvement and alter the course of
`neurological diseases with our novel mechanism of action. Our
`approach is designed to augment neuronal growth factor
`signaling
`through
`the hepatocyte growth factor/MET, or
`HGF/MET, a naturally occurring regenerative system. We believe
`enhancing HGF/MET signaling has the potential to protect
`existing neurons from damage, reduce inflammation, promote
`regeneration, and positively modulate brain activity. We anticipate
`that all of these characteristics may improve neuronal health and
`translate into clinical benefits. Our pipeline is built from our
`proprietary drug discovery platform, or ATH platform, and consists
`of a series of small molecules that are designed to target either (1)
`the central nervous system, or CNS, by crossing the blood brain
`barrier, or BBB, or (2) the peripheral nervous system.
`
`*
`
`*
`
`*
`
`We were incorporated in in March 2011 and since our inception,
`we have devoted substantially all of our resources to our research
`and development efforts such as small molecule compound
`discovery, nonclinical studies and clinical trials, as well as
`manufacturing activities, establishing and maintaining our
`intellectual property portfolio, hiring personnel, raising capital, and
`providing general and administrative support for these operations.
`We do not have any products approved for commercial sale, and we
`have not generated any revenues related to our products since
`inception. Our ability to generate product revenue sufficient to
`achieve profitability, if ever, will depend on the successful
`development of one or more of our product candidates which we
`expect will take several years.
`
`(Emphasis added).
`
`CLASS ACTION COMPLAINT - 8
`
`TOUSLEY BRAIN STEPHENS PLLC
`1700 Seventh Avenue, Suite 2200
`Seattle, Washington 98101
`TEL. 206.682.5600 • FAX 206.682.2992
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`Case 2:21-cv-00861 Document 1 Filed 06/25/21 Page 9 of 22
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`23.
`
`On March 25, 2021, Athira issued a press release announcing its fourth quarter and
`
`fiscal 2020 financial results. The press release contained the following quote from Defendant
`
`Kawas:
`
`“2020 was a momentous year for the Athira team, particularly as we
`initiated two trials evaluating ATH-1017. The goal of the ACT-AD
`and LIFT-AD studies is to demonstrate the clinical utility of this
`promising agent to treat Alzheimer’s disease and preserve cognitive
`health. Alzheimer’s disease is an area of immense medical need and
`we are actively enrolling patients with the aim of reporting data in
`2022,” said Leen Kawas, Ph.D., President and Chief Executive
`Officer at Athira. “Our novel treatment approach is agnostic to the
`underlying disease pathology and focuses on network recovery
`and information transmission in the brain, which has the potential
`to improve clinical outcomes for patients. Our compounds have
`potential in a broad range of clinical applications, and we look
`forward to submitting INDs for our Parkinson’s disease dementia
`program as well as our neuropsychiatric program this year. With our
`recently completed follow-on public offering, our balance sheet
`places us in a strong position to execute on our goals.”
`
`(Emphasis added).
`
`24.
`
`That same day, Athira filed its fourth quarter and fiscal 2020 financial results on
`
`Form 10-K with the SEC. Under the section entitled “Management’s Discussion and Analysis of
`
`Financial Condition and Results of Operations,” Defendants stated:
`
`We are a late clinical-stage biopharmaceutical company focused on
`developing small molecules to restore neuronal health and stop
`neurodegeneration. With our product candidates, we aim to
`potentially provide cognitive improvement and alter the course of
`neurological diseases with our novel mechanism of action. Our
`approach is designed to augment neuronal growth factor
`signaling
`through
`the hepatocyte growth factor/MET, or
`HGF/MET, a naturally occurring regenerative system. We believe
`enhancing HGF/MET signaling has the potential to protect
`existing neurons from damage, reduce inflammation, promote
`regeneration, and positively modulate brain activity. We anticipate
`that all of these characteristics may improve neuronal health and
`translate into clinical benefits. Our pipeline is built from our
`proprietary drug discovery platform, or ATH platform, and consists
`of a series of small molecules that are designed to target either (1)
`
`CLASS ACTION COMPLAINT - 9
`
`TOUSLEY BRAIN STEPHENS PLLC
`1700 Seventh Avenue, Suite 2200
`Seattle, Washington 98101
`TEL. 206.682.5600 • FAX 206.682.2992
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`Case 2:21-cv-00861 Document 1 Filed 06/25/21 Page 10 of 22
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`the central nervous system, or CNS, by crossing the blood brain
`barrier, or BBB, or (2) the peripheral nervous system.
`
`*
`
`*
`
`*
`
`We were incorporated in in March 2011 and since our inception,
`we have devoted substantially all of our resources to our research
`and development efforts such as small molecule compound
`discovery, nonclinical studies and clinical trials, as well as
`manufacturing activities, establishing and maintaining our
`intellectual property portfolio, hiring personnel, raising capital, and
`providing general and administrative support for these operations.
`We do not have any products approved for commercial sale, and we
`have not generated any revenues related to our products since
`inception. Our ability to generate product revenue sufficient to
`achieve profitability, if ever, will depend on the successful
`development of one or more of our product candidates which we
`expect will take a number of years.
`
`(Emphasis added).
`
`25.
`
`Under the section titled “Intellectual Property,” Athira told investors:
`
`We own or have in-licensed numerous patents and patent
`applications and possess substantial know-how and trade secrets
`relating to the development and commercialization of our product
`candidates,
`including
`related manufacturing processes and
`technologies.
`
`As of December 31, 2020, our patent portfolio consisted of eight
`owned or in-licensed U.S. issued patents, . . . . Our solely-owned
`and in-licensed patents and patent applications include, among
`others, claims directed to:
`
`• ATH-1017 and related compounds, including but not
`limited to ATH-1019 and ATH-1020;
`
`• methods of using ATH-1017; and
`
`• methods of using related compounds, including but not
`limited to ATH-1019 and ATH-1020.
`
`We intend to pursue, when possible, further composition, method of
`use, dosing, formulation, and device patent protection directed to the
`neurogenerative products and processes we develop. We may also
`pursue patent protection with respect to manufacturing and drug
`development processes and technology.
`
`CLASS ACTION COMPLAINT - 10
`
`TOUSLEY BRAIN STEPHENS PLLC
`1700 Seventh Avenue, Suite 2200
`Seattle, Washington 98101
`TEL. 206.682.5600 • FAX 206.682.2992
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`Case 2:21-cv-00861 Document 1 Filed 06/25/21 Page 11 of 22
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`26.
`
`On May 13, 2021, Athira issued a press release announcing its first quarter 2021
`
`financial results. The press release contained the following quote from Defendant Kawas:
`
`“We continue to execute on our corporate and clinical goals
`during this very important time in Athira’s history,” said Leen
`Kawas, Ph.D., President and Chief Executive Officer at Athira. “Our
`clinical trials, ACT-AD and LIFT-AD, are actively enrolling and
`will evaluate the clinical utility of ATH-1017 to treat Alzheimer’s
`disease and improve cognitive health. In addition to developing
`ATH-1017 in Alzheimer’s disease, we plan to evaluate it in
`Parkinson’s disease dementia. We also remain committed to
`advancing our expanding pipeline of novel, small molecule
`compounds. We have a well-defined strategic plan ahead of us and
`are well-funded
`to reach multiple clinical and regulatory
`milestones.”
`
`(Emphasis added).
`
`27.
`
`That same day, Athira filed its first quarter 2021 financial results on Form 10-Q
`
`with the SEC. Under the section entitled “Management’s Discussion and Analysis of Financial
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`Condition and Results of Operations,” Defendants stated:
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`We are a late clinical-stage biopharmaceutical company focused on
`developing small molecules to restore neuronal health and stop
`neurodegeneration. With our product candidates, we aim to
`potentially provide cognitive improvement and alter the course of
`neurological diseases with our novel mechanism of action. Our
`approach is designed to augment neuronal growth factor
`signaling
`through
`the hepatocyte growth factor/MET, or
`HGF/MET, a naturally occurring regenerative system. We believe
`enhancing HGF/MET signaling has the potential to protect
`existing neurons from damage, reduce inflammation, promote
`regeneration, and positively modulate brain activity. We anticipate
`that all of these characteristics may improve neuronal health and
`translate into clinical benefits. Our pipeline is built from our
`proprietary drug discovery platform, or ATH platform, and consists
`of a series of small molecules that are designed to target either (1)
`the central nervous system, or CNS, by crossing the blood brain
`barrier, or BBB, or (2) the peripheral nervous system.
`
`*
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`*
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`*
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`CLASS ACTION COMPLAINT - 11
`
`TOUSLEY BRAIN STEPHENS PLLC
`1700 Seventh Avenue, Suite 2200
`Seattle, Washington 98101
`TEL. 206.682.5600 • FAX 206.682.2992
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`Case 2:21-cv-00861 Document 1 Filed 06/25/21 Page 12 of 22
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`We were incorporated in in March 2011 and since our inception,
`we have devoted substantially all of our resources to our research
`and development efforts such as small molecule compound
`discovery, nonclinical studies and clinical trials, as well as
`manufacturing activities, establishing and maintaining our
`intellectual property portfolio, hiring personnel, raising capital, and
`providing general and administrative support for these operations.
`We do not have any products approved for commercial sale, and we
`have not generated any revenues related to our products since
`inception. Our ability to generate product revenue sufficient to
`achieve profitability, if ever, will depend on the successful
`development of one or more of our product candidates which we
`expect will take a number of years.
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`(Emphasis added).
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`28.
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`The statements identified in paragraphs 18–27 above were materially false and
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`misleading and failed to disclose material facts about the Company’s business, operations, and
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`prospects. As alleged herein, Defendants misled investors by misrepresenting and/or failing to
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`disclose: (1) that the research conducted by Defendant Kawas, which formed the foundation for
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`Athira’s product candidates and intellectual property, was tainted by Kawas’ scientific misconduct,
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`including the manipulation of key data through the altering of Western blot images; and (2) that,
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`as a result of the foregoing, Defendants’ positive statements about the Company’s business,
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`operations, and prospects were materially misleading and omitted material facts necessary in order
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`to make the statements made not misleading.
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`THE TRUTH EMERGES
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`29.
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`On June 17, 2021, after the market closed, Athira issued a press release entitled,
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`“Athira Pharma Chief Operating Officer, Mark Litton, Assumes Day-to-Day Leadership
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`Responsibilities of Company[:] Leen Kawas Place on Temporary Leave Pending Board Review of
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`Actions Stemming from Doctoral Research While at Washington State University.” Therein, the
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`Company stated in relevant part:
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`CLASS ACTION COMPLAINT - 12
`
`TOUSLEY BRAIN STEPHENS PLLC
`1700 Seventh Avenue, Suite 2200
`Seattle, Washington 98101
`TEL. 206.682.5600 • FAX 206.682.2992
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`Case 2:21-cv-00861 Document 1 Filed 06/25/21 Page 13 of 22
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`Athira Pharma, Inc. (NASDAQ: ATHA) (“Athira”), a late clinical-
`stage biopharmaceutical company focused on developing small
`molecules to restore neuronal health and stop neurodegeneration,
`today announced that Mark Litton, PhD, MBA, in his capacity as
`Chief Operating Officer, has assumed day-to-day leadership
`responsibilities for the Company, effective immediately.
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`This follows the Board’s determination to place Leen Kawas, PhD,
`President and Chief Executive Officer of Athira, on temporary leave
`pending a review of actions stemming from doctoral research Dr.
`Kawas conducted while at Washington State University. Dr. Kawas
`will remain on the Board. The Board has formed an independent
`special committee to undertake this review. The Company does not
`intend to comment further on this matter until the review is
`concluded.
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`30.
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`Although Athira’s press release provided the vaguest of explanations for placing
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`Kawas on leave, investigative journalist Olivia Goldhill published an article titled “Athira Pharma
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`CEO placed on leave amid allegations of altered images in her research papers.” The article,
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`published in STAT News on June 17, 2021, revealed the underlying allegations and the serious
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`implications for Athira. The article stated:
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`The chief executive officer of Athira Pharma, a biotech developing
`treatments for Alzheimer’s and other neurodegenerative diseases,
`has been placed on temporary leave as her university investigates
`claims she published several papers containing altered images while
`she was a graduate student.
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`The Seattle-based company did not disclose the reasons for the
`investigation of Leen Kawas, but STAT has learned that it involves
`allegations of altered images in four separate papers on which
`Kawas is the lead author. Images of Western blots, used to determine
`the presence of specific proteins in biological samples, look as
`though they’ve been altered from their original state, according to
`two image experts who spoke with STAT.
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`Washington State University is investigating the claims after several
`of the images were flagged on PubPeer, a forum dedicated to
`discussing scientific research after publication, in recent weeks.
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`CLASS ACTION COMPLAINT - 13
`
`TOUSLEY BRAIN STEPHENS PLLC
`1700 Seventh Avenue, Suite 2200
`Seattle, Washington 98101
`TEL. 206.682.5600 • FAX 206.682.2992
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`Case 2:21-cv-00861 Document 1 Filed 06/25/21 Page 14 of 22
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`
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`31.
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`The STAT News article explained the significance of the allegations and the
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`potential impact for Athira despite the fact that the alleged misconduct occurred years ago:
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`Although the papers are up to a decade old, dating back to when
`Kawas was a doctoral student, the papers are foundational to
`Athira’s efforts to treat Alzheimer’s and are cited in a patent
`licensed by Athira. Kawas, who co-founded Athira, is described as
`a co-inventor in the patent.
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`Athira is working to regrow neurons and strengthen synapses in the
`brain, based on a theory that doing so will alleviate the symptoms of
`the disease. The drugs under investigation by the company aim to
`achieve this by targeting hepatocyte growth factor (HGF), a protein
`present in the brain that stimulates the growth of cells, along with its
`receptor MET. Kawas’ papers established that a particular molecule
`affects the activity of HGF.
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`Although the company . . . has since moved on to a different
`molecule than the one Kawas was working on, it still aims to target
`HGF. And so Kawas’ doctoral work laid the biological
`groundwork that Athira continues to use in their approach to
`treating Alzheimer’s, neuroscientist George Perry of
`the
`University of Texas at San Antonio, told STAT: “They are the
`foundational basic science.”
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`32.
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`The STAT News article further expounded on the specifics of the allegations, and
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`spoke with multiple experts who dismissed the possibility that the altered images might have been
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`the result of error or careless work:
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`In all four papers led by Kawas, Western blots are surrounded by
`faint lines. “These lines suggest that some parts of the photo might
`have been derived from elsewhere, and that this was not the blot as
`it was originally obtained,” said Elisabeth Bik, a microbiologist and
`science consultant who focuses on image authenticity.
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`In eight different images in four different papers, the same
`Western blot bands seemingly appear repeatedly. “That’s
`highly unlikely that came about accidentally,” said Paul Brookes,
`professor at the University of Rochester Medical Center, who has
`also worked on exposing scientific errors. . . .
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`In two instances, the same image seems to be used to show the
`results of two different experiments published in different papers.
`
`CLASS ACTION COMPLAINT - 14
`
`TOUSLEY BRAIN STEPHENS PLLC
`1700 Seventh Avenue, Suite 2200
`Seattle, Washington 98101
`TEL. 206.682.5600 • FAX 206.682.2992
`
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