Athira Pharma in Crosshairs of Legal Action Over Data Manipulation Charges

Nearly two months after Athira Pharma Chief Executive Officer Leen Kawas was placed on a temporary leave of absence following reports she altered images that were part of her doctoral thesis, legal firms are lining up to lead litigation against the company on behalf of shareholders who saw their stock dive.

Since Kawas was removed from her position as CEO, Athira stock has lost about half of its value. The stock had been trading at $20.87 per share on June 7 of this year. Ten days later, the stock had fallen to $10.34 after the company announced the leadership issue. 

The company is focused on developing therapeutics for neurodegenerative diseases, including Alzheimer’s disease. Athira’s work is based, in part, on Kawas’ own doctoral research, which is raising concern among investors due to the question of data integrity.

Athira became a publicly traded stock last year, raising $204 million in its IPO. The legal firm of Bragar Eagel & Squire, P.C. have lined up a class action lawsuit against the company. According to its complaint, Athira made “false and misleading statements” to the market. The legal firm said the research conducted by the company and Kawas has been “tainted by scientific misconduct.” That taint was due to the manipulation of Western blot images, which is a technique in cell and molecular biology used to detect the presence of specific proteins that are extracted from cells or tissues.

“The tainted research was of critical importance to the company’s efforts to develop treatments for Alzheimer’s. The company’s research and development efforts were based on invalid data. Based on these facts, the company’s public statements were false and materially misleading throughout the class period. When the market learned the truth about Athira, investors suffered damages,” the law firm said in its announcement.

Athira’s lead asset is ATH-1017, which is being studied as a potential treatment for mild to moderate Alzheimer’s disease. ATH-1017 is designed to enhance HGF/MET, which plays a role in maintaining neuronal health and function. In Phase Ia and Ib studies, Athira reported that ATH-1017 increased high-frequency gamma power levels. Those are the frequency band associated with learning, memory, and cognitive function. Last year, Athira was able to secure a $15 million research grant from the National Institutes of Health to advance ATH-1017 into Phase II studies. According to a recent report, Athira used the tainted Western blot images in its application for the NIH grant, which could set the company up for additional legal troubles.

Athira has not publicly addressed the allegations that it used the tainted images in its grant application. Following the revelation of Kawas’ use of the doctored images, the company tapped Chief Operating Officer Mark Litton to manage the company. Kawas remains on the company’s board of directors.