Menlo Therapeutics Inc. (MNLO) Accused of Misleading Investors About the Effectiveness of Its Drug

According to the complaint against the company's officers and directors for alleged violations of the Securities Act of 1933 in connection with Menlo's January 29, 2018 initial public offering ("IPO"), Menlo Therapeutics Inc. (MNLO) issued over 8 million shares at $17 per share, raising over $136 million in gross proceeds. In its registration statement, Menlo stated that if the results of its Phase 2 clinical trials for the treatment of pruritus are promising, the company would "rapidly advance into Phase 3 clinical trials" and would use the net proceeds from the IPO to fund such trials. However, well before the IPO, data for the primary outcome measure of the Phase 2 clinical trial had already exposed serlopitant as ineffective and having little or no prospect of Phase 3 clinical trials or approval by the U.S. Federal Drug Administration. On April 8, 2018, Menlo revealed that the data it collected before the IPO did not meet the efficacy endpoints and its drug was therefore not effective. Menlo shares currently trade at only $5.55 per share — a 67% decline from the IPO price.

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