Novan, Inc. (NOVN) Accused of Lying About its Clinical Trials

According to the complaint, Novan, Inc. officials represented that the company performed two identical Phase 3 clinical trials for SB204.  Based on Novan's subsequent optimistic projections for SB204, Novan's stock climbed significantly above the IPO price of $11.00 per share, reaching a high of $29.09 per share on December 7, 2016.  Not long after that, on January 27, 2017, Novan announced the results of the two trials—while the NI-AC302 trial hit all of its goals, the NI-AC301 trial failed to beat a placebo.  Following the disclosures, the company's Chief Medical Officer, Chief Financial Officer, and Chief Executive Officer left the company, and Novan revealed that it was laying off 20% of its workforce.  On August 2, 2017, Novan disclosed that the company would be retreating from SB204 and refocusing on its other products.  As a result of Novan's disclosures, Novan's stock fell over 84% from its class period high to close at $4.54 per share on August 2, 2017.