Reata Pharma Accused in Securities Suit of Hyping Drug Prospects

Reata Pharmaceuticals Inc. and its top executives were hit with a federal securities lawsuit in Texas claiming they artificially inflated the company’s stock by hyping the approval prospects of an experimental inflammation drug, sticking investors with heavy losses after the Food and Drug Administration demanded further studies.

The suit, filed in the U.S. District Court for the Eastern District of Texas, concerns omaveloxolone, a therapy being developed to treat Friedreich’s ataxia, a rare genetic disorder also known as spinocerebellar degeneration.

A “precipitous decline in market value” of about one-third—from more than $156 a share to less than $105—followed news in ...