Despite a decline over the past year of class action lawsuits, life science companies remain a popular target for securities fraud litigation.
The annual Developments in U.S. Securities Fraud Class Actions Against Life Sciences Companies report issued by Dechert LLP, a legal firm, showed there were 86 class action securities lawsuits filed against life sconce companies in 2018. That number is down slightly from the 88 class action lawsuits that were filed in 2017. The Dechert report note that although there was a decline, no matter how slight, the number of class action lawsuits filed against the companies was still more than a 3.5 times increase from five years prior.
While the legal filings were fairly even throughout the year, the Dechert report notes that the first quarter alone saw 26 filings. Of these cases, six were filed against four non-U.S. issuers. Of those four non-U.S. issuers, three were based in Ireland, two were based in Canada and one was based in Israel, Dechert said.
The Dechert report shows that majority of the lawsuits were filed in three court circuits, the Second, Third and Ninth Circuits. The Third Circuit was a particular hot spot for filing lawsuits, with the District of New Jersey being the most active of areas, the report shows. Also, the District of Delaware, which is in the Third District, saw a 250 percent increase in filings due to merger litigation.
Three legal firms, Glancy Prongay & Murray LLP, Pomerantz LLP, and The Rosen Law Firm, were behind the majority of legal filings, according to the report. In 2017 there were also three legal firms behind the majority of the lawsuits, Levi & Korsinsky, Pomerantz LLP and The Rosen Law Firm.
An examination of the types of cases filed in 2018 reveals continuing trends from previous years. Approximately 20 percent of the securities fraud class action lawsuits involved alleged misrepresentations regarding product efficacy and safety. For example, in December, the Rosen Law Firm filed a class action lawsuit against Nektar Therapeutics over alleged misleading statements and failures to disclose information about one of its assets, NKTR-214. Alnylam Pharmaceuticals is also the subject of a similar class-action lawsuit over its Onpattro (patisiran) lipid complex injection.
Many of the cases, the Dechert report said, involved “misrepresentations regarding negative side effects related to leading product candidates, which could at times impact the likelihood of FDA approval.” About 14 percent of the lawsuits centered on alleged misrepresentations regarding regulatory hurdles, such as the timing of FDA approval and about 30 percent of the lawsuits alleged unlawful conduct in both the United States and abroad, including illegal kickback schemes, anticompetitive conduct, and inadequate internal controls in financial reporting. There were also a significant number of claims alleging misrepresentation associated with proposed mergers or sales, the Dechert report said.
During 2018, the Dechert report also noted that there were a larger number of decisions made regarding lawsuits involving life science companies.
Since the start of 2019, there have been several class action lawsuits filed against pharma companies. There is a class action lawsuit against GlaxoSmithKline over its acquisition of Tesaro. Also, a class action lawsuit was filed against Perrigo over the alleged failure to disclose material related to an audit, as well as a class action lawsuit against AxoGen over its business practices.
Date: February 11, 2019