Dechert Survey of Securities Fraud Class Actions Brought Against US Life Sciences Companies

The past year was particularly noteworthy with respect to the relative number of securities fraud class action lawsuits brought against publicly traded pharmaceutical, biotechnology and medical companies. In 2014, 38 different life sciences companies (along with their directors, officers and key personnel) were sued for alleged securities fraud in 39 different complaints — representing a remarkable increase from the 19 such lawsuits filed in 2013. In terms of substance, the 2014 securities fraud lawsuits continued the trend that we have observed in previous years of focusing on industry-specific issues (e.g., alleged misrepresentations regarding product efficacy) as compared to generalized claims of financial improprieties. Notwithstanding the significant number of new lawsuits, however, in 2014 life sciences companies continued to enjoy relative success in obtaining dismissals of the securities fraud lawsuits brought in prior years.

In this survey, we first highlight trends from the securities fraud lawsuits filed against life sciences companies in 2014, including a discussion of some of the notable allegations made in those suits. We then summarize and analyze the status of securities fraud lawsuits filed in the preceding five years. We next discuss how the U.S. Supreme Court’s 2011 decision in Matrixx Initatives, Inc. v. Siracusano has affected the litigation landscape, concerning the standard for asserting a claim for securities fraud against a pharmaceutical company that has failed to disclose adverse events associated with a product. We also provide an update on the impact of Amgen Inc. v. Connecticut Retirement Plans & Trust Funds, which lowered the bar for plaintiffs seeking class certification in all Rule 10b-5 cases, including those against life sciences companies. Finally, we provide guidance that may help minimize or eliminate the risk of securities fraud class action lawsuits.