David H. Kistenbroker
Chicago +1 312 646 5811
New York +1 212 698 3631
In 2022, the total number of securities class action complaints filed remained below the more elevated levels we saw during 2017-2020, but life sciences companies were nonetheless still popular targets among these filings.1 In this White Paper, we analyze and discuss trends identified in filings and decisions from 2022 so that prudent life sciences companies can continue to take heed of the results.
Filings against life sciences companies in 2022 represented a 27.1% decrease from the previous year, and a 51.1% decrease from five years prior. Of these cases, the following trends emerged:
Given the numbers from 2022 and recent years’ filings, and accounting for residual impact of the COVID-19 pandemic, there is no indication that the filings of securities claims against life sciences companies are going to slow downany time soon, and plaintiffs continue to have mixed results in surviving a motion to dismiss. The decisions in 2022 resulted in a variety of outcomes, with 21 opinions decided in favor of defendants,5 10 opinions6 denying motions to dismiss and 11 opinions in which only partial dismissal was achieved.7 These numbers illustrate how life sciences companies remain attractive targets for class action securities fraud claims. Therefore, companies should continue to stay abreast of recent developments and implement best practices to reduce their risk of being sued.
Life sciences companies continue to be a popular target for class action securities fraud claims. While many of the companies discussed above were successful in defending against these claims, companies should be cautious and take steps to reduce the risk of being targeted in a securities fraud class action. Below is a list of practices that life sciences companies should consider:
1 In 2022, 197 securities class actions were filed. Cornerstone Research, Stanford Univ., Securities Class Action Clearinghouse: Filings Database, SECURITIES CLASS ACTION CLEARING HOUSE (last visited Feb. 6, 2023). In 2020, 318 securities class actions were filed while 211 were filed in 2021. Id. Cornerstone Research reported 208 class action filings in 2022 and 218 in 2021, which included filings in both federal and state courts. Securities Class Action Filings 2022 Year in Review, Cornerstone Research, 1 (2023), https://www.cornerstone.com/wp-content/uploads/2023/01/Securities-Class-Action-Filings-2022-Year-in-Review.pdf
2 These figures are based on the first complaint filed.
3 This category also includes any issues at clinical trial. This category does not include deficiencies at the manufacturing site, nor are product deficiencies that arise from the deficiencies at the manufacturing site included in this category.
4 It should be noted that 79.1%, or 34 of 43 claims, of all 2022 filings fell in more than one category.
5 Throughout this White Paper, the terms “company” or “defendants” may be used to also include individual officers or directors.
6 This includes two cases where the motions were denied as moot because of settlements. See In re Sesen Bio, Inc. Sec. Litig.,No. 21-cv-7025 (S.D.N.Y. Aug. 31, 2022); Patrick McDermid v. Inovio Pharm.s, Inc. et al., 20-cv-1402 (E.D. Pa. Aug. 31, 2022).
7 The opinions were identified by evaluating the dockets of “Healthcare” filings from 2020 and 2021 and reviewing the docket for a disposition decision taking place in 2022. Additionally, opinions were also identified through Westlaw searches of dispositive orders involving the Private Securities Litigation Reform Act (“PSLRA”) between January 1 and December 31, 2022 and cross-referencing them against filters in the Securities Class Action Clearinghouse filings by “Healthcare.” They may not encompass all dispositive opinions. In many cases, the court dismissed the operative complaint without prejudice and amended complaints are anticipated.
We did not include decisions in which there was a partial order. See Hashem v. NMC Health PLC, et al., No. 2:20-cv-02303 (C.D. Cal. Aug. 16, 2022) (voluntarily dismissed without prejudice). In NMC Health PLC, the Partial Order certified the settlement class for settlement purposes only; awarded fees and reimbursement expenses to Co-Lead Counsel; and the Court also awarded each Lead Plaintiff a compensatory award to be paid from the settlement fund.