The number of securities class action lawsuits filed
against life sciences companies rose in both absolute and relative terms in
2012, according to a March 20, 2013 memorandum by David Kotler of the Dechert law form entitled "Survey of
Securities Fraud Class Actions Brought Against U.S. Life Sciences
Companies." According to the report, a copy of which can be found here,
life sciences companies "remain an increasingly popular target of securities
fraud class action lawsuits."
According to the report, 27 pharmaceutical, biotechnology
and medical companies were hit with securities suits in 2012, representing
about 18% of all securities suits filed during the year. By comparison,
in 2011, 17 of those companies had securities suits filed against them,
representing just 9% (It should be kept in mind when comparing the two years
that securities class action lawsuit filings overall declined significantly
between 2011 and 2012, as discussed in greater detail here.)
The 18% of all securities suits that life sciences companies' filings
represented in 2012 is "well above the percentage of securities fraud
complaints filed in recent years."
During 2012, the fillings against life sciences companies
continued to be concentrated on smaller companies. During 2012, 50% of all life
sciences securities suit filings involved companies with market caps of less
than $250 million, as compared to 58% in 2011 and 31% in 2010.
Abut 43% of the 2012 life sciences securities complaints
involved alleged misrepresentations or omissions regarding product efficacy.
However, "complaints claiming financial improprieties and insider trading were
still prevalent in 2012."
Though life sciences companies continue to be the target
of securities class action litigation, many of these cases are also dismissed.
The report notes that "in 2012, life sciences companies continued to enjoy
relative success in obtaining dismissals of the securities fraud lawsuits filed
in recent years." For example, the report shows that of the 23 securities
lawsuits filed against life sciences companies in 2008, three remain pending,
eleven were settled, and nine have been dismissed, or about 45% of all resolved
However, as the report also notes, "it is equally worth
noting that securities fraud lawsuits still carry a substantial risk of
exposure, and even when settled can result in very large payments." The report
notes that the 2008 securities suit filed against Medtronic settled during 2012
for $85 million.
The report also discusses the U.S. Supreme Court's
February 2013 decision in the Amgen case (background about which can be found here).
The report states that "the Supreme Court's decision in Amgen is expected to
have a profound impact on the critical class certification stage in securities
fraud class action lawsuits filed against life sciences companies, especially
in the Second, Fifth and First Circuits, where the previously required higher
threshold for plaintiffs to overcome the class certification barrier now will
The report concludes with a number of practical
suggestions for life sciences companies to take to minimize the risk of, and
impact from, securities fraud class actions.
Very special thanks to David Kotler for providing me with
a copy of the report.
other items of interest from the world of directors & officers liability,
with occasional commentary, at the D&O Diary, a blog by Kevin LaCroix.
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