Introduction

2017 was a record year for class action securities litigation, and life sciences companies continued to be popular targets of such lawsuits. Prudent life sciences companies should take heed of the results of last year's decisions and filings.

In 2017, plaintiffs filed a total of 88 class action securities lawsuits against life sciences companies, a more than 30% increase from the previous year, and a more than 225% increase from only five years prior. Of these cases, the following trends emerged:

  • Consistent with historic trends, the majority of suits were filed in the Second, Third and Ninth Circuits, with an increase in suits filed in the Third Circuit, and in New Jersey in particular.
  • Three law firms were associated with more than half of the filings against life sciences companies: Levi & Korsinsky LLP (21 complaints), Pomerantz LLP (14 complaints) and The Rosen Law Firm (11 complaints).
  • The vast majority of claims were filed in the first half of 2017, with 18 complaints filed in January alone.

An examination of the types of cases filed in 2017 reveals continuing trends from previous years, with some new developments.

  • Nearly 33% of claims involved misrepresentations regarding product efficacy and safety, especially negative side effects of leading product candidates or the likelihood of FDA approval.
  • Nearly 15% of the claims arose from misrepresentations regarding regulatory hurdles, the timing of FDA approval or the sufficiency of applications submitted to the FDA.
  • Just over 20% of the claims alleged unlawful conduct in both the United States and abroad, including illegal kickback schemes and anticompetitive conduct.

The securities litigation bar also saw a large number of decisions rendered in 2017 involving life sciences companies, including:

  • Claims that arose in the development phase before the company's product had gone to market, with a majority of defendants securing dismissal.
  • Claims that were independent of or arose after the development process, with which plaintiffs tended to have more success in surviving dispositive motions.
  • Claims based on the financial management of life sciences companies, which generally split between plaintiff- and defendant-friendly outcomes.

Given the numbers from this and recent years' filings, there is no indication that the filing of securities claims against life sciences companies is going to slow down any time soon. The decisions this year resulted in mixed outcomes, with 15 cases decided in favor of defendants, 13 cases denying motions to dismiss and 7 cases in which only partial dismissals were achieved. Accordingly, in 20 of the 35 decisions in 2017, the plaintiffs' claims were allowed to proceed. These numbers illustrate how life sciences companies remain attractive targets for class action securities fraud claims and should implement the best practices recommended at the end of this survey to reduce their risk of being targeted.

Life sciences companies remain popular targets for securities fraud litigation

In recent years, life sciences companies have increasingly been targeted in securities fraud lawsuits, and 2017 was no exception. This survey is intended to give a comprehensive overview of life sciences securities lawsuits in 2017. First, we analyze the number of cases filed, including trends relating to the location filed, types of companies that are targeted, and parallels between the underlying claims. Next, we analyze the life sciences securities decisions rendered in 2017 and how they impact the legal landscape of these types of claims.

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