As the world waits to overcome the COVID-19 pandemic, publicly traded pharmaceutical companies waging in that fight are facing the multifaceted challenge of developing COVID-19 responses, informing the public of their progress, and managing legal challenges related to their efforts. Enter AstraZeneca.
AstraZeneca partnered with Oxford University to develop a COVID-19 vaccine in April 2020, which it later called "AZD1222." On May 21, 2020, the company announced that the United States government was providing more than $1 billion for the development, production and delivery of the vaccine. Over the course of the next six months, the company continued to make public announcements on further financial support agreements and interim development results on its vaccine progress.
On January 26, 2021, an institutional holder of AstraZeneca's American depositary shares ("ADSs")" filed a putative securities class action complaint in the United States District Court for the Southern District of New York. The plaintiff claims that between May 21, 2020, and November 20, 2020, AstraZeneca failed to disclose certain alleged errors and flaws in AZD1222's clinical trials. According to the complaint, analysts and industry experts began to raise questions after AstraZeneca's November 23, 2020 disclosure of an interim analysis of two smaller scale trials of the vaccine in disparate locales with two different dosing regimens. This disclosure purportedly resulted in a decline of nearly $2 per ADS during the trading day on November 23, 2020.
The complaint goes on to allege that post-class period reports revealed that AstraZeneca failed to disclose (i) that initial AZD1222 clinical trials had suffered from a critical manufacturing error, resulting in a substantial number of trial participants receiving half the designed dosage; (ii) that clinical trials for AZD1222 consisted of a patchwork of disparate patient subgroups, each with subtly different treatments, undermining the validity and import of the conclusions that could be drawn; (iii) that certain clinical trial participants for AZD1222 received the second dose up to several weeks after the dose had been scheduled to be delivered according to the original trial design; (iv) that AstraZeneca had failed to include a substantial number of patients over 55 years of age in its clinical trials for AZD1222; and (v) that AstraZeneca's clinical trials for AZD1222 had been hamstrung by widespread flaws in design, errors in execution, and a failure to properly coordinate and communicate with regulatory authorities and the general public. Based on these purported problems, the complaint contends that the data and conclusions that could be derived from the clinical trials were of limited utility, and AZD1222 was unlikely to be approved for commercial use in the United States in the short term. The complaint also alleges that AstraZeneca's disclosures undermined confidence in AZD1222 and may have eroded public trust in the COVID-19 vaccine development process.
Interestingly, this complaint was filed the day after Merck & Co., Inc. announced its discontinuation of development of its own SARS-Cov-2/COVID-19 vaccines, following review of Phase 1 clinical trials As of the date of this post, Merck's stock price trades at $75.60 as compared to $80.98 on January 22, 2021.
Nevertheless, on February 10, 2021, the World Health Organization published interim recommendations for use of the AZD1222 vaccine developed by AstraZeneca and Oxford University, concluding that "the known and potential benefits of AZD1222 outweigh the known and the potential risks" and recommends "an interval of 8 to 12 weeks between the doses." That announcement came after the complaint against AstraZeneca was filed, but may alter the course of the litigation as it moves forward.
In the fight against COVID-19, the public continues to monitor the corporate disclosures closely for signs of hope. Disclosing inaccurate or misleading information can result in litigation; for example, see our post from earlier this month discussing an SEC complaint against Decision Diagnostics, which had boasted of a near-instant testing capabilities for COVID-19. As this case shows, pharmaceutical companies developing COVID-19 vaccines are subject to this same level of scrutiny, if not even more so, given the immense attention currently placed on vaccine development.
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