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 theDechert 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 cases.


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 be lessened.”


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.