It has been nearly a year since the coronavirus outbreak in the U.S. first led to widespread closures and disruptions. Throughout that time, plaintiffs’ lawyers have continued to file securities class actions and other claims against companies affected by the pandemic. On February 12, 2021, in the latest of these COVID-19-related securities lawsuits, a plaintiff shareholder filed a securities class action lawsuit against the biotechnology firm bluebird bio alleging that the company misrepresented the pandemic’s foreseeable impact on the company’s FDA application plans. A copy of the complaint can be found here.
Bluebird researches and develops gene therapies for genetic diseases. The company’s development program includes a therapy called LentiGlobin for the treatment of sickle cell diseases (SCD). In May 2020, the company announced that it expected to submit a biologics licensing application (BLA) to the FDA in the second half of 2021. In its press release relating to this announcement, the company stated among other things that its timeline was developed “after a rigorous review of all operational plans to reflect COVID-19 uncertainties and recent program shifts.” In a related conference call, a company official stated that the company was “liberated” to “move quiet aggressively” despite COVID-19.
On November 4, 2020, the company issued a press release in which, among other things, the company disclosed that it would no longer apply for FDA approval of its LentiGlobin product in the second half of 2021 as expected. Citing “feedback” from the FDA requiring the company to provide additional data showing drug product comparability for LentiGlobin, “alongside COVID-19 related shifts and contract manufacturing organization COVID-19 impacts,” the company was adjusted its planned submissions timing to 2022. According to the subsequently filed securities complaint, the company’s share price declined 16.6% on the news.
On February 12, 2021, a plaintiff shareholder filed a securities class action lawsuit in the Eastern District of New York against the company and certain of its executives. The complaint purports to be filed on behalf of a class of investors who purchased the company’s securities between May 11, 2020 and November 4, 2020. The plaintiff alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The plaintiff seeks to recover damages on behalf of the plaintiff class.
The complaint alleges that during the class period, the defendants made false and/or misleading statements and/or failed to disclose that: “(i) data supporting bluebird’s BLA submission for LentiGlobin for SCD was insufficient to demonstrate drug product comparability; (ii) Defendants downplayed the foreseeable impact of disruptions related to the COVID-19 pandemic on the Company’s BLA submission schedule for LentiGlobin for SCD, particularly with respect to manufacturing; (iii) as a result of the foregoing, it was foreseeable that the Company would not submit the BLA for LentiGlobin for SCD in the second half of 2021; and (vi) as a result, the Company’s public statements were materially false and misleading at all relevant times.”
By my count, this new lawsuit against bluebird is the 28th coronavirus-related securities class action lawsuit to be filed since the initial outbreak of the coronavirus in the U.S. last March. The lawsuit is also the fifth coronavirus-related securities suit to be filed so far in 2021.
As I have noted in prior posts about coronavirus-related securities suits, the suits generally fall into one of three categories: lawsuit against companies that experienced outbreaks in their facilities; lawsuits against companies that claimed to be able to profit or prosper from the pandemic; and lawsuits companies whose operations or finances were disrupted by the pandemic. This new lawsuit against bluebird seems to fall in the third category, since the allegation is that COVID-19 disrupted the company’s plans to submit its gene therapy to the FDA, causing the company’s share price to decline.
The lawsuit has only just been filed and it remains to be seen how the complaint will fare. The court will decide, but just based on the complaint, the plaintiff may face an uphill battle convincing the court that he has pled sufficient fact to create a compelling inference that the defendants acted with scienter. It seems just as likely to me that, rather than recklessly misleading the investing public, the defendants believed that they would be able to meet their timetable and that the pandemic would not interfere, but that subsequent events turned out differently. Maybe the defendants engaged in wishful thinking, but what would be the point of actively misleading investors and the market if it was, as the plaintiff alleges, it was foreseeable that the pandemic would interfere and then the defendants would have to walk back their earlier statements?
In any event, it does seem as if there could well be more complaints filed along this line, based on the allegation that the defendant companies made earlier optimistic statements about their ability to deal with the impacts of the coronavirus outbreak that later turned out to be unwarranted. As the public health emergency phase continues to drag on, the possibility for these kinds of event sequences seems likelier. The fact is that COVID-19 continues to disrupt businesses, their operations, and their finances. In some cases, companies experiencing these developments will find themselves getting hit with lawsuits.