One litigation trend that I have been following on this site since the initial coronavirus outbreak in the U.S. in March 2020 is the incidence of COVID-19-related securities class action litigation. Even though the outbreak is now well into its third year, these coronavirus-related cases continue to be filed. In the latest example of this phenomenon, on November 8, 2022, a plaintiff shareholder filed a securities class action lawsuit against Eiger Biopharmaceuticals in connection with the company’s efforts to develop a COVID-19 treatment. A copy of the plaintiff’s complaint in the case can be found here.
Eiger is a commercial-stage biopharmaceutical company. Among its product candidates is a therapy known as peginteferon lamda which the company has been evaluating for the treatment of COVID-19 through a Phase-3 study known as the TOGETHER study.
In March 2022, based on the results of the TOGETHER study, the company announced that it would be seeking Emergency Use Authorization (EUA) from the FDA for the treatment.
On September 6, 2022 the company announced that it had been told that the FDA had not yet been able to determine whether the EUA criteria for the treatment are likely to be met. According to the subsequently filed securities class action lawsuit, the company’s share price declined nearly 30% on this news.
On October 5, 2022, the company announced that it would not be seeking an EUA for the treatment after the FDA denied the company’s request for a pre-EUA meeting. The company announced further that “citing its concerns about the conduct of the TOGETHER study, the FDA concluded that any authorization request based on the data presented is unlikely to meet the statutory criteria for issuance of an EUA in the current context of the pandemic.” According to the complaint, the company’s share price declined another 5% on the news.
On November 8, 2022, a plaintiff shareholder filed a securities class action lawsuit in the Northern District of California against Eiger and certain of its directors and officers. The complaint purports to be filed on behalf of a class of investors who purchased the company’s securities between March 10, 2021 and October 4, 2022.
The complaint alleges that during the class period the defendants made false and/or misleading statements and/or failed to disclose that: “(i) Defendants overstated Eiger’s clinical and regulatory drug development expertise; (ii) Defendants failed to properly assess, and/or ignored issues with, the design of the TOGETHER study and its ability to support peginteferon lamda EUA; (iii) there were issues with the conduct of the TOGETHER study and/or the TOGETHER study was not properly designed for the pegintergeron lambda EUA in the current context of the pandemic; (iv) as a result, the FDA was unlikely to approve the submission of the peginterferon lambda EUA; (v) as a result of all of the foregoing, peginterferon lambda’s regulatory and commercial prospects for the treatment of COVID-19 were overstated; and (vi) as a result, the Company’s public statements were materially false and misleading at all relevant times.”
The complaint alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint seeks to recover damages on behalf of the plaintiff class.
By my count, this lawsuit is the 59th coronavirus-related securities class action lawsuit that has been filed since the initial COVID-19 outbreak in the U.S. in March 2020, and it is the 16th coronavirus-related securities suit to be filed so far this year.
On the one hand, it seems truly noteworthy that new COVID-19-related lawsuits continue to be filed. On the other hand, I suppose it is the same for the litigation as it is for the coronavirus itself – the outbreak and the litigation have both proved to be far more persistent than I think any of us anticipated at the outset.
As I have observed, the coronavirus-related litigation has generally fallen into one of three categories: companies that experienced coronavirus outbreaks in the facilities (such as cruise ship lines and private prison systems); companies that tried to position themselves as able to profit from the outbreak (such as diagnostic testing companies and vaccine development companies); and companies that experienced a downturn in their business operations or financial performance because of the outbreak (real estate development companies and hospital systems). More recently a fourth category has emerged, involving companies that initially prospered at the outset of the pandemic, but whose fortunes waned as the pandemic progressed (think, for example, Peloton).
This case clearly falls into the second category, as this company clearly sought to portray its COVID-19 treatment candidate as promising and as potentially qualifying for EUA treatment. The fact that the company’s efforts turned out differently than it hoped at the outset does not of course mean that the company committed securities fraud. Indeed, when the time comes for this case to fact the threshold judicial scrutiny at the motion to dismiss stage, the court will have to look very hard to find any allegations relevant to the scienter pleading requirements.
As time has gone by, it has seemed that perhaps sooner or later the COVID-19-related securities litigation phenomenon would have played itself out. Eventually, that will be the case – but we are not there yet, perhaps just as we have not yet moved beyond supply chain issues arising from COVID-19 closures in China and other indicia of the continuing influence of the coronavirus outbreak. It seems likely as we get ready to move into 2023 that we will continue to see COVID-19-related securities litigation being filed.