Readers will recall that in my recent wrap-up of top D&O liability and insurance issues of 2022, I included on the list the continuing prevalence of COVID-related securities class action lawsuit filings. Now, even though the coronavirus pandemic is about to enter its fourth year, the COVID-related lawsuits continue to be filed. In the first COVID-related lawsuit filing of 2023, a plaintiff shareholder has filed a securities class action lawsuit against the vaccine development company Invivyd, Inc. (formerly known as Adagio Therapeutics, Inc.). A copy of the January 31, 2023, complaint against the company can be found here.
Invivyd is a clinical stage biotechnology company. The company previously was known as Adagio until it changed its name to Invivyd in September 2022. The recently filed securities lawsuit complaint refers to the company as Adagio, as I will do here. Adagio completed an IPO on August 6, 2021. At the time of the IPO, Adagio’s lead product candidate (ADG20) was an antibody for the treatment and prevention of COVID-19.
According to the complaint, following the company’s IPO, and after the emergence of the Omicron variant of the COVID-19 virus in the fall of 2021, company officials made statements concerning the company’s ADG20’s potency and effectiveness with respect to known COVID-19 variants, including the Omicron variant.
However, in December 2021, after the period in which company officials had made the statements about the effectiveness of ADG20 with respect to the coronavirus variants, the company issued a press release describing data showing that ADG20 was actually less effective against the Omicron variant. According to the complaint, the company’s share price declined nearly 80% on this news. The complaint also alleges that following this announcement, the company subsequently shifted away from seeking to develop ADG20.
On January 31, 2023, a plaintiff shareholder filed a securities class action lawsuit in the District of Massachusetts against Invivyd and certain of its directors and officers. The complaint purports to be filed on behalf of investors who purchased the securities of the company (or of its predecessor) between November 29, 2021,and December 14, 2021.
The complaint alleges that during the class period, the defendants made materially false and misleading statements that:
(a) that the published epitope mapping, structural studies, and sequence analyses which defendants had used to claim ADG20 was effective against Omicron were insufficient, unreliable, and inadequate to make claims of effectiveness of ADG20 against Omicron; (b) that defendants’ claims regarding ADG20’s efficacy against Omicron lacked a reasonable factual basis; and (c) that ADG20 was over 300 times less effective against the Omicron variant as compared to its effectiveness against previous variants.
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 class.
As I noted at the outset, this new lawsuit is the first COVID-19-related securities class action lawsuit to be filed so far in 2023. By my count, there have now been a total of 62 COVID-related securities suits to have been filed since the initial coronavirus outbreak in the U.S. in March 2020.
It is worth noting that while this lawsuit is only just being filed now and therefore counts as a 2023 filing, the complaint relates to events that happened at a much earlier time, so the complaint’s filing may have little to say about the likelihood of further COVID-related securities suit filings in 2023.
The fact that the lawsuit involves a vaccine development company is a noteworthy in and of itself. As I noted in my recent round up of the top D&O stories of 2022, the coronavirus-related securities suit filings against vaccine development companies, arguably by contrast the many coronavirus-related securities suit filings against other kinds of companies, have fared relatively better.
Indeed, COVID-related securities suits against vaccine development companies in which the motions to dismiss were denied have resulted in the more significant settlements in COVID-related cases. In August 2022, Inovio Pharmaceuticals announced that it had reached an agreement to settle the COVID-19-related securities suit that had been filed against the company for cash and stock totaling $44 million. Also in August, Vaxart announced that it had agreed to settle the COVID-19 related securities suit pending against the company for $12 million.
To be sure, not all COVID-related suits against vaccine development companies have succeeded; the case against AstraZeneca, which was dismissed, related to the company’s efforts to develop a COVID-19 vaccine. However, and the AstraZeneca case notwithstanding, cases against vaccine development companies arguably represent the one category of cases outside of the generalization that overall the plaintiffs in the COVID-19-related securities suits have fared poorly.
Even though this complaint relates to somewhat earlier events, as noted above, its filing is significant, in that, as I noted at the outset, we are now about to enter the fourth year of the coronavirus outbreak and the COVID-related suits continue to be filed. While there is no way to know at this point whether the year ahead will bring further COVID-related lawsuit filings, as this point it does appear that the COVID-related securities litigation remains an ongoing phenomenon.