A few days ago when I published a post discussing a new COVID-19-related securities lawsuit I expressed my surprise that pandemic-related suits were still being filed in 2024, particularly after the pace of new coronavirus-related suits tailed off completely in the latter half of 2023. Well, it appears that the recent new case filing not just a single anomaly, as this past week yet another new pandemic-related securities lawsuit was filed.
On January 19, 2024, a plaintiff shareholder filed a securities suit against BioVie, a developmental stage biotech company, after the company reported that clinical trials for its Phase 3 drug candidate produced results the company concluded deviated from protocols and Good Clinical Practice (GCP) because the pandemic had limited patient access to clinical trial sites. A copy of the new complaint can be found here.
BioVie is a developmental stage biotech company based in Nevada. In August 2021, the company launched a Phase 3 clinical trial of a drug candidate for treatment of Alzheimer’s Disease.
During 2022 and into 2023, BioVie said in various public statements that the clinical trial was underway and that candidates had been enrolled in the trial. Beginning in October 2023, the company made a number of statements suggesting that clinical trial was showing measurable patient improvement and that the clinical impact was larger than would be expected from a placebo effect.
However, beginning in November 2023, the company issued several statements in which the company reported, with respect to the third-part service providers that were conducting the clinical trials, that the company had “uncovered what appears to be potential scientific misconduct and significant non-compliance with GCPs [Good Clinical Practices]” that “may call into question the rigor, robustness, and validity of the entire data set for this study and may require additional clinical studies to confirm the final results of the study.”
In a November 29, 2023, filing on Form 8-K, the company reported that “the trial started during the COVID-19 pandemic when access to clinical sites was limited…. Upon completion, the company found significant deviation from protocol and Good Clinical Practice (GCP) violations.”
In a subsequent analyst conference call, a company executive acknowledged that the clinical trial “did not achieve statistical significance because we had to exclude so many patients from the trials that we believe engaged in improper practices.” A company executive also stated that the problems at the outset of the trial due to limited access resulting from the pandemic “remained the case for most of the duration of the trial. We rely on third-parties to execute and monitor the trial so one could say the on the ground oversight of the sights [sic] was not what it needed to be.”
According to the subsequently filed securities class action lawsuit complaint, the company’s share price decline over 60% on this news.
On January 19, 2024, a plaintiff shareholder filed a securities class action lawsuit in the District of Nevada against the company and certain of its directors and officers. The complaint purports to be filed on behalf of investors who purchased the company’s securities between August 5, 2021, and November 29, 2023.
The complaint alleges that during the class period, the defendants failed to disclose that: “(1) the ongoing COVID-19 pandemic caused ‘limited access’ to clinical trial sites, significantly affecting the Company’s ability to conduct proper oversight of the clinical trial; (2) due to the ‘limited access’ to the clinical trial sites, the trial was at higher risk of having ‘significant deviation from protocol and Good Clinical Practice (GCP)’ and ‘anomalous data”; (3) the Company was experiencing issues with the CRO(s) [contract research organizations] it had retained, creating greater risk of the trial being in non-compliance with the GCPs; (4) the Company had identified ‘higher than expected levels of deviations’ in the data; (5) due to a ‘highly unusual level of suspected improprieties’ there was a heighted material risk that the clinical trial would ‘not achieve statistical significance’; and (7) as a result of the foregoing, statements about BioVie’s business, operations, prospects, and/or compliance with GCP were materially false and/or misleading and/or lacked a reasonable basis 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 class.
From reading this complaint, it appears that several factors that contributed to the problems with its drug candidate’s Phase 3 clinical trials. However, it also appears that among the significant factors was the problems with patient access to the clinical trial sites due to the pandemic. Because the trials were conducted by third parties and because during the trials the trial data was blinded to the company, the company could not be aware of the deviations from protocols and GCPs until the data was unblinded at the end of the trial period. But while the impact of the pandemic was only one of the contributing factors to the problems with the clinical trials, it clearly was an important factor. For that reason, I am comfortable classifying this new lawsuit as COVID-related.
As I noted at the outset of this post, I had already identified just in the first few days of the New Year a prior securities lawsuit filing that is COVID-related. This new lawsuit, filed just days after the prior suit, makes two COVID-related cases filed already in the New Year, after there were only nine COVID-related cases total filed in all of 2023 (and none at all after August 30, 2023).
It is, as I also noted in my post about the COVID-related suit filed earlier this month, somewhat surprising that COVID-related securities suits are still being filed at this late date. We are only weeks away from the beginning of what will be the fifth year from the initial outbreak of the coronavirus in the U.S. in March 2020. To be sure, looking at the time period since the initial outbreak, there has been steady drumbeat of COVID-related securities suit filings, even if the volume of the filings has diminished somewhat as time has progressed.
This case is indicative of how the pandemic’s effect can continue to play out in companies’ operations and their unfolding strategies and plans. This company’s drug candidate clinical trial apparently was undermined from the very outset by the lack of the clinical access due to the pandemic. However, because the company was dependent on its third-party service providers, this problem only recently became apparent to the company when it had access to the full trial data. The pandemic’s effects were embedded into the clinical trial results.
It remains to be seen whether there will be further COVID-19-related securities suit filings as the year progresses. The sequence of events leading to this lawsuit certainly seems anomalous. However, it could be that there are other companies were the lingering impact of pandemic effect could undermine company initiatives or results.
Time will tell, of course. In any event, with the filing of this lawsuit, there have now been a total of 73 COVID-related securities suits filed since the initial outbreak of the coronavirus in the U.S. in March 2020.
I will say this based solely on reading the complaint, it seems that this company was blindsided by the problems with the clinical trial — that is just the way the complaint reads. It may well be that when the time comes for the court to weigh the sufficiency of the plaintiff’s allegations, the court will struggle to find anything in this complaint to suggest the defendants acted with scienter.