Long-time observers of securities class action litigation filing patterns know well that life sciences companies are frequent targets of securities suit, reflecting a litigation frequency pattern that has been well-established for years. While in more recent years the overall number of securities suits filed against life sciences has shown a marginal decline, in 2024, the number of securities suits filed against life sciences companies increased to the highest level in several years, according to the latest annual report from the Sidley law firm. A copy of the law firm’s recent memo, entitled “Securities Class Actions in the Life Sciences Sector: 2024 Annual Survey” can be found here. A two-page summary of the report can be found here.

According to the report, there were 44 new securities class action lawsuits filed against companies in the life sciences sector in 2024, compared to 34 in 2023, representing a year over year increase of about 29%. The 44 securities suits filed against life sciences companies in 2024 is the highest annual number of filings since 2021, when there were 49 suits filed.

Interestingly, the number of suits filed against life sciences companies increased in 2024 despite the decrease during the year of COVID-related securities suits against life sciences companies relative to recent years. The number of COVID-related suits against life sciences companies has declined since the 2020-2022 time period, when there were six or seven new filings against life sciences companies per year. By contrast, during 2024, there were only two COVID-related suits filed against life sciences companies – one against a company developing a vaccine and the other against a company with an approved vaccine facing poor sales as demand declined.

Of the 44 new actions filed against life sciences companies in 2024, 25 were filed against companies with drugs or devices in the developmental stage, representing over half of the total number of filings during the year. This proportion of cases against developmental stage companies is in line with filing patterns in recent prior years, although it differs somewhat from the 2023 pattern, when less than half of the life sciences suit filings involved developmental stage companies. The majority of the cases against developmental stage companies arise from setbacks the company faced in the final stages of the regulatory approval process.

Nineteen of the new securities suits filed against life sciences in 2024 involved companies with mature products, representing about 43% of 2024 filings. The report notes that “the majority of these new filings arise from setbacks not unique to life sciences companies, such as disappointing sales performance. In previous years, we had seen a greater concentration of cases arising from regulatory action,” particularly in regulated areas of marketing and billing.”

While plaintiffs’ lawyers often are quick to file securities cases against life sciences companies that experience setbacks, the reality is that many of these lawsuits are unsuccessful, a pattern that remained in effect in 2024. During 2024, there were 41 federal district court decisions on motions to dismiss or motions for summary judgment and involving life sciences companies, in which the companies won dismissals in 59% of the cases (24 out of 41). The 59% success rate in 2024 was below the 68% success rate in 2023, though in line with success rates in recent years in which the success rate has fluctuated in the 50-60% range. The 41 cases that the district courts decided in 2024 is a notably higher number than was the case in recent years.

During 2024, the defendant company success rate in federal district court rulings was similar between companies with pre-approval drugs or devices and those with post-approval drugs or devices. Indeed, companies with post-approval drugs or devices prevailed slightly more frequently – companies prevailed in 57% of pre-approval cases (13 out of 26) and 61% of post-approval cases (11 out of 18). By contrast, in most prior years, the defendants generally fared better in cases involving pre-approval drugs or devices than in mature products cases, apparently reflecting “plaintiffs’ challenges in establishing falsity and scienter in cases where the statements they attack concern inherently unknowable events – the outcome of trials and of the FDA process.”

In addition to the favorable track record in federal district courts, life sciences companies also fare well in the appellate courts in 2024, with affirmance of the dismissal in six cases and affirmance of the district court’s grant of summary judgment in the remaining two cases. The report notes that “none of the appellate decisions broke new ground, and five of the eight [appellate decisions] were unpublished.”

The report itself is quite lengthy and quite detailed, full of interesting information, and merits a reading at length and in full.