Daily Stock Market Reports

2021 Year In Review: Securities Litigation Against Life Sciences Companies –


Introduction – Summary of 2021 Trends, Themes, and
Takeaways

We are proud to present our sixth annual Securities Litigation
Year in Review publication, in which we analyze data for securities
class actions filed nationally against publicly traded
pharmaceutical, biotechnology, medical device and healthcare
product and services companies (collectively referred to herein as
“life sciences companies”) and summarize important
decisions issued by courts in 2021 in key jurisdictions in these
cases. These cases are typically filed by shareholders, on behalf
of a putative class, seeking to recover investment losses after a
company’s stock price drops following the disclosure of a
setback or problem experienced by the company with respect to its
drugs or products, such as negative feedback from or action by FDA,
clinical trial delays, suspensions or terminations, negative
clinical data results, adverse events experienced by patients, or
manufacturing problems. Plaintiffs typically assert claims under
Sections 10(b), 20(a) and Rule 10b-5 of the Securities Exchange Act
of 1934 (the “1934 Act”) based upon allegedly false and
misleading statements or omissions made by the company and its
officers, and/or, if the alleged misstatements or omissions are
made in connection with a registered securities offering, under
Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 (the
“1933 Act”).

Securities Class Action Filings Across All Industries in
2021

For the first time in many years, in 2021, the number of new
securities class action filings in federal and state courts dropped
precipitously, falling from 333 actions in 2020 to 218 filings in
2021 – a 35% drop and below the 1997-2020 average of 228
actions.1 This decline was largely due to a dramatic
drop (82%) in M&A-related class action filings, but was also
due to a 17% decline in federal “core” class action
filings alleging Rule 10b-5 claims under the 1934 Act.2
Given the enormous volume of special purpose acquisition company
(“SPAC”) initial public offerings and transactions over
the last two or so years, “core” class action filings
related to SPACs not surprisingly increased more than sixfold from
2020 to 2021.3 As in 2020, there also were a significant
number of class actions filings related to the COVID-19 pandemic in
2021 – i.e., filings against companies that were particularly
impacted by the pandemic or companies involved in the development
of products (e.g., therapeutics, vaccines, and testing products) to
address COVID-19 – although the number of COVID-19-related cases
dropped significantly in the second half of 2021.4 After
a substantial drop in 2020, the total number of 1933 Act filings in
connection with registered offerings further declined slightly (3%)
in 2021.5 The majority of these 1933 Act filings – 62%,
the highest percentage since 2014 and as compared to 37% in
20206 – were exclusively filed in federal courts,
presumably due to exclusive federal forum selection provisions in
corporate charters or bylaws many Delaware corporations have
implemented requiring 1933 Act claims against them to be filed in
federal courts, the validity of which provisions have been upheld
by the Delaware Supreme Court and various other state courts since
March 2020.7

Securities Class Actions Filed Against Life Sciences
Companies in 2021

While the overall number of cases across all industries declined
substantially, the Consumer Non-Cyclical sector, primarily composed
of life sciences companies, once again had by far the greatest
number of securities class action filings in 2021 as compared to
other sectors.8 This is likely due to the inherently volatile
nature of the stock prices of life sciences companies and the many
event-driven disclosures made by such companies and, thus, the
continued focus by the plaintiffs’ bar on life sciences
companies. As depicted in Figure 1 below, the number of core
federal filings against companies in the Consumer Non-Cyclical
sector actually increased from 66 securities class actions in 2020
to 68 actions in 2021. Notably, cases against biotechnology
companies jumped from 18 cases in 2020 to 28 cases in 2021.

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Footnotes

1 Cornerstone Research, Securities Class Action Filings
2021 Year in Review (the “Cornerstone Report”), available
at Securities Class Action Filings 2021 Year in Review
(cornerstone.com).

2 Cornerstone Report, at 1, 4.

3 Cornerstone Report, at 1, 5.

4 Cornerstone Report, at 2, 5.

5 Cornerstone Report, at 4.

6 Cornerstone Report, at 4.

7 See e.g., Salzberg v. Sciabacucchi, 227 A.3d 102 (Del.
2020); Wong v. Restoration Robotics, Inc., No. 18-CIV-02609 (Cal.
Super. Ct. Sept. 1, 2020); In re Uber Technologies, Inc. Securities
Litigation, No. CGC-19-579544 (Cal. Super. Ct. Nov. 16, 2020); In
re Dropbox, Inc. Securities Litigation, No. 19-CIV-05089 (Cal.
Super. Ct. Dec. 4, 2020); In re Sonim Technologies Inc. Securities
Litigation, No. 19-CIV-05564 (Cal. Super. Ct. Dec. 7,
2020).

8 See Cornerstone Report, at 29 (depicting 68 filings
against companies in the Consumer Non-Cyclical industry, followed
by 29 filings against companies in each of the Technology
industry).

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.



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