On September 12, 2022, Judge J. Paul Oetken of the United States
District Court for the Southern District of New York dismissed with
prejudice a putative class action asserting claims under the
Securities Exchange Act of 1934 against a pharmaceutical company
and certain of its executives. In re AstraZeneca plc Sec.
Litig., 2022 WL 4133258 (S.D.N.Y. Sept. 12, 2022). Plaintiffs
alleged that the company made misstatements and omissions with
respect to clinical trials of its COVID-19 vaccine. The Court held
that plaintiffs failed to identify any misleading statements and
failed to adequately allege scienter.
As a general matter, the Court held that plaintiffs failed to meet
the heightened pleading standard under the Private Securities
Litigation Reform Act ("PSLRA") to "'demonstrate
with specificity why and how' each statement is materially
false or misleading." Id. at *6. Rather, the Court
observed that plaintiffs presented in "boilerplate
fashion" various statements from the class period and then,
"after each one, repeat[ed] a copy-and-pasted list of
omissions" as to allegedly adverse information regarding the
clinical trials. Id. This, the Court explained, was
insufficient because it did not "specify what understanding
each statement left investors, and how that understanding was
inconsistent with alleged omissions." Id.
With respect to plaintiffs' allegations that information was
omitted regarding the dosages used in the trials, the Court
determined that plaintiffs failed to identify "any inaccurate,
misleading, or incomplete statement" relating to vaccine
dosage, but rather "identified only accurate statements
describing the launch and historical progression of the ...
clinical trials." Id. at *7. The Court rejected
plaintiffs' argument that any statements "created the
misleading impression" that there were "no significant
setbacks or unusual issues;" rather, the Court explained that
there is "no generalized duty to 'disclose negative
facts.'" Id. Moreover, while plaintiffs argued
that the company had a duty to "tell the whole truth"
after it chose to speak on the issue of the clinical trials, the
Court concluded that the challenged statements were "at such a
high level of generality, and the alleged omitted facts so
granular, that there is no violation of that principle here."
Id.
Further, the Court rejected plaintiffs' allegations with
respect to the alleged omission that the number of trial
participants over the age of 55 was purportedly insufficient.
Id. at *8. The Court determined that no challenged
statement was rendered misleading by this alleged omission. For
instance, while plaintiffs pointed to a statement that the clinical
trials would measure immune responses "in different age
ranges," the Court noted that there was no dispute that the
trials indeed did so. Id. The Court also rejected
plaintiffs' argument that defendants "created the
misleading impression that the number of 55+ subjects was
sufficient to be studied," which the Court noted amounted to
"little more than a dispute about the proper interpretation of
data," which was insufficient to establish an actionable
misrepresentation. Id.
In addition, the Court held that various general statements were
non-actionable puffery, including statements that the company was
"moving quickly but without cutting corners," that the
clinical trial was "on track," and that the company would
"follow the science" and "put patients first."
Id. at *8-9. The Court determined that no reasonable
investor would rely on such general statements.
The Court also determined that plaintiffs' allegation that the
company failed to disclose that the vaccine was unlikely to receive
regulatory approval in the near term was not actionable under the
safe-harbor provision of the PSLRA for forward-looking statements
accompanied by meaningful cautionary language. Id. at *9.
The Court emphasized that statements regarding regulatory approval
are "classically forward-looking," and the challenged
statements were all accompanied by meaningful cautionary language.
Id.
The Court further concluded that plaintiffs failed to adequately
allege scienter. The Court rejected plaintiffs' argument that
scienter should be inferred on a theory of "motive and
opportunity." Id. The Court explained that plaintiffs
failed to establish the required "concrete and personal
benefit" from the alleged misrepresentations, as the only
motives identified—such as increasing the stock price to
facilitate the acquisition of another company—were
insufficient and were "common to most corporate
officers." Id.
The Court also rejected plaintiffs' argument for scienter based
on a theory of "strong circumstantial evidence of conscious
misbehavior or recklessness," which the Court explained
required behavior that was "highly unreasonable" and
"an extreme departure from the standards of ordinary
care." Id. While plaintiffs argued that defendants
had access to "contrary facts" conflicting with the
challenged statements, the Court determined that plaintiffs failed
to specifically identify the information any defendant had access
to. Id. Moreover, the Court noted that the alleged omitted
facts were, in fact, disclosed to the FDA, and that there was
"room for disagreement" as to whether this information
undermined the trial results, further undermining any inference of
fraudulent intent. Id. at *10.
Finally, the Court declined to grant leave to amend, concluding
that further amendment would be futile, given that plaintiffs had
previously amended their complaint and failed to explain how
further amendment would remedy the deficiencies identified by the
Court. Id.
In re AstraZeneca plc Sec. Litig.
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