On Tuesday in the Southern District of New York, a class-action complaint was filed against AstraZeneca PLC and three company officials, claiming that the defendants violated the Securities Exchange Act of 1934 through an alleged fraudulent scheme that misrepresented AstraZeneca’s COVID-19 vaccine trials, inflated the company’s share prices, and deceived share purchasers.
Monroe County Employees’ Retirement System (MCERS) filed the complaint against AstraZeneca, a biopharmaceutical company, and Pascal Soriot, AstraZeneca CEO; Marc Dunoyer, chief financial officer and a director; and Menelas Pangalos, executive vice president of biopharmaceuticals research and development. The complaint was made on behalf of MCERS and all others who bought American depositary shares (ADS) of AstraZeneca starting May 21, 2020, through Nov. 20, 2020, known as the class period. AstraZeneca has ADSs traded on the New York Stock Exchange and Nasdaq under “AZN,” with each ADS representing one half of a share.
The complaint notes that in April 2020, AstraZeneca partnered with Oxford University to develop a COVID-19 vaccine that would soon be known as AZD1222, which was “met with great optimism by investors and governments around the world.” AstraZeneca issued multiple releases in the class period announcing government support received for development, plans for clinical trials, results of clinical trials, and the company’s commitments to rigorous standards, all of which painted AZD1222’s development in a promising light. For example, on Aug. 31, 2020, AstraZeneca stated in a release that it was “commit(ting) to the highest safety standards and to broad and equitable access, reiterating its core values to ‘follow the science’ and ‘put patients first,’ ” according to the complaint. On Nov. 5, 2020, Pangalos said in a conference call, “We continue to lead across multiple fronts in the global response to the COVID-19 pandemic. Progress has been made with our vaccine, AZD1222, and we have now resumed dosing in all our trials globally, alongside entering a rolling regulatory review in Europe.”
However, the plaintiff noted that results of an interim analysis for its AZD1222 trial released by AstraZeneca on Nov. 23, 2020, “immediately began to raise questions among analysts and industry experts”; the analysis showed two smaller-scale trials in separate locations, one that provided a half-dose to patients followed by a full dose and the other that provided two full doses.
“Counterintuitively, AstraZeneca claimed that the half dosing regimen was substantially more effective at preventing COVID-19 at 90% efficacy than the full dosing regimen, which had achieved just 62% efficacy. AstraZeneca highlighted the blended ‘average efficacy of 70%’ among the two trials,” according to the complaint.
Additionally, Dr. Moncef Slaoui, the head of a government COVID-19 vaccine effort known as Operation Warp Speed, “told reporters that the half-strength dose had not been initially tested in people over the age of 55 — despite the fact that this population was the most vulnerable to COVID-19” and said “that if AstraZeneca could not clearly explain the discrepancies in its trial results, the results would most likely ‘not be sufficient for approval’ ” to commercially sell the vaccine in the U.S., the complaint states.
With the purported red flags in AstraZeneca’s interim analysis, AstraZeneca’s ADS price “declined nearly $2 per ADS” on Nov. 23, 2020, “on extremely high trading volume of over 13 million ADSs traded.” The plaintiff claims that had it and other putative class members known they were allegedly being misled by an “artificially and falsely inflated” ADS market price, they would not have bought the ADSs at the prices they did or in the first place.
The plaintiff alleged a violation of §10(b) of the Exchange Act and Rule 10b-5 against AstraZeneca and the individual defendants, claiming their conduct involved “(e)mploy(ing) devices, schemes and artifices to defraud,” issuing “untrue statements of material fact or omit(ing) to state material facts necessary in order to make the statements made … not misleading,” and “(e)ngag(ing) in acts, practices and a course of business that operated as a fraud or deceit” upon the plaintiffs.” Specifically, against the individual defendants, the plaintiff alleged a violation of §20(a) of the Exchange Act by virtue of that their company positions give them influence and access, and thus the ability to mitigate misleading information from being released and to issue corrections as needed.
Requests by the plaintiffs include certification of the putative class, compensatory damages, and litigation fees, among other reasonable relief.