Two groups of Novavax shareholders, Charles R. Blackburn and Michele Rosati and Amy Snyder, filed shareholder derivative complaints on Friday in the District of Maryland against biotechnology company Novavax, Inc. and its directors for alleged breach of fiduciary duties by failing to comply with manufacturing safety regulations and for insider trading over its failed COVID-19 vaccine development.
The complaints note that in March 2020, just as Novavax was going to be removed from the NASDAQ exchange for falling stock prices, it announced its intention to develop a COVID-19 vaccine. In mid-June, the company announced that the board would grant over $70 million in equity to its senior executives for their “extraordinary work” in helping to develop the vaccine. As the vaccine developed, Novavax allegedly “concealed” issues with it so its stock prices would continue to rise. Accounting for this, “insiders sold nearly $90 million in Novavax stock at prices far in excess of the Company’s stock price today” as the stock price was $248 in September 2021 and then crashed to under $50 per share.
Despite receiving millions in equity, “the Board failed to oversee the effectiveness of Novavax’s manufacturing controls and procedures on a regular basis,” according to the plaintiffs. Furthermore, there was allegedly no Board committee that oversaw production quality or manufacturing safety risks for the entire vaccine development period. Instead, the plaintiffs allege that the Board sold their shares at inflated prices before the majority of shareholders faced a crash of Novavax’s stock price. Thus, the plaintiffs are suing for a violation of the Exchange Act, two counts of breach of fiduciary duty, and unjust enrichment.
The plaintiffs are seeking a declaration that Novavax’s officers breached their fiduciary duties and that they were in violation of Section 14 of the Exchange Act, costs and disbursements, attorney’s fees and costs, and other relief.
Blackburn and Rosati are represented by Adelburg, Rudow, Dorf & Hendler, LLC, Glancy Prongay & Murray LLP, Robbins LLP and the Law Offices of Alfred G. Yates, J.R., P.C. Snyder is represented by Levi & Korsinsky, LLP.