COVID-19 related D&O losses continue to accumulate: Spotlight
Advisen
COVID-19 related D&O losses continue to accumulate: Spotlight
By Rebecca Gainsburg, Advisen
Securities class action and shareholder derivative action lawsuits stemming from COVID-19 continue to be filed, indicating coronavirus-related Directors and Officers (D&O) losses may continue long into the upcoming year, according to Advisen loss data.
These lawsuits, which commonly accuse companies of making false or misleading statements about the full impact of COVID-19 on business or the effectiveness of different COVID-19 treatments, highlight the ability of the plaintiffs’ bar to profit off of adverse or challenging situations affecting companies.
“The fact that these lawsuits are being filed now, more than a year into the pandemic, underscores the fact that even though the pandemic has been going on for a while, pandemic winners and losers continue to emerge,” said Keven Lacroix in a recent blog post.
The majority of COVID-19 related D&O losses in Advisen’s loss database were filed in 2020, but new losses continue to arise, including a pending investigation into the president and CEO of the biopharmaceutical company Emergent for selling $10 million worth of stock immediately before the public disclosure that Emergent had ruined 15 million doses of the Johnson & Johnson vaccine, according to Advisen’s loss database.
Manufacturing losses accounted for the majority of COVID-19 related D&O losses in Advisen’s database, with pharmaceutical and biotech manufacturing companies making up one-third of total losses. Losses stemming from pharmaceutical and biotech manufacturing companies frequently occurred at companies that made statements about their abilities to manufacture or distribute vaccines, or other vaccine-related issues.
A securities class action lawsuit was filed against Sorrento Therapeutics for announcing it had discovered an antibody with 100% inhibition of the COVID-19 virus. The statement was made on May 15, 2020 and the lawsuit was filed May 26, 2020 alleging that the company made materially false or misleading statements, according to Advisen’s loss database.
On January 26, 2021 Monroe County Employees' Retirement System filed a class action lawsuit against Astrazeneca PLC and its directors and officers for allegedly misrepresenting facts regarding the problems that were occurring during clinical trials of the COVID-19 vaccine.
It’s also common for manufacturing companies to face multiple D&O lawsuits stemming from the same issue. Looking at all of the manufacturers with COVID-19 related D&O losses in Advisen’s loss database, roughly 30% were facing multiple lawsuits from the same problem.
Chembio Diagnostics allegedly made false and misleading statements about the accuracy of its COVID-19 antibody tests and is facing two securities class action lawsuits and one derivative shareholder lawsuit, according to Advisen loss data.
Other common COVID-19 related Directors & Officers (D&O) losses in Advisen’s loss database include allegations that companies released materially false or misleading statements regarding the impact COVID-19 would have on business.
A loss which occurred on February 12, 2021 at the biotech company Bluebird Bio, for allegedly downplaying the foreseeable impact of COVID-19 related disruptions to manufacturing and for making false or misleading statements about their progress.
In October 2020 a Registration Statement published by investing firm Lizhi Inc. allegedly failed to disclose that COVID-19 was already ravaging China, that COVID-19 had already negatively impacted business, and that the company published false or misleading statements.
This pinwheel graph is representative of the types of D&O related COVID-19 losses which occurred most frequently in each industry, according to Advisen’s loss database. The inner circle represents the industries with the greatest frequency of these losses, while the outer circle represents the types of losses that have occurred.
In this instance, the manufacturing industry was separated into two categories – Pharmaceutical/Biotech manufacturing and Other manufacturing – to show the significance that vaccine production and vaccine-related manufacturing had on COVID-19 related D&O losses.
To learn more about Advisen’s Data call (212) 897-4800 or email adv_support@zywave.com .
*Advisen’s loss data is curated from a wide variety of public sources. Our COVID-19 collection efforts will be updated periodically as more related losses become available. For this reason, the figures in this article may not be fully representative of all cases of this type.
