Shareholder Lawsuits: Implications for Biotech Stocks

Frequency and Nature of Shareholder Lawsuits in Biotech

Shareholder lawsuits in the biotech sector are frequent, with cases like Biogen's securities class action and Regeneron's patent litigation highlighting the nature of these disputes. Gilead's involvement in advocacy-related litigation further underscores the diverse legal challenges biotech companies face.

"When the market learned the truth about Biogen, investors suffered damages. Join the case to recover your losses. The Schall Law Firm represents investors around the world and specializes in securities class action lawsuits and shareholder rights litigation. This press release may be considered Attorney Advertising in some" --- (BIIB, press release, 2024/05/30)

"It's another one that's tough for us to answer, Brian, but I think we had we obviously backing up a favorable decision that was issued at the end of 2023 with regard to a formulation patent for EYLEA, the 865 patent, which was found to be valid and would be infringed by Biocon, by a judge in the Northern District of involved in a Flibercept litigation to come together on May 17th, involved in a Flibercept litigation to come together on May 17th." --- (REGN, conference, 2024/05/14)

"Case in point, abortion. Gilead has spoken out publicly in favor of abortion and has joined litigation in favor of abortificence. Furthermore, the company pledged substantial shareholder resources to pro abortion advocacy groups and in addition pledged more shareholder resources to employee matching program for abortion advocacy." --- (GILD, Annual General Meeting transcript, 2024/05/08)

"NEW YORK, July 15, 2024 (GLOBE NEWSWIRE) -- Bernstein Liebhard LLP reminds shareholders that only 7 days remain to move for lead plaintiff in a securities class action lawsuit alleging claims on behalf of investors (the "Class") who purchased or acquired the securities of Biogen Inc. ("Biogen") (NASDAQ:BIIB) between February 3, 2022 and February 13, 2024, inclusive (the "Class Period")." --- (BIIB, press release, 2024/07/15)

"An investor's ability to share in any potential future recovery is not dependent upon serving as lead plaintiff of the Biogen class action lawsuit." --- (BIIB, Press release, 2024/06/17)

Regulatory Environment and Its Influence on Shareholder Lawsuits

Regulatory challenges in biotech, such as obtaining approvals and maintaining patents, significantly impact revenue and can lead to shareholder lawsuits if financial performance is affected. Governance practices and contingent value rights tied to regulatory milestones also play a crucial role, as unmet milestones can trigger litigation.

"In the longer term, our revenue growth will depend upon the successful clinical development, regulatory approval and launch of new commercial products as well as additional indications for our existing products, our ability to obtain and maintain patents and other rights related to our marketed products, assets originating from our research and development efforts and/or successful execution of external business development opportunities. BUSINESS ENVIRONMENT" --- (BIIB, sec filing, 2024/Q1)

"The resignation policy empowers shareholders within the confines established under state law by allowing the Board to balance considerations such as Board composition and continuity, while also taking into account the interest of shareholders who express their views through their vote." --- (GILD, event transcript, 2024/05/08)

"In our late stage pipeline, we continue to drive programs into Phase III and towards regulatory approval, creating multiple opportunities for both revenue growth and diversification, including: one, completing our regulatory submissions for the vanzacaftor triple in patients with cystic fibrosis 6 years and older in both the U.S. and the EU, initiating the rolling NDA submission for VX-548 or suzetrigine in moderate-to-severe acute pain; three, advancing inaxaplin into the Phase III portion of its pivotal trial in APOL1-mediated kidney disease and expanding the eligible patient population down to age 10." --- (VRTX, earning call, 2024/Q1)

"In addition, Decibel shareholders received one non-tradeable contingent value right ("CVR") per share of Decibel common stock, entitling them to receive up to an additional $3.50 per share in cash upon achievement of certain clinical development and regulatory milestones for DB-OTO within specified time periods." --- (REGN, sec filing, 2024/Q1)

"In addition to representing individual investors, the Firm has been retained by some of the largest public and private pension funds in the country to monitor their assets and pursue litigation on their behalf." --- (BIIB, press release, 2024/05/28)

Financial Impact on Biotech Companies

Biotech companies face significant financial impacts from shareholder lawsuits, including stock price volatility, macroeconomic challenges, fluctuating financial results, and negative earnings per share due to litigation-related costs. These factors collectively contribute to the financial instability and unpredictability within the biotech sector.

"To the extent that we continue to hold strategic equity investments in publicly traded companies, we expect that due to the volatility of the stock price of biotechnology companies, our other income (expense), net will fluctuate in future periods based on increases or decreases in the fair value of our strategic equity investments." --- (VRTX, sec filing, 2024/Q1)

"Macroeconomic and other challenges Uncertain macroeconomic conditions, including higher inflation, rising interest rates and instability in the financial system, as well as rising healthcare costs continue to pose challenges to our business." --- (AMGN, sec filing, 2024/Q1)

"Our financial results may fluctuate from quarter to quarter and will depend on, among other factors, the net sales of our products; the scope and progress of our research and development efforts; the timing of certain expenses; the continuation of our collaborations, in particular with Sanofi and Bayer, including our share of collaboration profits from sales of commercialized products and the amount of reimbursement of our research and development expenses that we receive from collaborators; and the amount of income tax expense we incur, which is partly dependent on the profits or losses we earn in each of the countries in which we operate." --- (REGN, sec filing, 2024/Q1)

"Biogen also disclosed that Q4 "GAAP and Non-GAAP diluted EPS [was] negatively impacted by $0.35 related to [the] previously disclosed closeout costs for ADUHELM," confirmed that Biogen had "approximately 2,000 patients on [Leqembi] at the moment," and that it had "an indication that there are about 3,800 patients as of last week on the registry" – significantly less than the 10,000-patient goal set by Biogen and Eisai for the end of following month, according to the complaint." --- (BIIB, press release, 2024/06/02)

Future Outlook and Potential Trends

Biotech companies like Amgen and Vertex Pharmaceuticals are focusing on strategic risk management and diversified research to balance development risks and mitigate potential impacts from shareholder lawsuits. This approach aims to ensure a robust pipeline and stable future outlook despite legal challenges.

"Except as required under the federal securities laws and the rules and regulations of the SEC, we do not have any intention or obligation to update publicly any forward-looking statements after the distribution of this report, whether as a result of new information, future events, changes in assumptions or otherwise." --- (AMGN, sec filing, 2024/Q1)

"We believe that pursuing research in diverse areas allows us to balance the risks inherent in product development and may provide product candidates that will form our pipeline in future years." --- (VRTX, sec filing, 2024/Q1)