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.