For Directors and Officers of Life Sciences Companies

Protecting Yourself and Your Company

In 2021, approximately of all federal securities fraud class action lawsuits filed nationwide were against life sciences companies and their officers and directors. Nearly every time a company announced a developmental setback or FDA inquiry, disappointed stockholders filed suit, claiming defendants misrepresented their products’ efficacy or safety and seeking significant damages. Luckily, courts can and often do dismiss such suits quickly where companies have carefully managed their disclosures and otherwise prepared for such an eventuality. The following considerations are for directors and officers of life sciences companies looking to manage disclosures and mitigate risk before a suit ever gets filed.

What Can You Do Before and After a Business Setback?

Before a Setback

  • Actively consider and regularly update company-specific risk factors in SEC filings.
  • Ensure that a board committee is regularly informed of R&D developments.
  • Make forward-looking statement disclaimers before public statements, including at industry conferences.
  • Designate a board member or committee to review press releases.
  • Clearly express optimism as opinion and disclose material contrary data.
  • Enact social media and confidentiality policies to maintain control of corporate communications and information.
  • Enact 10b-5 trading plans for officers and directors who wish to sell stock.
  • Enter confidentiality agreements with departing employees and consultants.

After a Setback

  • Consult a securities litigator for disclosure guidance before revealing news that could depress stock prices.
  • Warn current and former employees and consultants that they will likely be contacted by investigators hired by plaintiffs’ lawyers, and things they say to such individuals may be twisted out of context to support a lawsuit.
  • Preserve relevant documents.