Avoiding Shareholder Class Actions After FDA Drug Denials

By Lisa Dwyer, Michael Biles and Rebecca Matsumura (October 26, 2020, 6:03 PM EDT) -- According to the U.S. Court of Appeals for the First Circuit's opinion in In re: Ariad Pharmaceuticals Inc. Securities Litigation, "When a company's stock declines, a shareholder lawsuit often follows."[1] That maxim rings particularly true for pharmaceutical companies seeking approval from the U.S. Food and Drug Administration for experimental drugs, who often see putative securities class actions filed following an adverse FDA decision.

By searching Westlaw, we found that in the first three quarters of 2020, out of 10 such cases, eight class actions were dismissed on a motion to dismiss or had such a dismissal upheld on appeal, while only two...

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