Law360 (January 29, 2021, 7:07 PM EST) -- An AstraZeneca investor filed a putative class action in New York federal court Friday accusing the biopharmaceutical giant of withholding information about its COVID-19 vaccine candidate, misleading the public about the progress and adequacy of its clinical trial.
Investor Vladimir Zhukov alleged the company and its executives committed securities fraud when they hid the clinical trial's missteps that would make the vaccine unlikely to be approved in the U.S.
"Defendants engaged in a scheme to deceive the market and a course of conduct that artificially inflated the price of AstraZeneca securities and operated as a fraud or deceit on purchasers of AstraZeneca securities," the complaint says.
In April, the large biopharmaceutical company partnered with Oxford University, which had been working to develop a potential vaccine for COVID-19 since January 2020, according to the complaint.
A Phase I clinical trial began in April. The complaint alleges that AstraZeneca and its executives hid that the trial had a critical manufacturing error that resulted in a large number of trial participants receiving half the dosage.
They also didn't disclose that the clinical trial was a patchwork of "disparate patient subgroups, each with subtly different treatments," which undermined the conclusions that could be drawn from the clinical data, Zhukov says.
The trial amalgamated a "bewildering array" of experimental groups and subgroups, each receiving different treatments and excluded some subgroups from the reported interim analysis, the suit alleges.
The company and its executives also hid that certain trial participants received a second dose of the vaccine up to several weeks after the dose had been scheduled, the suit claims.
Other allegations include that AstraZeneca didn't include a substantial number of patients over 55 years old, despite that population being vulnerable to COVID-19 and a high priority target market for the vaccine.
"Widespread flaws" plagued the trial, including not properly coordinating and communicating with regulatory authorities and the public, making the data and conclusions from the trial "of limited utility" and the vaccine unlikely to be approved in the U.S., the complaint said.
On Nov. 23, AstraZeneca announced the results of the ongoing trial for the vaccine, claiming that it had met its primary goals, but analysts and industry experts began to raise questions, the lawsuit alleges.
The company disclosed that the interim analysis involved two smaller scale trials in the United Kingdom and Brazil that employed two different dosing regimens, according to the complaint.
That day, AstraZeneca's American depository share price fell almost $2 per share, on high trading volume of more than 13 million American depositary shares traded, according to the complaint.
In an attempt to limit the fallout, the company defended its analysis and held conference calls with analysts, which caused additional damaging revelations to come to light, the suit alleges.
AstraZeneca revealed that the half-doses were not a part of the original trial design but was the result of a manufacturer underpredicting the dose of the vaccine in the U.K. trial, the complaint alleges.
Dr. Moncef Slaoui, the head of the U.S. vaccine effort, Operation Warp Speed, told reporters that the half-strength dose hadn't been initially tested in people older than 55.
He said if AstraZeneca couldn't clearly explain the discrepancies in its trial results, the results would most likely "not be sufficient for approval" in the U.S., according to the complaint.
The biopharmaceutical giant also didn't provide timely information to the U.S. Food and Drug Administration after two clinical trial participants showed neurological symptoms earlier in the year, which caused a temporary halt to U.S. clinical trials, the suit says.
In criticizing the faulty trial design and AstraZeneca's failure to be forthright, analysts and reporters described the company's interim results as a "mess," filled with "irregularities and omissions," and the product of "cherry-picked ... data" and "very shaky science," the suit says.
Following the negative news reports, AstraZeneca's ADS price fell to $52.60 per share by market close on Nov. 25, a 5% decline over three trading days, according to the suit.
"When the truth about AstraZeneca's misconduct was revealed over time, the value of the company's securities declined precipitously as the prior artificial inflation no longer propped up the price of the securities," the suit says.
Zhukov is hoping to represent a proposed class period of people who bought AstraZeneca securities between May 21 and Nov. 20.
Also named in the suit is AstraZeneca CEO Pascal Soriot; Marc Dunoyer, chief financial officer; and Menelas Pangalos, executive vice president, biopharmaceuticals R&D.
Last week, AstraZeneca announced that its spring vaccine delivery in the European Union would be much smaller than expected because of unforeseen production snags.
It's not the only pharmaceutical company facing investor lawsuits over its efforts to get a COVID-19 vaccine approved for use in the U.S.
Inovio Pharmaceuticals Inc. was hit with a March lawsuit in Pennsylvania federal court, with investors alleging it misled them about its development of the vaccine. The company has since filed a motion to dismiss and investors asked the judge in December not to let the company off the hook.
An August lawsuit in California federal court alleged that biotechnology company Vaxart Inc. lied about its COVID-19 vaccine candidate to investors to inflate its stock price.
Counsel information for AstraZeneca wasn't immediately available and a spokesperson for the company didn't immediately respond to a request for comment Friday.
Counsel for the investors didn't immediately respond to a request for comment Friday.
Zhukov is represented by Jeremy A. Lieberman, J. Alexander Hood II, James M. LoPiano and Patrick V. Dahlstrom of Pomerantz LLP and Peretz Bronstein of Bronstein Gewirtz & Grossman LLC.
The case is Zhukov v. AstraZeneca plc et al., case number 1:21-cv-00825, in the U.S. District Court for the Southern District of New York.
--Additional reporting by Alex Lawson, Matthew Santoni, Emilie Ruscoe, Dean Seal and Mike LaSusa. Editing by Michael Watanabe.
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