Securities class actions against life-sciences sector double in 2014

TheLifeSciencesre has been a recent increase in securities class actions filed against life-sciences companies, with 39 cases filed in 2014 compared to 19 in 2013. These actions are being targeted towards companies with products in the early stages because of the inherent risk of such products. For these new companies, any potential negative news about the product or a quick fluctuation in the stock market seems to provoke a class action.

Of all the securities class actions filed in 2014, cases filed against life-sciences companies accounted for 23%. But the merits of the life-sciences cases seem to be lacking; 22% of the cases filed since 2011 have been dismissed, compared to the average dismissal rate of 10 to 15% for cases against all types of companies. In a study done by David Kotler, he notes that recent plaintiff-friendly securities have not affected the life-sciences fraud litigation, but should be watched closely to determine any future impact. For example, the fraud-on-the-market presumption that took place in Halliburton v. Erica P. John Fund could help protect the life-sciences companies in defending against class action securities fraud in the future.

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