Jessy Edwards  |  May 17, 2021

Category: Legal News

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Emergent misled its investors about its capability to produce COVID-19 vaccines, artificially inflating stock price, a class action lawsuit claims.
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A biopharma company misled its investors about its capability to produce coronavirus vaccines, leading to an artificially inflated stock price that later plummeted when the truth became known, a new nationwide class action lawsuit alleges.

Plaintiff Alan I. Roth brought the class action against Emergent BioSolutions Inc. in a Maryland federal court Friday, alleging violations of the Securities Exchange Act and Securities and Exchange Commission rules.

Roth claims Emergent — a biopharmaceutical company that develops vaccines for infectious diseases — signed a series of deals with Johnson & Johnson (J&J) and AstraZeneca from April last year worth a combined $876 million to manufacture their vaccines. It also got $628 million from the U.S. government for a total of over $1.5 billion in COVID-19 deals. 

News of the deals sent the Company’s stock soaring, closing at over $134 per share on August 13, 2020, the claim states.

“Throughout the Class Period, Defendants repeatedly assured investors of Emergent’s ability to manufacture COVID-19 vaccines and fulfill its contracts with J&J and AstraZeneca.”

“But…the price of Emergent common stock was artificially inflated as the Company had failed to disclose to investors a myriad of manufacturing and quality control issues at its Baltimore facility that would prevent it from effectively manufacturing the vaccines.” 

Investors began to learn the truth after the close of markets on March 31 this year, the class action alleges, when media reports revealed that employees at Emergent’s Baltimore facility had “mixed up” ingredients for the J&J and AstraZeneca vaccines, contaminating up to 15 million doses of the J&J vaccine. 

Further reports revealed the Food and Drug Administration (FDA) had cited Emergent for problems such as poorly trained employees, cracked vials, problems managing mold and other contamination, lack of data control, failure to follow proper lab procedures and carelessness.

“In response to this news, shares of Emergent’s stock fell $12.45 per share, or over 13 percent, from a close of $92.91 per share on March 31, 2021, to close at $80.46 per share on April 1, 2021,” the claim contends.

Investors then learned that between October 2020 and January 2021 Emergent had discarded millions of doses of AstraZeneca vaccine because of contamination concerns and that a report found the Baltimore facility was poorly equipped to handle the COVID-19 vaccine projects. 

The revelations “were no surprise” to Emergent, the class action claims, but investors had no way of knowing the true nature of its manufacturing and quality control issues prior to the reports.

Then, on April 19, Emergent told investors the FDA had ordered it not to make any more vaccines at its Baltimore facility until it had completed an investigation into the company’s practices. 

Roth says, in response to this news, the price of Emergent’s common stock declined $9.77 per share to close at $67.87 per share on April 19.

“As a result of Defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s common stock, Plaintiff and the other Class (defined below) members have suffered significant losses and damages,” the class action states.

Roth is looking to represent anyone who purchased Emergent stock between April 24, 2020, and April 16, 2021. He is asking for certification of the class action, damages, interest, fees, costs and a jury trial.

Meanwhile, another pharmaceutical company, Inovio must face the majority of claims it misled the public about having a COVID-19 vaccine in the works, causing its stocks to spike, then plummet.

In that case, Inovio is accused of having made intentionally confusing statements around its progress on a COVID-19 vaccine in an attempt to take advantage of virus fears and push up its trading price.

What do you think of the claims in this class action lawsuit brought by investors? Let us know in the comments! 

The plaintiff is represented by John B. Isbister and Daniel S. Katz of Tydings & Rosenberg LLP, and Naumon A. Amjed, Ryan T. Degnan, Ethan J. Barlieb and Karissa J. Sauder of Kessler Topaz Meltzer & Check, LLP.

The Emergent COVID-19 Vaccine Class Action Lawsuit is Roth et al., v. Emergent BioSolutions Inc., Case No. 1:21-cv-01189-CCB, in the U.S. District Court District of Maryland (Southern Division)


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