Securities Litigation Against Life Sciences Companies: 2025
Securities class actions against life sciences companies are mostly second-order problems. The first-order problem is a business or regulatory setback that, when disclosed by the company or a third party, triggers a stock price decline. Following the decline, plaintiffs’ class action attorneys search the company’s previous public statements and seek to identify inconsistencies between past positive comments and the current negative development. In most cases, plaintiffs’ attorneys then seek to show that any arguable inconsistency amounts to fraud — that is, they will claim that the earlier statement was knowingly or recklessly false or misleading. When the challenged statement appears in a public offering document (that is, a registration statement or prospectus), plaintiffs need only show that the statement was materially false or misleading, not that it was made with scienter or caused their losses.
Congress Must Resolve PSLRA Issue For Section 11 Litigants
Uncertainty in Section 11 securities litigation has grown following the Supreme Court’s Slack v. Pirani decision and ambiguities in the Private Securities Litigation Reform Act (PSLRA). The PSLRA grants judgment reduction credits when outside directors settle, but its silence on other Section 11 defendants has created confusion that discourages fair and efficient settlements. Although courts often extend judgment reduction credits more broadly, inconsistent interpretations leave litigants uncertain. Amending the PSLRA to provide uniform rules would promote quicker, fairer resolutions and better serve its goal of curbing abusive securities litigation.
