In re Astrazeneca PLC Securities Litigation

Background

Lead Plaintiffs Nuggehalli Balmukund Nandkumar and Wayne County Employees’ Retirement System, along with Plaintiff Vladimir Zhukov, brought a putative securities class action against AstraZeneca plc, Pascal Soriot, Marc Dunoyer, and Menelas Pangalos. The plaintiffs asserted claims under Section 10(b) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5. They also asserted control-person liability claims under Section 20(a) against the individual defendants.

The claims concerned AstraZeneca’s development of AZD1222, a COVID-19 vaccine candidate developed with Oxford. The amended complaint alleged that AstraZeneca failed to disclose several matters concerning Phase II/III clinical trials, including that some participants received a half dose followed by a full dose, some participants received the second dose later than planned, and the trial included groups with different dosing regimens. The plaintiffs also alleged that the trials included too few participants over age 55, contained design and execution problems, did not follow applicable standards, and made near-term approval in the United States unlikely.

The plaintiffs identified several alleged corrective disclosures, including disclosures about the different dosing groups, delayed second doses, limited data about older participants, and statements questioning the vaccine’s effectiveness in older people. The amended complaint alleged that AstraZeneca’s stock price declined after these disclosures.

Defendants’ Motion to Dismiss

The defendants moved to dismiss under Federal Rules of Civil Procedure 8, 9(b), and 12(b)(6), and under the Private Securities Litigation Reform Act. Rule 12(b)(6) permits dismissal when a complaint does not state a legally sufficient claim. The securities-fraud pleading rules required the plaintiffs to identify each allegedly misleading statement, explain why it was misleading, and plead particular facts supporting a strong inference that the defendants acted with fraudulent intent.

Section 10(b) and Rule 10b-5 Claims

Judge Oetken held that the amended complaint did not meet the required level of detail. The complaint quoted numerous statements and then repeatedly attached a broad list of alleged omissions, but it did not explain how each particular statement misled investors or how each omission related to that statement.

As to the dosing allegations, the court held that the plaintiffs had not identified any inaccurate, incomplete, or misleading statement about the strength or timing of doses in the Phase II/III trials. The statements the plaintiffs cited—such as statements that the trials had begun, had recruited participants, or were underway in various countries—were accurate descriptions of historical events. They did not create a duty to disclose every more detailed fact about the trial.

The court also rejected the claim concerning participants over age 55. AstraZeneca had stated that the trials would measure immune responses in different age groups, and the plaintiffs did not dispute that the trials did so. The court characterized the parties’ disagreement about whether the number of older participants was enough to support reliable conclusions as a dispute about how to interpret the data, not a basis for securities liability.

The court found that statements that AstraZeneca was “moving quickly but without cutting corners” and that the trial remained “on track” were vague optimism, or “puffery,” rather than statements on which a reasonable investor would rely. The court likewise found that statements about following science, putting patients first, maintaining high safety standards, and providing equitable access were too general to support liability.

The court further held that statements about the likelihood of regulatory approval were future-looking statements protected by the Private Securities Litigation Reform Act’s safe harbor. The court found that those statements were accompanied by adequate cautionary language and therefore could not support the claims.

Scienter

Separately, the court held that the amended complaint did not plead a strong inference of scienter, meaning an intent to deceive or sufficiently reckless conduct. The alleged motive to inflate AstraZeneca’s stock price to help fund an acquisition was not specifically connected to the alleged fraud. The alleged desire to develop a successful COVID-19 vaccine and avoid reputational or financial harm was common to corporate officers and did not establish a fraudulent motive.

The court also found that the plaintiffs had not adequately identified reports or other information showing that the defendants had access to facts contradicting their public statements. The alleged dosing information had been disclosed to health regulators. In addition, the court found room for disagreement about whether the half-dose group undermined the trial results and about how many older participants were needed to evaluate immune responses. The alleged conduct therefore did not amount to the highly unreasonable behavior required to infer recklessness.

Section 20(a) Claims

The court dismissed the Section 20(a) control-person claims against the individual defendants because those claims required a primary violation of the Exchange Act, and the plaintiffs had not adequately pleaded a primary Section 10(b) or Rule 10b-5 violation.

Disposition

Judge Oetken granted the defendants’ motion to dismiss. The court declined to grant leave to amend, finding that the plaintiffs had not followed the court’s individual rules, had not explained how another amendment would cure the identified defects, and that amendment would be futile under the circumstances. The court denied the plaintiffs’ motion to file a sur-reply as moot. It directed the Clerk to enter final judgment dismissing the amended complaint with prejudice, close the motions, and close the case.