Over the past year, several major players in the pharmaceutical industry have faced severe shareholder scrutiny for misleading the public regarding their roles in the production of COVID-19 vaccines.

The company to most recently fall in the limelight is Emergent Biosolutions (“Emergent”). Emergent had entered into contracts with Johnson & Johnson and AstraZeneca worth $875 million to manufacture their COVID-19 vaccines. Last month, shareholders filed a securities lawsuit against Emergent in the U.S. District Court for the District of Maryland in response to news that the company had withheld information regarding several manufacturing issues related to vaccine production. According to the complaint, Emergent’s management cut corners by operating facilities with a history of contamination risks. Consequently, the company was forced to discard millions of doses of COVID-19 vaccines that were spoiled by bacterial contamination. When media reports finally revealed the company’s manufacturing issues, Emergent shares dropped dramatically. Thanks to the company’s mismanagement of its vaccine production, Emergent has earned both private litigation and Congressional investigation.

At the heart of several of these lawsuits is the temptation of sizeable grants through the U.S. government’s “Operation Warp Speed.” The program was designed to accelerate the development and distribution of COVID-19 vaccines by granting billions of dollars to pharmaceutical companies. Emergent was one of the companies selected to take part in the Operation Warp Speed. In pursuit of a $628 million payout from the program in addition to its lucrative contracts, Emergent relied on substandard facilities. Other companies have similarly taken ill measures to benefit from the government program. Noravax, Inc. management discretely obtained impressive equity awards, armed with the foreknowledge that their company would be receiving a grant through Operation Warp Speed. Vaxart Inc. also faces private litigation and federal investigation after the company falsely claimed that it had been selected to take part in Operation Warp Speed.

Other recent lawsuits have revolved around the development of the vaccines themselves. For example, shareholders brought suit earlier this year against British-Swedish pharmaceutical giant AstraZeneca for making misleading statements about the success of the clinical trials for its COVID-19 vaccine, AZD1222. Because of manufacturing errors and haphazard experimental design, the clinical trials for AZD1222 were fundamentally flawed, making the vaccine unlikely to receive FDA approval.

In each of these instances, companies have taken advantage of the Coronavirus epidemic to mislead the public for personal gain. Given the magnitude of the epidemic and the ongoing process of vaccine distribution, it is likely that further litigation is to follow. If you have any inquiries regarding these events, please contact James Pedersen (jpedersen@lowey.com) at 914-733-7219.

Emergent investors seeking to recover their losses can also follow this link to learn more about getting involved in the litigation.