Regeneron Wins Complete Dismissal of Securities Class Action Alleging Fraud Involving Sales of Retinal Disease Drugs

Paul, Weiss achieved a significant victory on behalf of Regeneron Pharmaceuticals, Inc., and four of its executives, when U.S. District Judge Mary Kay Vyskocil of the Southern District of New York dismissed in full, with prejudice, a putative securities class action alleging that Regeneron committed securities fraud by misleading investors about the drivers of sales for its blockbuster retinal disease drugs Eylea and Eylea HD.

The lead plaintiff alleged that Regeneron misled shareholders by attributing Eylea’s market success to its clinical effectiveness while concealing that the company had been reimbursing its wholesale distributors’ credit card processing fees since 2012—a practice already the subject of a False Claims Act lawsuit brought by the U.S. Department of Justice. The complaint further alleged that Regeneron executives overstated early demand for Eylea HD, a newer, high-dose version of the drug launched in August 2023, concealing that they took private jets to make “clandestine deals” with large retina practices to purchase Eylea HD in bulk to supposedly inflate demand. The plaintiff asserted securities fraud claims under Sections 10(b) and 20(a) of the Securities Exchange Act.

In her opinion granting the motion to dismiss, Judge Vyskocil held that the plaintiff failed to allege any actionable false statements with respect to Eylea. The court echoed the defendants’ arguments that Regeneron’s statements touting Eylea’s clinical effectiveness were not rendered misleading by the company’s failure to disclose every factor materially contributing to the drug’s market success, emphasizing that a “company’s decision to speak about one aspect of sales does not necessarily require it to address other issues.” The court further held that the credit card reimbursement practice was not a deceptive scheme undertaken “in connection with” the purchase or sale of securities or with the requisite scienter to deceive investors.

Turning to Eylea HD, Judge Vyskocil held that Regeneron’s optimistic statements about strong physician enthusiasm and early demand were, at worst, unactionable puffery. The court found that the plaintiff’s reliance on pre-launch market research identifying potential problems and on allegations from unnamed, low-level former employees reporting second-hand information was insufficient to allege that the defendants knew their positive statements were false. The court further held that the plaintiff’s allegations about executives’ trips to large retina practices to encourage bulk purchases of Eylea HD simply described the defendants attempting to sell their new product rather than a deceptive scheme.

The court also identified fatal problems with the plaintiff’s loss causation allegations including that Regeneron’s credit card fee practices had been publicly disclosed years before the stock price decline, and that the plaintiff could not allege a concealed risk had materialized because Regeneron continues to reimburse credit card fees to this day. As for Eylea HD, Judge Vyskocil found that the stock price increased after one alleged corrective disclosure, negating loss causation, and that the plaintiff’s own repeated emphasis that Regeneron’s stock price was “substantially dependent on the success of Eylea” undermined any inference that a revelation about Eylea HD caused another alleged stock price decline.

The Paul, Weiss team includes litigation partners Audra Soloway, David Friedman and counsel Daniel Sinnreich.