Back

Novo Nordisk A/S

Case Details

Class Period: February 3, 2015 - February 2, 2017
Date Filed: January 11, 2017
Case Number: 3:17-cv-00209
Jurisdiction: District of New Jersey

Case Summary

The Complaint brings forth claims for violations of the Securities Exchange Act of 1934 against Novo Nordisk A/S (“Novo” or the “Company”), and certain of its senior executives.  The Complaint alleges that Defendants made false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects on behalf of all persons or entities that purchased or otherwise acquired Novo American Depositary Receipts (“ADRs”) during the Class Period.

Novo is a global healthcare company and one of the most prolific producers of diabetes medications in the world.  It derives roughly 80% of its revenues from selling insulin-based medications and approximately 54% of its revenues from the U.S. insulin market.

Specifically, the Complaint alleges that  during the Class Period, Novo:  (1) reported materially false and misleading earnings and forecasts in that they were inflated through the collusive price fixing of its insulin drugs; (2) misrepresented and concealed the true extent of the pricing pressures it was experiencing from pharmacy benefit managers (“PBMs”), the middlemen between the manufacturers and the health insurers who controlled market access; and  (3)  falsely mispresented that its impressive operating performance was attributable to its innovation and product-specific qualities when, in fact they were the result of a scheme whereby Novo paid increasingly large kickbacks to these PBMs in exchange for placement on their formularies (i.e., the lists of covered drugs recommended to providers).  Then, when Novo lost its ability to raise its list prices due to increasing political pressure and regulatory scrutiny regarding insulin prices, the larger and larger kickbacks Novo had to pay to the PBMs for market access inevitably and increasingly cut into Novo’s sales growth and profits.  Ultimately, through a series of corrective disclosures starting on August 5, 2016 and continuing through February 2017, the investing public learned the truth.  Since that time, Novo has further admitted that high rebates to PBMs in exchange for formulary access, and increased public scrutiny, severely harmed the value of Novo ADRs.  On the day prior to the first disclosure, August 4, 2016, Novo ADRs closed at a price of $55.20 per ADR, falling to a close at $49.87 on August 5, 2016.  Then by the end of the Class Period, Novo ADRs fell to $33.48 per ADR, causing substantial damages to the Class.

Co-Lead Plaintiffs filed a Consolidated Amended Complaint on August 4, 2017.  Defendants moved to dismiss on October 3, 2017, and Co-Lead Plaintiffs opposed this motion on November 11, 2017.

On August 16, 2018, the Court denied, in its entirety, Defendants’ Motion to Dismiss. The Court found that Plaintiffs had properly alleged that Defendants made material misstatements and omissions which misled shareholders, and that all the facts alleged, taken collectively, supported a strong inference of scienter.

After the Court denied the Motion to Dismiss, Defendants filed their Answer to the Amended Complaint on October 1, 2018.

Plaintiffs filed their Motion to Certify Class on April 1, 2019.  Defendants filed their Opposition to the Motion to Certify Class along with a motion to exclude Plaintiffs’ expert report on June 13, 2019.  Plaintiffs’ filed their Reply on July 25, 2019.

On January 31, 2020, the Court granted Plaintiffs’ Motion to Certify Class and denied Defendants’ motion, finding that Plaintiffs’ expert’s “event study approach has been approved as a methodology” for calculating damages” in previous cases, and that he “presented a model which may be ‘adjusted to isolate misrepresentations and omissions that the trier of fact ultimately deems fraud-related.’”  Then the Court concluded that class action was superior to any other method of adjudication.