The biotech industry faces significant ESG risks, particularly in governance. Social and operational risks are less common but still material.
Across the sector, companies like Cassava Sciences, BrainStorm Cell Therapeutics, and Anavex Life Sciences frequently face governance controversies, including shareholder and class action litigation, security fraud, SEC investigations, and more. While social risks are generally secondary, they are notable in areas such as workforce reductions, layoffs following acquisitions, and labor disputes, with patient-safety considerations emerging in therapies with adverse effects.
What are the most pressing ESG challenges currently facing the biotech sector? Read on to find out.
Cassava Sciences: Governance and Transparency Concerns
Cassava Sciences has a high Controversy Exposure Score, the result of its involvement in several severe ESG controversies. The company has faced class action and shareholder litigation, resulting in settlements of $31M and $40M over allegedly misleading statements related to its Alzheimer’s drug, Simufilam. Governance concerns are further amplified by allegations of manipulating trial data and scientific misconduct, which have attracted both SEC investigations and reports of criminal probes. Additional legal controversies include malicious prosecution and defamation lawsuits filed in response to alleged “short and distort” campaigns. On the social side, Cassava has faced a 33% reduction in its workforce, reflecting operational restructuring.
Key Controversies:
Anavex Life Sciences: Lawsuits and Regulatory Scrutiny
Anavex Life Sciences faces notable governance risks, primarily stemming from shareholder litigation and concerns regarding the integrity of its clinical trials. Multiple class action lawsuits allege misrepresentation and deceptive practices, particularly in reporting outcomes for Rett syndrome and Alzheimer’s disease trials. Governance concerns are compounded by data inconsistencies, changes in trial evaluation criteria, and regulatory scrutiny, including the EU’s rejection of its Alzheimer’s drug.
Key Controversies:
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- Class-Action Lawsuit Targets Anavex Life Sciences: Alleged Misrepresentation and Deceptive Practices
- AVXL Stockholders: Additional Lawsuit Filed Against Anavex
- Anavex: Many Questions Answered, A Few Still Left, But Things Are Progressing Well (AVXL)
- AVXL - Anavex Seeks EU Approval But The Data Says Otherwise
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BrainStorm Cell Therapeutics: Fraud and Credibility Allegations
BrainStorm Cell Therapeutics exhibits a concentrated governance risk profile, with issues spanning several aspects. Class action lawsuits and securities fraud claims allege investor harm from misstatements, while the company faces lawsuits for overstating FDA feedback and misrepresenting the efficacy of its ALS therapy, NurOwn. These allegations are reinforced by FDA panel and reviewer concerns, raising questions about its scientific credibility. BrainStorm is also facing delisting from Nasdaq and a breach of contract lawsuit. On the social front, the company’s ESG exposure stems from plant shutdowns, workforce restructuring, and job cuts, raising labor practice concerns.
Key Controversies:
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- BrainStorm’s ALS therapy not effective, FDA panel finds
- BrainStorm Cell Therapeutics Investors Advance FDA Feedback Suit
- Brainstorm Cell Therapeutics Sued for Misleading on ALS Therapy
- BrainStorm Cell Therapeutics to move from Nasdaq to OTCQB
- Plant Shut-Downs, Closings & Layoffs Profile -- BrainStorm Cell Therapeutics
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Conclusion
The biotech industry’s ESG profile is increasingly shaped by governance-related controversies, particularly around transparency, litigation, and regulatory scrutiny. Companies like Cassava Sciences exemplify how unresolved allegations, ranging from trial data manipulation to securities fraud, can significantly shake stakeholder trust and financial stability. While social and operational risks appear less frequently, workforce reductions, safety concerns, and labor disputes highlight broader vulnerabilities tied to the sector’s rapid pace and scientific complexity. As the industry continues to innovate, managing these ESG risks will be crucial not only for compliance but also for long-term credibility and sustainable growth.
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