On Friday in the Western District of Washington, an individual filed a class-action complaint against biotechnology company CytoDyn Inc. and top company officials, alleging that the defendants contravened federal securities laws through promoting a drug normally used to treat HIV as a potential COVID-19 treatment.
Class leader and CytoDyn shareholder Jamey Chris Goodwin brought the lawsuit against CytoDyn and its chief executive and financial officers, Nader Z. Pourhassan and Michael Mulholland, respectively, seeking to recover damages allegedly caused by Securities and Exchange Act of 1934 violations through the defendants’ representations of CytoDyn drug Leronlimab, generally used as a therapy for HIV.
“Since the beginning of the global COVID-19 pandemic, however, CytoDyn has made an about-face and has begun to aggressively tout Leronlimab as a treatment for COVID-19,” the complaint claimed.
After this alleged “hyping” of the drug, CytoDyn stock rose from less than $1 per share throughout 2019 to its peak of $10 per share on June 30, 2020, according to the complaint.
One such moment of promotion was when CytoDyn partner Bruce Patterson represented in an interview that CytoDyn may be participating in Operation Warp Speed, a federally funded program for “fast-tracking virus treatments,” the complaint said.
While the defendants publicly touted Leronlimab as a potential option for COVID-19 therapy, effectively inflating shares, the complaint said, shareholders — including Pourhassan and Mulholland — concurrently “dumped millions of shares” after it was announced that CytoDyn would not be involved in Operation Warp Speed and other purported revelations.
Pourhassan at one point sold more than 4.8 million of his shares, banking a profit of $15.7 million; Mulholland sold more than 1.1 million of his shares to make $5.8 million in proceeds, later selling 711,000 more to bank an additional $4.4 million, according to the complaint. The executives’ earnings came at the expense of the putative class, the plaintiff alleged.
“Following Defendants Pourhassan’s and Mulholland’s cash-out of CytoDyn shares at artificially inflated prices, the price of CytoDyn shares dropped precipitously to the detriment of Plaintiff and the class,” the complaint claimed.
Goodwin requests for the court to certify the proposed class and for monetary and other damages.
Pomerantz LLP is representing Goodwin and the proposed class.