Suit filed against firm that promised coronavirus vaccine
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A putative securities class action lawsuit has been filed against a pharmaceutical company that allegedly falsely promised a quick coronavirus vaccine, and whose stock plunged once it failed to deliver.
On Feb. 14, J. Joseph Kim, CEO of Plymouth Meeting, Pennsylvania-based Inovio Pharmaceuticals Inc. appeared on Fox Business News and said it had developed a COVID-19 vaccine “in a matter of three hours once we had the DNA sequence from the virus” and that its goal was to start human testing in the U.S. early this summer, according to the lawsuit filed Thursday in U.S. District Court in Philadelphia in Patrick McDermid v. Inovio Pharmaceuticals Inc. and J. Joseph Kim.
In response to the news, the company’s stock price increased more than 10% over the next few trading days on “enormous trading volume,” according to the litigation, which was originally publicized by the D&O Diary blog.
On March 2, following a meeting with President Trump, Mr. Kim again claimed the company had developed a vaccine, and said further it planned to begin trials in April, and the firm’s stock price more than quadrupled, according to the lawsuit.
However, on March 9, in response to a research report that charged the defendants with misstatements, the stock plummeted, leading to a $643 million drop in capitalization.
The company then admitted it had not developed a vaccine, but merely designed a precursor for one, although it believed it had a “viable approach” to addressing the outbreak, according to the lawsuit.
The lawsuit charges the company with making false and misleading statements in violation of the Securities and Exchange Act of 1934.
A company spokesman could not be reached for comment.
Experts have advised businesses to brace themselves for a likely flood of shareholder suits related to the new coronavirus outbreak, although the success of any litigation may depend on companies’ willingness to fully disclose directors and officers liability-related risks now.
More insurance and risk management news on the coronavirus crisis here.
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