Top Class Actions reported that Inovio stockholders, led by Patrick McDermid, filed a class-action lawsuit against the pharma company after it made false statements that it had developed a vaccine against the novel coronavirus. As a result, stock prices nearly doubled. However, after an investigative news source questioned Inovio's claims, price shares quickly pummeled, leaving investors reeling. The lawsuit alleges that the biotech company violated federal security laws. Class members consist of those who owned Inovio stocks (NASDAQ: INO) between February 14, 2020 and March 9, 2020.
On February 14, Inovio CEO J. Joseph Kim appeared on Fox News and stated that his company developed a COVID-19 vaccine "in a matter of about three hours once we had the DNA sequence from the virus” and that "our goal is to start phase one human testing in the U.S. early this summer.” On March 2, Mr. Kim met with President Trump making the same claims that Inovio had developed a vaccine against the coronavirus and added that "Our plan is to start [U.S. based COVID-19 trials] in April of this year.'” The company also filed an 8-K with the Securities and Exchange Commission, which is required by law when publicly traded companies announce major events relevant to shareholders. Lead plaintiff claimed that "the market responded favorably to Kim’s statement and Inovio’s stock price more than quadrupled."
However, "Inovio had not developed a COVID-19 vaccine. On March 9, 2020, before trading commenced, Citron Research exposed Defendants’ misstatements, calling for an SEC investigation into the Company’s 'ludicrous and dangerous claim that they designed a [COVID-19] vaccine in 3 hours.'" As a result, stock prices fell 71% in two days. "In a message to shareholders that same day, Inovio attempted to blunt the Citron revelations but only highlighted its own misstatements, admitting that it had not developed a COVID-19 vaccine but rather had merely 'designed a vaccine construct' – i.e., a precursor for a vaccine – and that it believed it had a 'viable approach to address the COVID-19 outbreak.'
The lawsuit states that Inovio and Mr. Kim violated two sections of the Exchange Act. First, the defendants
(i) employed devices, schemes, and artifices to defraud
(ii) made untrue statements of material fact and/or omitted to state material facts necessary to make the statements not misleading; and
(iii) engaged in acts, practices, and a course of business which operated as a fraud and deceit upon those who purchased or otherwise acquired the Company’s securities during the class period.
Second, investors "paid artificially inflated prices for the Company’s common stock. Plaintiff and the Class would not have purchased the Company’s common stock at the price paid, or at all, if they had been aware that the market prices had been artificially and falsely inflated by Defendants’ misleading statements."
On a related note, The New York Times announced yesterday that Trump selected five candidates--Moderna Inc, AstraZeneca Plc and Pfizer Inc, Johnson & Johnson and Merck & Co Inc--as the most likely candidates to produce a COVID-19 vaccine. These companies will have "access to additional government funds, help in running clinical trials, and financial and logistical support." The article added, "The project — called Operation Warp Speed — amounts to a sprawling, on-the-fly experiment in industrial policy by a Republican administration that has been otherwise dedicated to giving the private industry a free hand." Of course, these companies will have to face several months, maybe years of trials and testing, not to mention close examination and questions from Congress, and stringent Food and Drug Administration requirements.
$INO. SEC should immediately HALT this stock and investigate the ludicrous and dangerous claim that they designed a vaccine in 3 hours. This has been a serial stock promotion for years. This will trade back to $2. Investors have been warned.— Citron Research (@CitronResearch) March 9, 2020