Inovio Pharmaceuticals and its top officer have been hit with a proposed class action that alleges the parties issued materially false and misleading statements claiming the company had successfully developed a vaccine for COVID-19 and that such may soon be available on the market.
The timeline in the lawsuit dates back to February 14, 2020, when Inovio’s CEO appeared on Fox Business News and stated the company had developed a vaccine “in a matter of about three hours once we had the DNA sequence from the virus,” according to the case. Adding that the company hoped to begin human testing of the apparent vaccine in early summer, Inovio saw its stock price rise more than 10 percent over the next few days on high trading volume, the lawsuit says.
Two weeks later, the suit continues, Inovio’s CEO again claimed the company had a vaccine, purporting that the defendant was able to “fully construct our vaccine within three hours” and that testing was planned for April 2020. The market responded favorably to this statement, the case says, with Inovio’s stock price more than quadrupling on February 28 and continuing to climb in the following weeks.
In truth, however, the Plymouth Meeting, Pennsylvania company had not developed a COVID-19 vaccine, the lawsuit says. According to the complaint, Citron Research on March 9 “exposed [the] Defendants’ misstatements,” calling for a Securities and Exchange Commission investigation into the company’s claims. In response to this news, the lawsuit says, Inovio’s stock price fell from $18.72 per share to close at $9.83, with a similar trend continuing the following day.
“The two-day drop wiped out approximately $643 million in market capitalization for the Company, marking a 71% decline from its Class Period high,” the complaint reads.
Further, the case claims that “[i]n the midst of the hype surrounding Inovio,” the company entered into an agreement to sell an aggregate $50 million of its shares of common stock on the open market starting March 9. According to the suit, Inovio acted intentionally in claiming it had a vaccine when it had nothing of the sort.
“Given the heightened anxiety surrounding this pandemic and the desperate demand for an effective COVID-19 vaccine, Defendants knew and were deliberately reckless as to the falsity of their claims,” the lawsuit alleges, noting that it is a “scientific impossibility” that Inovio could have developed a vaccine in only a few hours.
Though the company “attempted to blunt the Citron revelations” to shareholders in the aftermath of the stock price plummet, Inovio merely “highlighted its own misstatement,” the lawsuit says. According to the complaint, the company admitted that it had not developed a COVID-19 vaccine but had “designed a vaccine construct,” a precursor for a vaccine, that Inovio thought was a viable approach to address the outbreak.
The lawsuit looks to represent those who bought or otherwise acquired Inovio common stock between February 14 and March 9, 2020.