Ex-CytoDyn CEO, Amarex CEO charged for allegedly defrauding investors
In another twist down the CytoDyn rabbit hole, former CEO Nader Pourhassan, Ph.D., and Amarex CEO Kazem Kazempour are both facing multiple charges for their alleged roles in schemes to defraud investors.
The two executives are accused of exaggerating the progress of CytoDyn’s leronlimab, an investigational monoclonal antibody being tested in several indications, according to a Dec. 20 release from the Department of Justice. Pourhassan and Kazempour allegedly deceived investors about the timeline and status of FDA submissions to boost the biotech’s stock price and pull in new investors.
Pourhassan is known for his decade serving as CytoDyn’s president and CEO until being ousted by the board this January. Meanwhile, Kazempour is the co-founder, president and CEO of Amarex Clinical Research, a CRO that managed CytoDyn’s trials and interactions with the FDA. Kazempour was also a member of CytoDyn’s disclosure committee, which reviews and approves the biotech’s filings with the U.S. Securities and Exchange Commission (SEC).
The Dec. 20 indictment alleges that the two made false and misleading representations about CytoDyn’s biologics license application (BLA), which was submitted to the FDA regarding leronlimab as a potential treatment for HIV.
In April 2020, after the two companies failed to meet publicly disclosed timelines for the application, Pourhassan allegedly told Kazempour and Amarex to submit an incomplete BLA so CytoDyn could announce the submission to investors. Pourhassan and Kazempour allegedly knew that the FDA would not evaluate an incomplete application.
According to an SEC release, Kazempour signed off on the incomplete submission and proceeded to sell more than $420,000 of CytoDyn stock.
Within days, the FDA had gotten back to the company about the BLA’s deficiencies, but the former CytoDyn CEO didn’t tell shareholders about this, according to the SEC. The CEO is accused of selling $15.8 million worth of the biotech’s stock based on the false information, raking in a profit of more than $4.7 million.
“The indictment alleges that these defendants conspired to defraud investors in order to line their own pockets,” Erek Barron, U.S. attorney for the District of Maryland, said in a Dec. 20 release. “Investors must be able to rely on the statements of biotech companies about their products. Executives who knowingly mislead investors must be held accountable.”
Pourhassan is also accused of causing CytoDyn to make false and misleading representations about developing leronlimab as a potential treatment for COVID-19, including the significance of clinical trial data and the status of CytoDyn’s FDA submissions. Pourhassan allegedly knew that leronlimab’s clinical studies failed to achieve the results needed for FDA approval, but CytoDyn continued to insist the drug could treat patients with severe disease. The FDA publicly disagreed and called out the company for cherry-picking data to suggest the therapy was a success.
“The conduct alleged in these charges erodes public trust in the safety and effectiveness of medical products, including drugs,” Catherine Hermsen, assistant commissioner of the FDA’s office of criminal investigations, said in the Dec. 20 release. “The FDA would like to extend our thanks to our federal law enforcement partners for sending a strong message to biotechnology executives and others that these types of actions will not be tolerated.”
Pourhassan and Kazempour are each charged with one count of conspiracy to commit securities fraud and wire fraud, three counts of securities fraud and two counts of wire fraud. Pourhassan is separately charged with another securities fraud charge, an additional count of wire fraud related to the COVID-19 scheme and three counts of insider trading. Kazempour separately faces one count of making false statements to federal law enforcement agents. The charges come from the work of the U.S. Postal Inspection Service Criminal Investigation group.
If convicted, each faces a maximum of 20 years in prison on each securities fraud and wire fraud count, and five years in prison for the conspiracy count. Kazempour also faces up to five years in prison for the false statements count if convicted.
That’s not all, though. Amarex and CytoDyn are also currently tied up in a legal battle of their own, in which CytoDyn blames the CRO for “systemic issues” with the quality of data. The biotech pointed to the issues as reasoning for withdrawing its approval application for leronlimab in a specific HIV indication this October. The biotech is currently filing a claim for damages against the CRO.
However, the ever-optimistic biotech has reaffirmed its commitments to pursuing other underserved HIV indications as well as nonalcoholic steatohepatitis and metastatic triple-negative breast cancer, where it has already secured a fast-track tag from the FDA.
The biotech continues to search for a permanent CEO in the wake of Pourhassan’s termination. Meanwhile, the biotech is helmed by President Cyrus Arman, Ph.D., who remains optimistic about leronlimab's and CytoDyn's potential.