Embattled CytoDyn and key ex-executives must face an investor lawsuit claiming the company knowingly misled shareholders about the status of its FDA application for leronlimab as a potential treatment for HIV and COVID-19.
In the lawsuit, former CEO Nader Pourhassan, former chief financial officer Michael Mulholland and Scott Kelly, who previously served as board chairman and chief medical officer, are accused of making false and misleading statements about the company’s lead candidate over the span of two years to boost share prices. Investors, led by shareholder Brian Courter, sued the company and named executives in federal court in Washington State back in 2021 for alleged violations of the Securities Exchange Act.
While CytoDyn argued for dismissal, contending that the complaint “ignores the context” in which many statements at issue were made, U.S. District Judge Benjamin H. Settle ultimately disagreed with the company's arguments. This week, the judge ruled (PDF) that the claims at issue are plausible, denying CytoDyn's motion for dismissal.
Courter’s complaint alleges that in April 2020, the executives communicated to CytoDyn investors that the company's FDA Biologics License Application for leronlimab in HIV was complete when it was in fact not. The false disclosure spiked the company's stock price until the truth was revealed a week later, according to the lawsuit.
Later that year, the company claimed that a secondary endpoint in a clinical trial for leronlimab as a COVID-19 treatment showed that the therapy was effective and supported an emergency use authorization (EUA) request to the FDA, according to the lawsuit. CytoDyn later admitted that it had not requested an EUA, despite previously assuring investors that it had, the suit contends.
The situation continued through 2022, when executives continued to “falsely represent” that the drug was on a path to FDA approval and wouldn’t need another trial in HIV, the investor lawsuit claims. The FDA placed leronlimab’s development in HIV on a partial pause in 2022, along with a full hold in COVID.
CytoDyn’s HIV program escaped the clinical hold in 2024. Under new leadership and a recently established oncology advisory board, the company is still moving forward with leronlimab in various solid tumor uses. New CEO Jacob Lalezari, M.D., made clear in a March letter to shareholders that he believes investors deserve “clear and direct updates” on business matters and that the company’s “collaborative relationship” with the FDA puts it on a “positive trajectory.”
Meanwhile, Pourhassan, who led CytoDyn as CEO and president for ten years until being ousted by the board in 2022, was criminally convicted separately in December on four counts of securities fraud, two counts of fraud and three counts of insider trading. The former CEO was convicted alongside the ex-CEO of Amarex Clinical Research, the CRO that managed CytoDyn’s trials and FDA interactions. According to the Department of Justice, Pourhassan netted $4.4 million from CytoDyn’s stock sales during the time of the securities fraud scheme, while former Amarex head Kazem Kazempour made more than $340,000.
The sentencing in the cases of Pourhassan and Kazempour has been pushed back to late September 2025.