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Two Biotech CEOs charged in securities fraud schemes

Published: Dec 21, 2022

By Alex Keown


The U.S. Department of Justice indicted former CytoDyn Inc. Chief Executive Officer Nader Z. Pourhassan and the chief executive officer of Amarex Clinical Research on multiple counts of fraud.

The DOJ said Pourhassan, who was terminated by Washington-based CytoDyn earlier this year, and Kazem Kazempour conspired to defraud investors by misrepresenting data related to the clinical development of experimental monoclonal antibody leronlimab.

Kazempour was head of Amarex, a Maryland-based contract research organization that managed CytoDyn’s clinical trials. He also served on CytoDyn’s Disclosure Committee, which was responsible for approving the company’s filings with the U.S. Securities and Exchange Commission.

The federal indictment, unsealed Tuesday, alleged the two men engaged in “false and misleading representations and material omissions” regarding the development of leronlimab in order to artificially inflate the price of CytoDyn’s stock.

Leronlimab is being developed for both HIV and COVID-19.

Leronlimab is an investigational humanized IgG4 monoclonal antibody that is designed to bind to C-C chemokine receptor type 5. Development of the experimental drug has been stymied by clinical holds.

The DOJ said Pourhassan and Kazempour made “false and misleading representations” regarding the development timelines related to the Biologics License Application for leronlimab.

According to the government, after CytoDyn missed multiple publicized development timelines, Pourhassan pushed for Kazempour to file the BLA, even if it was incomplete.

Even though a rejection of the BLA was almost assured, the government alleged the men filed for approval to meet those announced timelines and influence stock prices.

Following the regulatory filing, CytoDyn publicly stated it had filed a completed BLA.

After the announcement was made and stock prices increased, Pourhassan sold millions of dollars worth of CytoDyn stock, the government said.

This isn’t the first time Pourhassan has been associated with misleading clinical data.

In 2022, while still helming CytoDyn, Pourhassan and the company were the focus of an FDA public scolding. The regulatory agency accused CytoDyn of misrepresenting clinical trial results assessing leronlimab as a potential treatment for COVID-19.

CytoDyn pushed a positive narrative for the drug’s efficacy based on a small subset of patients on mechanical ventilation. The company argued the drug generated a 24% decrease in all-cause mortality and a six-day reduction in hospitalization.

The FDA rejected the data. The agency said no amount of spin from CytoDyn could show a statistical significance.

In October, CytoDyn pulled its BLA for leronlimab as a potential treatment for COVID-19 based on concerns related to the clinical trials conducted by Amarex Clinical Research LLC. Company Pres. Cyrus Arman, tapped for the role in July, announced at the time that CytoDyn is seeking damages from the CRO due to a breach of the Master Services Agreement.

While leronlimab’s development is marred, when the company pulled the BLA, Arman noted the monoclonal antibody is showing promise in other indications, including oncology and non-alcoholic steatohepatitis (NASH).

He said CytoDyn plans to re-enter leronlimab into the clinic in those indications.

Pourhassan and Kazempour are each charged with one count of conspiracy to commit securities fraud and wire fraud.

They are also charged with three counts of securities fraud, and two counts of wire fraud related to the HIV BLA scheme.

Pourhassan is also charged with an additional count of securities fraud, an additional count of wire fraud related to the COVID-19 scheme, and three counts of insider trading. Kazempour is separately charged with one count of making false statements to federal law enforcement agents.

If convicted, Pourhassan and Kazempour each face a maximum penalty of 20 years in prison on each securities fraud and wire fraud count. They also face five years in prison on the conspiracy count. Kazempour also faces a maximum penalty of five years in prison on the false statements count, according to the government.

Source: BioSpace