Stockholders of a San Diego-based biopharmaceutical company have filed a class-action lawsuit alleging the company's leaders used "false and misleading" claims that it had developed a "cure" for COVID-19, causing them to lose money.
The lawsuit alleges that Sorrento Therapeutics violated the Securities Exchange Act (SEC) when it announced on May 15 it had found an antibody that could block and neutralize COVID-19 with 100% effectiveness, a message that was touted by Sorrento's founder, Dr. Henry Ji, as a breakthrough.
On May 15, Sorrento Therapeutics said their scientists believe the company has found the first antibody for COVID-19 that would be used in a cocktail dubbed the "COVI-SHIELD."
NBC 7 spoke with Ji and his Co-founder Dr. Mark Brunswick, who said "given the very effective data that we've seen, how potent this antibody is, we are very confident this could actually work out."
That day the company's stocks rose sharply, representing an about 281% increase from the day prior, the lawsuit said.
But, according to the lawsuit, Sorrento Therapeutics "failed to disclose that: (i) Sorrento had overstated the prospects of the STI-1499 antibody for completely inhibiting COVID-19; (ii) the foregoing, once revealed, was foreseeably likely to have a material negative impact on the Company’s financial results; and (iii) as a result, the Company’s public statements were materially false and misleading at all relevant times."
Several days later, stock investment publications began expressing doubts about the company's claims, which led Sorrento's stock to begin dropping. Meanwhile, Ji publicly continued to back the drug, the lawsuit claims.
Then, an investigative financial research publication, Hindenburg Research -- which had already expressed skepticism of Sorrento's claims -- reported that Ji "walked back his comments about having a cure," which "amounts to flagrant securities fraud when compared to his statements to Fox [News] last week,” the publication wrote.
The lawsuit claims that the hundreds of thousands of shareholders that bought stock between May 15 and May 22 were hurt by artificially inflated prices and asks that the court require the defendants to pay damages.
NBC 7 reached out to Sorrento Therapeutics for a response to the allegations in the lawsuit but had not heard back as of Friday evening.
Sorrento Therapeutics told NBC 7 in May they believed they had found the first antibody to be used in a cocktail that it's calling COVI-SHIELD.
At the time, the treatment hadn't been tested on humans yet, but they planned to use this antibody with a combination of a few others to provide a cocktail that could work on people if the virus mutates, the company said.
Some scientists at the time cautioned only 10% of drugs that enter clinical trials get approved by the FDA.
"What's key to remember though about the results from Sorrento is that this is laboratory data, they haven't actually tested this drug in actual human beings. So once that happens, it'll be great, but we need to see safety and efficacy data," Dr. Lipi Roy, NBC News medical contributor, said at the time.