Case 3:21-cv-05260 Document 1 Filed 04/09/21 Page 1 of 27
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`UNITED STATES DISTRICT COURT
`FOR THE WESTERN DISTRICT OF WASHINGTON
`AT TACOMA
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`Case No.
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`CLASS ACTION COMPLAINT FOR
`VIOLATIONS OF THE FEDERAL
`SECURITIES LAWS
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`JURY TRIAL DEMANDED
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`JAMEY CHRIS GOODWIN, Individually
`and on Behalf of All Others Similarly
`Situated,
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`Plaintiff,
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`v.
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`CYTODYN, INC., NADER Z.
`POURHASSAN, and MICHAEL
`MULHOLLAND,
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`Defendants.
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`CLASS ACTION COMPLAINT - 1
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`Ide Law Office
`7900 SE 28th Street, Suite 500
`Mercer Island, WA 98040
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`Ph.: 206 625-1326
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`Case 3:21-cv-05260 Document 1 Filed 04/09/21 Page 2 of 27
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`Plaintiff Jamey Chris Goodwin (“Plaintiff”), individually and on behalf of all others
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`similarly situated, alleges the following based upon personal knowledge, as to Plaintiff and
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`Plaintiff’s own acts, and upon information and belief, as to all other matters, based upon, inter
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`alia, the investigation conducted by and through Plaintiff’s attorneys, which included, among
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`other things: a review of Defendants’ public documents, conference calls, and announcements;
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`United States (“U.S.”) Securities and Exchange Commission (“SEC”) filings; wire and press
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`releases published by and regarding CytoDyn, Inc. (“CytoDyn” or the “Company”); analysts’
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`reports and advisories about the Company; and information readily obtainable on the Internet.
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`NATURE OF THE ACTION
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`1.
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`This is a federal securities class action on behalf of a class consisting of all
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`persons and entities that purchased or otherwise acquired CytoDyn common stock between
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`March 27, 2020 and March 9, 2021, inclusive (the “Class Period”). Plaintiff brings claims
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`under the Securities Exchange Act of 1934 (the “Exchange Act”) against Defendants CytoDyn,
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`the Company’s Chief Executive Officer (“CEO”) Nader Z. Pourhassan (“Pourhassan”), and the
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`Company’s Chief Financial Officer (“CFO”) Michael Mulholland (“Mulholland”), and seeks to
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`recover damages caused by Defendants’ violations of the Exchange Act.
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`2.
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`CytoDyn is a publicly-traded biotechnology company. Headquartered in
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`Vancouver, Washington, and incorporated in Delaware, CytoDyn is focused on the
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`development and commercialization of a drug named “Leronlimab” which has long been
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`promoted as a potential therapy for HIV patients.
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`3.
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`Since the beginning of the global COVID-19 pandemic, however, CytoDyn has
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`made an about-face and has begun to aggressively tout Leronlimab as a treatment for COVID-
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`19.
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`CLASS ACTION COMPLAINT - 2
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`Ide Law Office
`7900 SE 28th Street, Suite 500
`Mercer Island, WA 98040
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`Ph.: 206 625-1326
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`Case 3:21-cv-05260 Document 1 Filed 04/09/21 Page 3 of 27
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`4.
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`After CytoDyn’s pivot to hyping Leronlimab as a treatment for COVID-19,
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`CytoDyn’s stock price rose exponentially. Throughout 2019, CytoDyn’s stock traded for less
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`than $1.00 per share. Upon the pivot to hyping Leronlimab as a COVID-19 treatment, however,
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`CytoDyn’s stock price skyrocketed. The hype hit its peak when CytoDyn shares reached over
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`$10.00 per share on June 30, 2020.
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`5.
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`CytoDyn issued numerous press releases, conducted conference calls, participated
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`in interviews, and aggressively utilized several third-party investor relations and stock
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`newsletter services to tout Leronlimab as a potential treatment for COVID-19 and to pump up
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`the stock price of CytoDyn while executives aggressively sold shares.
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`6.
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`Indeed, while CytoDyn’s stock price was sufficiently pumped with the COVID-
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`19 cure hype, long-term shareholders, including Defendants Pourhassan and Mulholland,
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`dumped millions of shares. For example, on April 30, 2020, after exercising options to
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`purchase millions of CytoDyn shares at prices less than $1.00 per share, Defendant Pourhassan
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`sold over 4.8 million shares of CytoDyn stock, for over $15.7 million in total proceeds.
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`Defendant Pourhassan’s sale was approximately 85% of his total holdings of CytoDyn stock. In
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`addition, on December 21, 2020, Defendant Mullholland sold over 1.1 million shares for over
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`$5.8 million in total proceeds. Thereafter, on December 28, 2020, Defendant Mullholland sold
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`over 711,000 shares for over $4.4 million in total proceeds.
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`7.
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`In addition to overstating the viability of Leronlimab as a COVID-19 treatment,
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`CytoDyn also engaged in a wrongful scheme with its lender, Iliad Research and Trading L.P.
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`(“Iliad”), and its principal John Fife (“Fife”), whereby Iliad and other Fife entities operated as
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`an unregistered securities dealer for CytoDyn. In connection with Iliad lending funds to
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`CytoDyn, Iliad obtained a convertible promissory note from CytoDyn and converted the note
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`CLASS ACTION COMPLAINT - 3
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`Ide Law Office
`7900 SE 28th Street, Suite 500
`Mercer Island, WA 98040
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`Ph.: 206 625-1326
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`Case 3:21-cv-05260 Document 1 Filed 04/09/21 Page 4 of 27
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`into newly issued shares of CytoDyn and sold those shares into the public market at a profit, in
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`violation of the dealer registration requirements of the federal securities laws.
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`8.
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`Following Defendants Pourhassan’s and Mulholland’s cash-out of CytoDyn
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`shares at artificially inflated prices, the price of CytoDyn shares dropped precipitously to the
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`detriment of Plaintiff and the class. The market has learned that CytoDyn’s development and
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`marketing of Leronlimab as a treatment for COVID-19 was not commercially viable for
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`CytoDyn.
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`JURISDICTION AND VENUE
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`9.
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`The claims asserted herein arise under and pursuant to Sections 10(b) and 20(a) of
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`the Exchange Act (15 U.S.C. §§ 78j(b) and 78t(a)) and Rule 10b-5 promulgated thereunder by
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`the SEC (17 C.F.R. § 240.10b-5).
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`10.
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`This Court has jurisdiction over the subject matter of this action pursuant to
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`Section 27 of the Exchange Act (15 U.S.C. § 78aa) and 28 U.S.C. § 1331.
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`11.
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`Venue is proper in this District pursuant to Section 27 of the Exchange Act (15
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`U.S.C. § 78aa) and 28 U.S.C. § 1391(b), as the misleading statements entered into this District.
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`12.
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`In connection with the acts, conduct, and other wrongs alleged in this Complaint,
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`Defendants, directly or indirectly, used the means and instrumentalities of interstate commerce,
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`including, but not limited to, the U.S. mail, interstate telephone communications, and facilities
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`of national securities markets. All of the transactions in the securities that are at issue in this
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`action took place within the U.S.
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`CLASS ACTION COMPLAINT - 4
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`Ide Law Office
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`Ph.: 206 625-1326
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`Case 3:21-cv-05260 Document 1 Filed 04/09/21 Page 5 of 27
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`PARTIES
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`13.
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`Plaintiff purchased or otherwise acquired CytoDyn shares at artificially inflated
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`prices during the Class Period and was damaged upon the revelation of the alleged corrective
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`disclosures.
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`14.
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`Defendant CytoDyn is a biotech company based in Vancouver, Washington.
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`CytoDyn’s business is primarily focused on the development and commercialization of a drug
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`named Leronlimab. CytoDyn’s stock trades in the U.S. under the symbol “CYDY.”
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`15.
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`The Company is liable for the acts of the Individual Defendants (defined below)
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`and its employees under the doctrine of respondeat superior and common law principles of
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`agency because all of the wrongful acts complained of herein were carried out within the scope
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`of their employment.
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`16.
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`17.
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`18.
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`Defendant Pourhassan is CytoDyn’s CEO and a director of the Company.
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`Defendant Mullholland is CytoDyn’s CFO.
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`Defendants Pourhassan and Mullholland are collectively referred to herein as the
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`“Individual Defendants.”
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`19.
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`CytoDyn and the Individual Defendants are collectively referred to herein as
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`“Defendants.”
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`SUBSTANTIVE ALLEGATIONS
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`20.
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`The Class Period begins on March 27, 2020. On that day, CytoDyn issued two
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`press releases regarding Leronlimab’s use in treating COVID-19 patients. CytoDyn issued a
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`release entitled “Leronlimab Used in Seven Patients with Severe COVID-19 Demonstrated
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`Promise with Two Intubated Patients in ICU, Removed from ICU and Extubated with Reduced
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`Pulmonary Inflammation.” That press release stated:
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`CLASS ACTION COMPLAINT - 5
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`Ide Law Office
`7900 SE 28th Street, Suite 500
`Mercer Island, WA 98040
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`Ph.: 206 625-1326
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`Case 3:21-cv-05260 Document 1 Filed 04/09/21 Page 6 of 27
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`VANCOUVER, Washington, March 27, 2020 (GLOBE NEWSWIRE) –
`CytoDyn
`Inc.
`(CYDY),
`(“CytoDyn” or
`the “Company”), a
`late-stage
`biotechnology company developing Leronlimab (PRO 140), a CCR5 antagonist
`with the potential for multiple therapeutic indications, announced today the three-
`day results post-Leronlimab treatment of the first four patients under an
`Emergency Investigational New Drug (EIND) granted by the U.S. Food and Drug
`Administration (FDA). A total of seven patients have been enrolled thus far under
`EIND in the same leading medical center in the New York City area.
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`The treatment with Leronlimab is targeted as a therapy for patients who
`experience respiratory complications as a result of contracting SARS-CoV-2
`causing the Coronavirus Disease 2019 (COVID-19). Leronlimab is believed to
`provide therapeutic benefit by enhancing the immune response while mitigating
`the “cytokine storm” that leads to morbidity and mortality in these patients.
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`Bruce Patterson, M.D., Chief Executive Officer and founder of IncellDx, a
`diagnostic partner and advisor to CytoDyn, said, “IncellDx has developed specific
`companion diagnostic tests to determine the efficacy and dosing of Leronlimab in
`these severe cases of COVID-19. We found that patients with severe COVID-19
`disease are in the midst of immunologic chaos which includes the cytokine storm.
`Our companion diagnostics showed that after three days of therapy, the immune
`profile in these patients approached normal levels and the levels of cytokines
`involved in the cytokine storm were much improved.”
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`Jacob Lalezari, M.D., Interim Chief Medical Officer of CytoDyn, commented,
`“These preliminary results give hope that Leronlimab may help hospitalized
`patients with COVID-19 recover from the pulmonary inflammation that drives
`mortality and the need for ventilators. A leading medical center in the heart of the
`New York City epidemic was instrumental in giving the preliminary data.”
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`Nader Pourhassan, Ph.D., President and Chief Executive Officer of CytoDyn said:
`“We are extremely pleased for the coronavirus patients under the care of the
`treating medical team and that the FDA is so responsive to advance our Phase 2
`clinical trial. I am very hopeful that Leronlimab can help to reduce the rate of
`mortality among COVID-19 patients with severe symptoms of ARDS and to
`assist our government to fight this battle.”
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`21.
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`On March 31, 2020, CytoDyn entered into a Securities Purchase Agreement with
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`Iliad whereby CytoDyn issued a secured convertible promissory note in the initial principal
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`amount of $17.1 million. Iliad gave consideration of $15.0 million. The note was secured by
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`all of the assets of CytoDyn, except its intellectual property. As part of the agreement, Iliad had
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`the option to convert all or part of the outstanding balance into shares of common stock at an
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`CLASS ACTION COMPLAINT - 6
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`7900 SE 28th Street, Suite 500
`Mercer Island, WA 98040
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`Ph.: 206 625-1326
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`Case 3:21-cv-05260 Document 1 Filed 04/09/21 Page 7 of 27
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`initial conversion price of $4.50 per share. Iliad secured anti-dilution adjustments with the
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`promissory note and the conversion price of the promissory note was made subject to full-
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`ratchet anti-dilution protection, pursuant to which the conversion price would be automatically
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`reduced to equal the effective price per share in any new offering by CytoDyn of equity
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`securities.
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`22.
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`At the same time that CytoDyn was entering into the agreement with Iliad,
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`CytoDyn’s stock price rose dramatically as it aggressively touted Leronlimab as a treatment for
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`COVID-19. After trading below $1.00 per share for the entirety of 2019, the price of CytoDyn
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`stock skyrocketed.
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`23.
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`Shares of CytoDyn were so actively traded during April 2020 that they accounted
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`for nearly half of all dollar volume on the entire OTCQB Venture Market. The trading volume
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`of CytoDyn trades in April was $612,566,094.1
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`24.
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`On April 30, 2020, CytoDyn filed a Form S-3 with the SEC. The Company
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`registered over 46.3 million shares of common stock for resale by “selling shareholders.” These
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`shares in the offering were largely comprised of converted preferred stock and exercised
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`warrants and stock options.
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`25.
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`One of the selling shareholders identified was Iliad. Pursuant to the Form S-3,
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`Iliad offered 6,300,000 shares that it obtained in connection with the promissory agreement.
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`26.
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`Another of the selling shareholders was Bruce Patterson (“Patterson”), the
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`CytoDyn “partner” that boasted of Leronlimab’s efficacy in treating COVID-19 in CytoDyn
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`press releases. In the Form S-3, Patterson registered for sale 400,000 warrants and/or stock
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` 1
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` See https://www.benzinga.com/news/20/05/16076196/these-were-the-most-active-securities-on-otc-markets-in-
`april.
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`CLASS ACTION COMPLAINT - 7
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`7900 SE 28th Street, Suite 500
`Mercer Island, WA 98040
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`Case 3:21-cv-05260 Document 1 Filed 04/09/21 Page 8 of 27
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`options. The Form S-3 also noted that Patterson continued to own 169,242 shares following the
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`offering.
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`27.
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`Another of the selling shareholders identified in the Form S-3 is Michael
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`McCarthy (“McCarthy”). McCarthy is the former owner of The DreamTeam Group, Mission
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`Investor Relations, LLC, and QualityStocks LLC. On April 10, 2017, the SEC hit McCarthy
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`and his businesses with an Order Instituting Cease and Desist Proceedings Pursuant to Section
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`8A of the Securities Act of 1933, Making Findings, and Imposing a Cease and Desist Order in
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`connection with improper stock promotion of two pharmaceutical companies, Galena
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`Biopharma, Inc. (“Galena”), and CytRx Corporation (“CytRx”). See In the Matter of Michael
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`A. McCarthy, The DreamTeam Group, LLC, Mission Investor Relations, LLC, and
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`Qualitystocks LLC, Administrative Proceeding No. 3-17917, Release No. 10343 (April 10,
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`2017). The SEC found that McCarthy and his companies paid writers to post misleading
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`internet articles promoting securities of their publicly traded clients. Id. The articles purported
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`to be independent when, in fact, they were promotional pieces indirectly funded by the clients.
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`Id. Galena and CytRx were both fined by the SEC for this conduct and paid tens of millions in
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`shareholder settlements in connection with the scheme. See In the Matter of CytRx
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`Corporation, Administrative Proceeding No. 3-17919, Release No. 10345 (April 10, 2017); In
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`the Matter of Galena Biopharma, Inc., and Mark J. Ahn, Administrative Proceeding No. 3-
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`17911, Release No. 10337 (April 10, 2017).
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`28.
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`On April 30, 2020, after exercising options to purchase millions of CytoDyn
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`shares at prices less than $1.00 per share, Defendant Pourhassan sold over 4.8 million shares of
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`CytoDyn stock, for over $15.7 million in total proceeds. Defendant Pourhassan’s sale was
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`approximately 85% of his total holdings of CytoDyn stock.
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`CLASS ACTION COMPLAINT - 8
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`7900 SE 28th Street, Suite 500
`Mercer Island, WA 98040
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`Ph.: 206 625-1326
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`Case 3:21-cv-05260 Document 1 Filed 04/09/21 Page 9 of 27
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`29.
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`On June 30, 2020, the price of CytoDyn stock hit its Class Period high of $10.01
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`per share, on a trading volume of over 56 million trades.
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`30.
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`In June 2020, CytoDyn remained the most heavily traded security on the OTCQB
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`Market for that month and for the year to date. The dollar volume for June was $1,031,931,939,
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`which was more than five times greater than the second-most heavily traded security on the
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`OTCQB Venture Market.
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`31.
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`On July 24, 2020, CytoDyn entered into a second amendment to the secured
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`convertible promissory note with Iliad. The second amendment to the Note eliminated the
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`monthly volume limitation on the Investor’s sale of Conversion Shares under the Note.
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`32.
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`On July 29, 2020, CytoDyn entered into a further agreement with Iliad whereby
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`Iliad would extend credit to CytoDyn in exchange for a $28.5 million Secured Convertible
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`Promissory Note.
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`33.
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`On August 17, 2020, CytoDyn issued a press release where it announced that it
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`had requested emergency use approval from the FDA. The press release stated, in part:
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`CytoDyn Submits its Top-line Report from its Phase 2 COVID-19 Trial to
`the U.S. FDA and Requests Emergency Use Approval
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`The Top-line Report has been sent to the regulatory authorities in Mexico, and
`will be provided to U.K. MHRA, and E.U. EMA, with requests for emergency use
`approval
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`CytoDyn (CYDY) is preparing a Phase 3 protocol for Leronlimab use in
`longhauler COVID-19 individuals
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`VANCOUVER, Washington, Aug. 17, 2020 (GLOBE NEWSWIRE) – CytoDyn
`Inc., (“CytoDyn” or the “Company”), a late-stage biotechnology company
`announced today it has provided its Top-line Report from its recently completed,
`randomized, double-blind, Phase 2 trial for COVID-19 patients with mild-to-
`moderate symptoms to the U.S. Food and Drug Administration (FDA), and
`requested emergency use approval.
`
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`CLASS ACTION COMPLAINT - 9
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`Ide Law Office
`7900 SE 28th Street, Suite 500
`Mercer Island, WA 98040
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`Ph.: 206 625-1326
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`Case 3:21-cv-05260 Document 1 Filed 04/09/21 Page 10 of 27
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`In addition, CytoDyn has sent its Top-line Report of the Phase 2, mild-to-
`moderate COVID-19 population, to the regulatory authorities in Mexico and
`hopes to obtain emergency use approval from the MHRA in the U.K., EMA in the
`European Union, as well as the regulatory authorities in the Philippines.
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`Along with the above activities, CytoDyn has been approached by several doctors
`about a clinical study of Leronlimab in long-hauler COVID-19 individuals. The
`Company is preparing a Phase 3 protocol and will file it as soon as possible.
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`Nader Pourhassan, Ph.D., President and Chief Executive Officer of CytoDyn,
`stated, “We are very motivated to provide Leronlimab to patients throughout the
`world who are suffering from COVID-19. We believe the statistically significant
`data of NEWS2 findings, along with impressive safety results (less SAEs or AEs
`with Leronlimab vs. placebo), from our Phase 2 trial set forth in the Top-line
`Report provides compelling data in support of Leronlimab’s use to fight COVID-
`19. We are in discussions with several regulatory agencies in other countries and
`hope to obtain emergency approval for its use. We are in a very exciting period
`for CytoDyn in regards to the potential role of Leronlimab in three different
`COVID-19 populations, mild-to-moderate, severe-to-critical, and long-haulers.”
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`34.
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`The statements made in paragraph 33 are false and misleading because, as would
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`later be revealed, CytoDyn did not actually request emergency-use authorization (“EUA”) from
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`the FDA.
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`35.
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`On August 20, 2020, Patterson participated in an interview with Dr. Drew Pinsky,
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`where he noted that he thought CytoDyn would move forward with a federal government
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`program aimed at fast-tracking virus treatments, dubbed Operation Warp Speed. Patterson’s
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`comments “went viral” and CytoDyn stock rose 13% to $3.43 on August 21, 2020, and another
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`12% to $3.84 on August 24, 2020.
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`36.
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`Like Galena, CytRx, and McCarthy’s entities, CytoDyn has also aggressively
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`employed stock promotion firms that create misleading newsletters and internet postings to
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`hype investment in CytoDyn and promote the use of Leronlimab as a COVID-19 treatment.
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`CLASS ACTION COMPLAINT - 10
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`Ide Law Office
`7900 SE 28th Street, Suite 500
`Mercer Island, WA 98040
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`Ph.: 206 625-1326
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`Case 3:21-cv-05260 Document 1 Filed 04/09/21 Page 11 of 27
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`37.
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`Throughout September 2020, CytoDyn remained the most traded security on the
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`OTCQB Venture Market, with $285,663,617 in Dollar Volume.2
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`38.
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`Through the use of Company press releases and other information released by
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`CytoDyn’s partners, CytoDyn has released, or caused to be released, materially false and
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`misleading statements in violation of the federal securities laws.
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`THE TRUTH BEGINS TO EMERGE
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`39.
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`Following the pump of CytoDyn stock price and cash-out by Company insiders
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`and long-term shareholders, Defendants’ scheme began to unravel. For instance, on August 26,
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`2020, The Wall Street Journal reported that CytoDyn was not being considered for Operation
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`Warp Speed. According to a senior administration official interviewed by The Wall Street
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`Journal, “CytoDyn had only completed a preliminary qualification for being included in the
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`initiative.” The official said that CytoDyn had submitted information through a so-called
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`CoronaWatch, a program run by the Biomedical Advanced Research and Development
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`Authority, or BARDA, to assess the viability of drugs and therapeutics that might be effective
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`against COVID-19. Technical experts reviewed the submission and opted not to proceed
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`further at this time, the official confirmed.
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`40.
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`Going further, the official noted that the team responsible for reviewing the
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`materials makes clear to companies that submissions are for informational purposes only and do
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`not lead to funding on their own, and that companies must apply to specific grant programs to
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`receive
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`funding, which CytoDyn
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`has
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`not
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`even
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`done
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`at
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`this
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`time.
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`See
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`
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` 2
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` See
`https://www.benzinga.com/general/biotech/20/10/18025965/traders-have-rotated-into-big-multinational-
`companies-on-otc-market.
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`CLASS ACTION COMPLAINT - 11
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`
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`Ide Law Office
`7900 SE 28th Street, Suite 500
`Mercer Island, WA 98040
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`Ph.: 206 625-1326
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`Case 3:21-cv-05260 Document 1 Filed 04/09/21 Page 12 of 27
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`https://www.wsj.com/articles/small-biotech-stock-cytodyn-soars-on-warp-speed-comment-
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`11598456736.
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`41.
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`On the day before the publication of The Wall Street Journal article, on August
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`25, 2020, CytoDyn shares were closed at $3.81 per share. Following the publication of this
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`article, CytoDyn shares dropped over 17% to $3.15 over the next two trading days.
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`42.
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`On September 3, 2020, the SEC filed suit against Iliad, its principal Fife, and
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`related entities, Chicago Venture Partners L.P., St. George Investments LLC, Tonaquint, Inc.,
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`and Typenex Co-Investment, LLC. Calling Fife a “recidivist violator of the federal securities
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`laws,” the SEC alleged that these entities violated the mandatory dealer registration
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`requirements of the federal securities laws. The SEC alleged that Iliad and its related entities,
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`by buying convertible promissory notes, converting the notes into newly issued shares of stock,
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`then rapidly selling those shares into the public at a profit, operated as unregistered securities
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`dealers in violation of the federal securities laws. See Securities and Exchange Commission v.
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`John M. Fife, Chicago Venture Partners, L.P., Iliad Research and Trading L.P., St. George
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`Investments LLC, Tonaquint, Inc., and Typenex Co-Investment LLC, Case No. 1:20-cv-05227,
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`Complaint (N.D. Ill. Sept. 3, 2020).3
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`43.
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`Through Iliad’s actions with respect to CytoDyn, including entering into the
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`convertible promissory note and its amendments, converting the note to newly issued shares of
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`CytoDyn stock, and selling those shares into the market at a profit, Iliad operated as an
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`unregistered securities dealer and generated substantial profits.
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`44.
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`On September 16, 2020, Defendant Pourhassan was forced to admit that no
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`formal EUA request was actually made with the FDA, despite the Company claiming for weeks
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` 3
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` Available at https://www.sec.gov/litigation/complaints/2020/comp24886.pdf.
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`CLASS ACTION COMPLAINT - 12
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`
`
`Ide Law Office
`7900 SE 28th Street, Suite 500
`Mercer Island, WA 98040
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`Ph.: 206 625-1326
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`Case 3:21-cv-05260 Document 1 Filed 04/09/21 Page 13 of 27
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`
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`that it had done so. Instead, Pourhassan stated that CytoDyn had asked only for the FDA’s
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`opinion, stating “we did not submit a formal letter to FDA saying we want to get Emergency
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`Use Authorization. We asked them for their opinion and they were not positive about it. Their
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`reasoning made a lot of sense to us.” See Moon Kil Woong, CytoDyn’s Update Provides A
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`Clear Path Towards Approval With Up-Listing Potential Still In The Cards, TALKMARKETS
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`(Sept. 18, 2020).
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`45.
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`On September 17, 2020, CytoDyn was sued in the 11th Judicial Circuit for
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`Miami-Date County, Florida by stock promoter Shift Media Lab for alleged failure to pay for its
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`stock promotion services. Shift Media Lab vaguely alleged in its complaint that it was
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`providing “services” for CytoDyn for three months at $25,000 per month. Shift Media Lab was
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`previously listed by CytoDyn in a disclosure statement to the OTCQB Venture Market as
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`providing “Brand Awareness” for CytoDyn.
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`46.
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`On November 10, 2020, CytoDyn entered into an amended $28.5 million Secured
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`Convertible Promissory Note with Fife’s company, Streeterville Capital LLC, a related entity
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`that was not specifically named in the SEC action against Iliad and Fife.
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`47.
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`On November 10, 2020, the day of CytoDyn’s further agreement with the Fife
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`entity Streeterville Capital LLC, CytoDyn shares closed at $2.02 per share, representing an
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`approximate 80% decline from the Class Period high.
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`48.
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`Through the end of 2020 and the beginning of 2021, CytoDyn continued to
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`aggressively hype Leronlimab as a COVID-19 treatment. As CytoDyn shares were artificially
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`inflated once again, on December 21, 2020, Defendant Mullholland sold over 1.1 million shares
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`for over $5.8 million in total proceeds. Thereafter, on December 28, 2020, Defendant
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`Mullholland sold over 711,000 CytoDyn shares for over $4.4 million in total proceeds.
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`CLASS ACTION COMPLAINT - 13
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`Ide Law Office
`7900 SE 28th Street, Suite 500
`Mercer Island, WA 98040
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`Ph.: 206 625-1326
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`Case 3:21-cv-05260 Document 1 Filed 04/09/21 Page 14 of 27
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`Moreover, on February 5, 2021, Deborah Celeste Kelly, the wife of CytoDyn Chairman Scott
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`Kelly, filed a Form 144 Notice of Proposed Sale of Securities and listed an “approximate date
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`of sale” as February 1, 2021. The document lists a sale of over 350,000 shares for over $2.5
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`million.
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`49.
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`Beginning on the Friday after the close of trading on March 5, 2020, and
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`continuing over the weekend, CytoDyn issued a flurry of press releases describing the results of
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`Phase IIb/III data on Leronlimab. Hidden in press releases with titles like “CytoDyn to File
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`Accelerated Rolling Review with MHRA and Interim Order (IO) with Health Canada for
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`COVID-19” and “CytoDyn’s Phase 3 Trial Demonstrates Safety, a 24% Reduction in Mortality
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`and Faster Hospital Discharge for Mechanically Ventilated Critically Ill COVID-19 Patients
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`Treated with Leronlimab,” however, was a disclosure that the primary endpoint of the study—
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`lowering all-cause mortality at Day 28—was not statistically significant. CytoDyn announced
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`that:
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`Amongst all patients in mITT, the primary endpoint (all-cause mortality at Day
`28) was not statistically significant. When age adjustment was conducted, the
`primary endpoint was much closer to statistically significant value. Of note, the
`reduction of mortality in this population of 65 years and younger leronlimab arm
`had more than 30% less mortality than placebo and 9% less mortality in
`participants over 65.
`
`
`* * *
`
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`With the age adjustment analysis in all other major secondary endpoints, there
`was consistent numerical superiority over the placebo group, with some
`secondary endpoints approaching statistical significance.
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`50.
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`Following the flurry of press releases, CytoDyn was accused of “massaging the
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`data” and squeezing good news out of a failed study, the results of which CytoDyn reportedly
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`sat on pending regulatory discussions. CytoDyn also focused in on a subgroup that accounted
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`for 62 out of 384 patients enrolled in the CD12 trial and declared a survival benefit. While the
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`CLASS ACTION COMPLAINT - 14
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`Ide Law Office
`7900 SE 28th Street, Suite 500
`Mercer Island, WA 98040
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`Ph.: 206 625-1326
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`Case 3:21-cv-05260 Document 1 Filed 04/09/21 Page 15 of 27
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`trial involved severe to critically ill patients, the Company touted that mechanically ventilated,
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`critically ill patients saw a 24% reduction in all cause-mortality between the Leronlimab and
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`placebo arms, without breaking down the number of deaths in either group.
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` See
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`https://endpts.com/cytodyn-tries-to-squeeze-positive-news-out-of-a-failed-covid-19-study-and-
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`shares-take-a-beating/.
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`51.
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`In the trading days that followed the release of the data, the price of CytoDyn
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`shares plummeted. After closing at $4.05 on March 5, 2021, CytoDyn shares dropped over
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`28% to close at $2.91 on March 8, 2021. On March 9, 2021, CytoDyn shares dropped an
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`additional 19% to close at $2.35.
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`52.
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`As a result of Defendants’ wrongful acts and omissions, and the precipitous
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`decline in the market value of the Company’s securities, Plaintiff and the other Class members
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`have suffered significant losses and damages.
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`PLAINTIFF’S CLASS ACTION ALLEGATIONS
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`53.
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`Plaintiff brings this action as a class action pursuant to Rules 23(a) and (b)(3) of
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`the Federal Rules of Civil Procedure on behalf of a class consisting of all those who purchased
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`or otherwise acquired CytoDyn securities during the Class Period and were damaged upon the
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`revelation of the alleged corrective disclosure (the “Class”). Excluded from the Class are the
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`Defendants named herein, the officers and directors of the Company, at all relevant times,
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`members of their immediate families and their legal representatives, heirs, successors, or
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`assigns, and any entity in which Defendants have or had a controlling interest.
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`54.
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`The members of the Class are so numerous that joinder of all members is
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`impracticable. Throughout the Class Period, CytoDyn securities were actively traded over the
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`counter (“OTC”) in the U.S. While the exact number of Class members is unknown to Plaintiff
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`CLASS ACTION COMPLAINT - 15
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`Ide Law Office
`7900 SE 2