Former president and CEO of CytoDyn Nader Pourhassan along with Kazem Kazempour, former CEO of the CRO running CytoDyn’s trials, are awaiting sentencing but could face up to 20 years in prison for each count of securities and wire fraud and insider trading.
An ex-official of Washington State–based CytoDyn was found guilty on Wednesday of defrauding investors by misrepresenting facts about the company’s development pipeline to raise its stock price, according to a Department of Justice press release.
A federal jury in Maryland convicted Nader Pourhassan, former president and CEO of CytoDyn, of running and participating in a scheme to “deceive” the company’s investors regarding the development of leronlimab—an investigational antibody for HIV and COVID-19—in effect artificially inflating and maintaining its stock price, according to the DOJ.
The jury also convicted Kazem Kazempour of a similar offense. During the time of the scheme, between 2018 and 2021, Kazempour was CEO of Amarex Clinical Research, a Maryland-based contract research organization (CRO) that was running CytoDyn’s clinical trials and acting as the biotech’s representative to the FDA.
Evidence presented during the trial showed that Pourhassan and Kazempour lied to investors regarding CytoDyn’s clinical trials and regulatory submission to the FDA. In 2020, for instance, they told shareholders that they had filed a regulatory application for the approval of leronlimab in HIV—even as they were aware that the filing was incomplete and could not be reviewed.
Pourhassan and Kazempour also misled investors regarding the results of clinical trials for leronlimab in COVID-19, as well as its chances of approval. According to the DOJ, the former CEO knew that leronlimab’s studies had failed and would thus be unlikely win approval.
The pair used these misrepresentations “for their own benefit,” according to Wednesday’s announcement. Over the duration of the scheme, CytoDyn brought in more than $300 million from investors, $22 million of which was then paid to Amarex for its services. Pourhassan earned more than $4.4 million from the fraud by selling off CytoDyn shares, while Kazempour pocketed over $340,000.
Pourhassan was convicted of four counts of securities fraud, two counts of wire fraud and three counts of insider trading, while Kazempour was found guilty of one count of securities fraud and one count of wire fraud. Sentencing is scheduled for a later date, though both face up to 20 years in prison for each count.
Pourhassan had served as CytoDyn’s CEO for almost 10 years before the biotech’s Board sacked him in January 2022 in search of a leader with more experience to commercialize leronlimab. A few weeks earlier, in December 2021, CytoDyn secured a preliminary injunction against NSF International—the parent company of Kazempour’s Amarex—citing “substantial damages” because the CRO had failed to meet its obligations to the biotech.
Correction (Dec. 19): This story was updated to avoid implying that Kazem Kazempour was an executive at CytoDyn. BioSpace regrets the error.
