Ex-CEO of Vancouver biotech firm charged over COVID treatment claims

For the better part of a decade, Nader Pourhassan tirelessly pitched an experimental drug called Leronlimab as a promising treatment for a variety of ailments, from HIV to certain forms of breast cancer to COVID-19.

Leronlimab was the brainchild of CytoDyn, the Vancouver, Wash.-based biotech firm that Pourhassan led until January. He made a killing on CytoDyn stock when optimism over the drug’s potential as a COVID cure pushed up the share price.

But on Tuesday, the U.S. Justice Department revealed it would prosecute the Lake Oswego, Oregon, resident on multiple counts of wire fraud, securities fraud and insider trading.

According to court documents, Pourhassan, 59, and a second biotech executive, Kazem Kazempour, 69, of Potomac, Maryland, allegedly engaged in a conspiracy to defraud investors through a series of phony claims about the efficacy of Leronlimab and the timeline for regulatory approval.

Kazempour is the co-founder, president and CEO of Amarex Clinical Research, which managed CytoDyn’s clinical trials, and he was CytoDyn’s regulatory agent in interactions with the U.S. Food and Drug Administration.

When fears about the pandemic were at their peak, CytoDyn pitched Leronlimab as a possible lifesaver. The company issued numerous news releases, conducted conference calls, participated in interviews and aggressively used several third-party investor relations and stock newsletter services to tout Leronlimab as a potential treatment.

The company’s stock, which had been bouncing between 40 and 60 cents a share before the pandemic, soared to a high of $6.92 a share on June 22, 2020.

Disgruntled investors alleged in a class-action lawsuit that with “CytoDyn’s stock price sufficiently pumped with the COVID-19 cure hype,” it was time for Pourhassan and other insiders to “dump.”

In April 2020, as the stock was still on its way up, Pourhassan allegedly exercised stock options to purchase millions of company shares at less than $1 apiece. He then sold 4.8 million of those shares, netting a quick profit of $5.8 million.

By that August, the CytoDyn stock had fallen back to its earlier levels, but not before Pourhassan cashed in.

The FDA later said CytoDyn’s claims weren’t supported by the evidence from clinical trials. In a rare public statement in May 2021, the agency said trials had found “no clinical benefit.”

“The Department of Justice is committed to protecting the investing public from criminals who would exploit public health crises for personal profit,” said Assistant Attorney General Kenneth A. Polite Jr. of the Justice Department’s Criminal Division.

Pourhassan was charged with multiple counts of wire fraud and securities fraud and three counts of insider trading. If convicted, Pourhassan faces a maximum penalty of 20 years in prison on each securities fraud and wire fraud count, and five years in prison on the conspiracy count.

Last January, CytoDyn announced that Pourhassan was leaving the company. The company said it would begin a search for a replacement “possessing the requisite pharmaceutical industry experience to enhance the Company’s efforts to achieve regulatory approval and commercialization of leronlimab.”

The company did not return phone calls or emails. Pourhassan could not be reached.