This securities class action against Immunocellular Therapeutics, Ltd. (IMUC) makes a two-pronged claim. First, the complaint alleges, the company misrepresented the viability of the company’s main vaccine candidate; second, it engaged in an illegal stock promotional scheme. The complaint alleges that the company and individual defendants violated the Securities Exchange Act of 1934.
The class for this action is all persons who acquired IMUC common stock on the open market between May 1, 2012 and December 11, 2013.
IMUC develops new therapeutic treatments that use the body’s immune system to treat brain, ovarian, and other solid cancer tumors. The company’s lead product candidate, ICT-107, is a vaccine targeting glioblastoma multiforme (GMB), the most common type of brain cancer.
The result of the vaccine’s Phase I study, the complaint says, was that its effectiveness had not been proved, because those who responded to the vaccine showed “a non-significant trend toward increase progression-free survival, but not overall survival.” Six patients had survived for four years or longer, but, the complaint claims, no clear correlation was observed between the presence of immune response and ICT-107, a necessity for the vaccine to be working.
According to the complaint, the company called the results “encouraging” although the study neither met the FDA’s standards for showing effectiveness nor showed effectiveness on its own terms. However, the company announced its first Phase II patient enrollment on February 2, 2011.
In the meantime, CEO Manish Singh engaged Lidingo Holdings to disseminate articles praising the company. It placed articles on websites like Seeking Alpha and Benzinga, claiming that the vaccine was a “breakthrough” and speculating that it might be headed to a partnership with or acquisition by a larger pharmaceutical company.
While US securities laws require that published articles about securities fully disclose any compensation received, none of Lidingo’s articles did so. The complaint alleges that Singh had control over the content of the articles, and that he received a kickback from Lidingo through another company he owned.
The first sign that all was not right emerged on August 20, 2012, when the company filed a Form 8-K to announce that Singh had resigned. The Form 8-K also disclosed that Singh had claimed he was entitled to severance benefits but that the company said he was not. The stock price fell at the announcement.
Yet, the complaint says, the company still did not reveal that the articles were part of a paid promotion scheme, nor did they correct the wrong impressions about the vaccine’s Phase I trial. On December 11, 2013, however, the company revealed disappointing Phase II results. At the news, the stock price fell by nearly 60%.
On April 10, 2017, Singh admitted he had been involved in a “paid stock-touting scheme” and was ordered by the SEC to pay $2.9 million in disgorgement, penalties, and interest. On the same day, the SEC also filed a lawsuit against Lidingo and some of its employees.