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Law360 (October 28, 2020, 6:56 PM EDT) -- The U.S. Securities and Exchange Commission has reached a tentative deal to settle its suit in New York federal court accusing a company of making misleading statements about the availability of at-home COVID-19 tests.
U.S. District Judge Jesse M. Furman on Monday agreed to dismiss the SEC's case against biotechnology company Applied BioSciences Corp., noting that the parties have resolved the case in principle.
The judge said there is a 60-day window for reopening the case if the settlement isn't finalized.
"To be clear, any application to reopen must be filed by the aforementioned deadline; any application to reopen filed thereafter may be denied solely on that basis," the judge wrote. "Further, requests to extend the deadline to reopen are unlikely to be granted."
The regulator filed the case at issue in May, alleging that Applied BioSciences issued a series of misleading press releases claiming that it had begun offering at-home COVID-19 testing kits to the general public for private use.
But in reality, the finger-prick tests had not yet been shipped, were not meant to be used at home as advertised and were not approved by the U.S. Food and Drug Administration, the SEC said.
The SEC claimed the biotech company was "seeking to exploit the COVID-19 pandemic for profit" by "dramatically" shifting its focus from cannabinoid therapeutic goods to coronavirus-related products in March.
The company announced to the public that it would begin developing a range of products to fight COVID-19, including hand sanitizer and at-home testing kits for private use, causing its share prices to soar by as much as 80% in the span of a day, according to the regulator.
The SEC said the company "simply entered into an agreement to purchase test kits from the Essential Oil Company, a company that prior to the COVID-19 pandemic sold 'vitamin essential oil aromatherapy diffuser sticks[,]' and whose sole officer has a background in acting and modeling."
Later press releases in April announced that Applied BioSciences had ended its relationship with Essential Oil and backtracked on its advertisement that anybody, with or without medical training, could use the test kits at home, but still failed to acknowledge that the kits were never approved for home use by the FDA to begin with, according to the SEC.
Representatives for the parties did not immediately respond to requests for comment on Wednesday.
The SEC is represented in-house by Dugan W. E. Bliss, Lara S. Mehraban, Thomas P. Smith Jr. and Kristine M. Zaleskas.
Applied BioSciences is represented by Thomas E. Puzzo of the Law Offices of Thomas E. Puzzo PLLC.
The case is and Securities and Exchange Commission v. Applied BioSciences Corp., case number 1:20-cv-03729, in the U.S. District Court for the Southern District of New York.
--Additional reporting by Reenat Sinay. Editing by Steven Edelstone.
For a reprint of this article, please contact reprints@law360.com.
