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Law360 (August 24, 2020, 10:35 PM EDT) -- Investors in Vaxart Inc. accused the San Francisco-headquartered biotechnology company of lying about its COVID-19 vaccine candidate in order to inflate its stock price, according to a complaint filed Monday in California federal court.
Vaxart shareholder Kirk Himmelberg sued on behalf of himself and anyone else who bought the company's stock between June 25, when Vaxart announced plans for production of the vaccine, and July 25, when media reports revealed the company publicly said it was receiving support from the federal initiative known as Operation Warp Speed even though it was not.
Himmelberg said the company "exaggerated the prospects of its COVID-19 vaccine candidate, including its purported role or involvement in OWS."
"Vaxart's COVID-19 vaccine candidate had no reasonable prospect for mass production and marketing and was not among the companies selected to receive significant financial support from OWS to produce hundreds of millions of vaccine doses," he added.
Himmelberg is suing Vaxart and its CEO Cezar Andrei Floroiu, as well as the hedge fund Armistice Capital LLC and two of its managers, Steven J. Boyd and Keith Maher.
The Vaxart investor says the biotech company and Armistice, which held nearly a third of Vaxart's outstanding stock, changed the warrant agreements on the roughly 21 million shares in early June.
Later that month, Vaxart announced a partnership with another company aimed at producing a COVID-19 vaccine. The next day, the company announced it had been picked to participate in a study as part of Operation Warp Speed.
Those two announcements sent the stock price soaring from $3.61 per share to $8.04, and in the coming days, Armistice sold almost all of its stock, making a profit of some $200 million, Himmelberg says.
About a month later, however, the New York Times published an article focusing on corporate profits associated with the race for a COVID-19 vaccine, in which the newspaper reported that Vaxart was not part of the Operation Warp Speed initiative.
Himmelberg says that in response to the news, Vaxart shares dropped on July 27, 2020, from $12.29 per share to $11.16, causing him and other investors to lose money.
The suit alleges two counts of violating the Exchange Act. It seeks damages, costs and attorney fees.
"We're focused on investors' losses and proving Vaxart misled investors about OWS' potential funding support for the company," Reed Kathrein, the Hagens Berman partner leading the investigation, said Monday.
Vaxart did not respond on Monday to a request for comment.
The suit appears to have sparked the interest of other firms that focus on stock fraud. Scott + Scott Attorneys at Law LLP issued a press release on Monday announcing an investigation of whether Vaxart may have broken securities laws in relation to its COVID-19 vaccine.
Himmelberg is represented by Reed R. Kathrein and Lucas E. Gilmore of Hagens Berman Sobol Shapiro LLP.
Counsel information for Vaxart wasn't immediately available on Monday.
The case is Kirk Himmelberg v. Vaxart Inc. et al., case number 3:20-cv-05949, in the U.S. District Court for the Northern District of California.
--Editing by Janice Carter Brown.
For a reprint of this article, please contact reprints@law360.com.
