CytoDyn Faces Investor Lawsuit Amid Ongoing Legal Troubles

In a significant development for the pharmaceutical industry, biotechnology company CytoDyn and its former executives are set to face a lawsuit from investors alleging misleading claims regarding the company's lead drug candidate, leronlimab. This legal challenge comes amidst a series of setbacks for the company, including regulatory hurdles and criminal convictions of former leadership.

Investor Lawsuit Moves Forward

U.S. District Judge Benjamin H. Settle has ruled that a lawsuit led by shareholder Brian Courter can proceed against CytoDyn and its former executives. The lawsuit alleges violations of the Securities Exchange Act, claiming that the company made false and misleading statements about leronlimab's status as a potential treatment for HIV and COVID-19 over a two-year period.

Former CEO Nader Pourhassan, ex-CFO Michael Mulholland, and former board chairman and chief medical officer Scott Kelly are named in the suit. The complaint contends that these executives knowingly misled shareholders about the FDA application status for leronlimab, causing artificial spikes in the company's stock price.

Regulatory Challenges and Clinical Holds

CytoDyn's troubles extend beyond the investor lawsuit. The FDA placed leronlimab's development for HIV on a partial clinical hold in 2022, while its COVID-19 program received a full hold. However, the company saw some relief in 2024 when the HIV program was released from the clinical hold.

Under new leadership, CytoDyn is attempting to move forward with leronlimab in various solid tumor indications. CEO Jacob Lalezari has pledged transparency, promising "clear and direct updates" to shareholders and emphasizing a "collaborative relationship" with the FDA.

Criminal Convictions and Ongoing Legal Proceedings

Adding to CytoDyn's woes, former CEO Nader Pourhassan was criminally convicted in December on multiple counts of securities fraud, fraud, and insider trading. The Department of Justice reported that Pourhassan netted $4.4 million from CytoDyn's stock sales during the alleged fraud scheme.

Kazem Kazempour, former CEO of Amarex Clinical Research, the CRO managing CytoDyn's trials and FDA interactions, was also convicted. Kazempour reportedly made over $340,000 during the period in question.

Sentencing for both Pourhassan and Kazempour has been postponed to late September 2025, prolonging the legal saga surrounding CytoDyn and its former leadership.