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Class Says Firm Lied About Drugs, Ph.D.

(CN) - Cellceutix Corporation made false statements about its anti-cancer and anti-bacterial drugs and a company co-founder lied about getting his doctorate from Harvard, a class action lawsuit claims.

Nicole O'Connell sued Cellceutix Corporation, Leo Ehrlich and Krishna Menon, individually and on behalf of a proposed class of those who bought Cellceutix stock between May 10, 2013 and Aug. 6, 2015. The lawsuit was filed in Southern New York Federal Court last week.

Cellceutix did not disclose that its anti-cancer drug Kevetrin does not active a tumor suppressant gene and its anti-bacterial drug Brilacidin is not effective, according to the lawsuit.

"Each of the defendants participated directly or indirectly in the preparation and/or issuance of the quarterly and annual reports, SEC filings, press releases, and other statements and documents...including statements made to securities analysts and the media that were designed to influence the market for Cellceutix securities," the complaint states. "Such reports, filings, releases and statements were materially false and misleading in that they failed to disclose material adverse information and misrepresented the truth about Cellceutix's finances and business prospects."

In addition, O'Connell claims on behalf of the class that Menon, one of Cellceutix's co-founders, lied about earning his Ph.D. in pharmacology from Harvard University.

The lawsuit cites a report from financial website SeekingAlpha, which says it tried to use to verify Menon's degree status.

"Menon simply did not graduate from Harvard, and to claim otherwise is wrong. Unfortunately, he has made these claims many times," the report states, according to the lawsuit. "In the most recent [Cellceutix financial report], Menon claims he earned his PhD from Kerala University in India. He no longer mentions Harvard at all."

The SeekingAlpha report confirmed that Menon actually received a Ph.D. from Kerala University, the lawsuit states. Cellceutix stock fell 73 cents per share, or 31 percent, after the SeekingAlpha report, according to the complaint.

A press release on Cellceutix's website titled "Shareholder Alert" calls the lawsuit frivolous. It also says the claims about Menon's degree arose from an error in financial documents.

"There is the last ditch attempt to cast aspersions on Dr. Menon's credentials once again. Like the other spurious comments, we have already addressed this. Dr. Menon's biography was incorrect on our 2009 10-K filing and was first corrected on our website in late 2009 and was stated correctly on our 2010 10-K filing (Oct 12, 2010)," the release states. "Rosen alleges that shareholders were damaged by the administrative error, which we find baffling. The CTIX share price during that year averaged less than 50 cents and traded on very low volume."

The class seeks unspecified damages, attorneys' fees and costs. It is represented by Phillip Kim of the Rosen Law Firm in New York City.

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