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Drug Firm Accused of Concealing Deaths

SAN FRANCISCO (CN) - Cellular Biomedicine Group paid a promoter to pump its stock and hid deaths connected to a cancer treatment, shareholders claim in a federal class action.

Cellular Biomedicine, a Delaware corporation based in Palo Alto, develops stem cell and immune cell therapies for cancer and neurodegenerative diseases such as knee osteoarthritis, spinal muscular atrophy and amyotrophic lateral sclerosis, marketing its patented "homegrown" cell technology to China's burgeoning health care market.

Lead plaintiff Francis Bonanno claims the company inflated its stock price through false and misleading financial statements that failed to disclose that it achieved its $500 million valuation using a paid stock promoter, and that its "Car-T" technology studies involved patient deaths.

Bonanno also sued CEO Wei Cao and CFO Tony Liu, alleging violations of the Securities Exchange Act's "anti-touting" provision.

Stock-issuing companies are prohibited from "publicizing information about a security without fully disclosing any consideration received or to be received, directly or indirectly, from the issuer and the amount thereof."

Cellular's Car-T technology involves engineering cancer patients' own immune cells to recognize and attack their tumors, according to the complaint.

But Bonanno claims Car-T is "worthless," and claims some patients died while participating in Cellular studies.

The company's $500 million valuation was set, in part, through LifeTech Capital, "a purported research-focused biotechnology and medical technology investment bank," that ballooned its target price for Cellular to $32.50 with a 'strong speculative buy rating,'" according to the complaint.

LifeTech senior managing director of research Stephen Dunn wrote a 26-page report highlighting Cellular's latest acquisitions and market valuation.

Dunn is not a party to the lawsuit.

According to the complaint, Dunn wrote in his report: "With four human clinical and two preclinical programs in immuno-oncology, CBMG is now the leader in China for this promising cancer technology. We expect CBMC to continue their aggressive acquisition strategy for immuno-oncology drugs in China, as well as sign development partnerships with western pharma companies for the Chinese market."

But Bonnano claims the truth about Cellular's finances and research was revealed this month in a report published by Seekingalpha.com, which claims the company was "engaged in a massive fraudulent scheme to mislead investors and that the company had no meaningful financial value."

The report stated that Cellular's $500 million valuation is "unsustainable" and that Cellular's Car-T technology, which was acquired for $1.8 million, is "worthless," according to the complaint.

Cellular stock sank by $7 per share to close at $25.22 the day after that report, Bonnano says.

Bonnano's lead attorney Jennifer Pafiti, with Pomerantz LLP, did not immediately return a call. Pomerantz attorneys in Chicago and New York were not available to answer after-hour calls.

Bonanno claims that investors "suffered significant losses and damages as a result of the fraudulent scheme.

He seeks class certification, damages and costs.

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