Sunday, May 28, 2023 | Back issues
Courthouse News Service Courthouse News Service

Ebola Scare Linked to Alleged Stock Inflation

WILMINGTON, Del. (CN) - A drugmaker inflated its stock by exaggerating its role in efforts to treat the Ebola virus, a federal shareholder class action alleges.

The complaint Juan Pena filed Friday accuses iBio Inc. and its CEO, Robert Kay, of trying to exploit the publicity tied to the demand for the experimental Ebola-fighting drug ZMapp.

On Oct. 16, 2014, just one day after the U.S. Ebola scare escalated with a second health care worker testing positive for the virus, iBio "issued a materially false and misleading press release" that led investors to believe that it had an affiliation "based on creating antibody-based drugs to fight the Ebola virus," Pena says.

IBio shares "spiked nearly 70 percent" after news broke that the U.S. government had requested ZMapp-production plans from Texas A&M Health Science Center, Emergent Biosolutions and a third center led by Novartis AG, according to an Oct. 20 article by, as quoted in Pena's complaint.

Pena says iBio tried to horn in on the publicity of that news by touting its collaboration deal with (nonparty) Caliber Biotherapeutics, a subcontractor with the Texas A&M Health Science Center.

Though the iBio-Caliber deal from February 2013 involved a certain antibody for oncology indications, iBio offered in its Oct. 16 press release "to assist the U.S. government by making its proprietary technology available for emergency use ... [in] the current Ebola virus outbreak."

The next day, investment site quoted an iBio spokesperson as saying: "Any Lab that Wants to Make ZMapp Vaccine Using Plant-Based Technology Would Have to License it from iBio; Caliber has License from iBio," according to the complaint.

In demonstrating those assertions as "materially false and misleading" on Oct. 20, Seeking Alpha reported that "iBio's relationship with Caliber had nothing to do with the production of ZMapp or combating the Ebola virus," according to the complaint.

Pena says that news caused iBio shares fell to close on Oct. 20 at 32 percent below its prior closing price of $3.21 per share.

Seeking Alpha gave its Oct. 23 follow-up article the headline "A Wannabe Ebola Player Infecting Buyers With False Hope," Pena notes.

"No matter how tempted IBIO might have felt to further capitalize on the Ebola scare - or how thrilled it must be with the immediate results - the company should have known better than to hype a vague possibility so remote that it looks downright far-fetched," the article states, according to the complaint.

That article goes on to say that "we feel so confident that IBIO will play no role in the urgent mass production of ZMapp that we dare the company to share any concrete evidence that clearly suggests otherwise."

Pena says iBio's August 2014 sale of stock to Aspire Capital Fund "incentivized" iBio "to increase the value of the stock and to do so in a short period of time."

IBio and Robert Kay thus "were motivated to materially misrepresent the truth concerning the affiliation between iBio and Caliber, as well as the lack of any role for the Company in the manufacture of ZMapp in order to artificially inflate the price of iBio's stock to increase the proceeds from the sale of stock to Aspire," according to the complaint.

Pena seeks damages for violations of the Exchange Act. He is represented by Brian Long of Rigrodsky & Long and by Manhattan-based Laurence Rosen.

Both Texas nurses who contracted Ebola from the Liberian patient who brought the virus stateside last month were declared cured last week. A doctor meanwhile reportedly remains in isolation in New York.

Read the Top 8

Sign up for the Top 8, a roundup of the day's top stories delivered directly to your inbox Monday through Friday.