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The Securities and Exchange Commission temporarily halted trading in three more stocks on Monday because of questions regarding the accuracy of information in the marketplace about a drug candidate for the coronavirus illness COVID-19.
It’s the latest move by the regulator to crack down on false information regarding tests, therapies or equipment relating to the virus, which has infected more than 3.5 million people worldwide and killed more than 248,000. The SEC has put temporary halts on shares of at least 29 companies, and has released several warnings to investors since Feb. 4 to beware of fraud, illicit schemes and other misconduct during the pandemic.
The regulator halted the stocks of Houston-based CNS Pharmaceuticals Inc. CNSP, -3.83% and Moleculin Biotech Inc. MBRX, -1.83%, as well as WPD Pharmaceuticals Inc. WCOTF, -2.49% of Vancouver, British Columbia. The halts are effective through May 15.
The SEC used the same language in three press releases announcing the halts, saying it had “questions regarding the accuracy and adequacy of information in the marketplace about the company and its securities.”
In each case, it cited statements made by the company and others in press releases “concerning the company’s business, including the status of development of a drug candidate labeled WP1122 for potential application to COVID-19, and the ability to expedite regulatory approval of any such treatment.”
None of the three companies responded to emailed or telephone requests for comment.
In the case of CNS Pharma, the SEC highlighted press releases to investors issued between March 23 and April 13. On March 23, the company said it had entered into an agreement with WPD Pharma to develop “several preclinical drug candidates,” including WP 1122, which it said was being tested on several viruses including COVID-19. WPD had previously licensed rights to a portfolio of drug candidates including WP1122 from Moleculin Biotech for certain regions.
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CNS said it had agreed to fund the development costs of WP1122 and other antivirals and made an upfront payment of $225,000. CNS committed to a milestone payment of $775,000 upon the successful completion of a Phase 2 study in return for 50% of net sales of any resulting commercial product.
On April 13, CNS said in another press release that independent research by the University of Frankfurt in Germany found 2-deoxy-D-glucose (“2-DG”) to reduce replication of the coronavirus by 100% in in vitro testing. WP1122 is a “prodrug” of 2-DG, said the release, or a compound that can be metabolized in the body to produce a drug. The research is available as a preprint, or a preliminary report that has not been peer reviewed.
“While the free form of 2-DG is rapidly metabolized and ineffective within minutes of entering the body, WP1122 has a much longer half-life, potentially enabling it to deliver quantities adequate for a therapeutic effect,” said the release.
For Moleculin Biotech, the SEC cited press releases from March 20 and April 8, along with statements made on March 19, March 20 and April 16, as well as the company’s annual 10-K filing filed on March 19.
On March 20, the company said it had made a patent application covering the use of WP1122 as a therapy “to limit the ability of coronavirus and other viruses to replicate.” The company said it had entered an agreement with a major Texas university to research WP1122.
“We’ve actually been working on the antiviral potential of WP1122 for some time now,” commented Walter Klemp, Moleculin’s chairman and CEO, “but the rise of COVID-19 has obviously placed a new sense of urgency on what we are doing. We hope to be generating animal data on WP1122’s antiviral potential in the near term.”
On April 8, a press release cited the same University of Frankfurt research cited by CNS.
For WPD Pharma, the SEC cited a press release from April 9, and statements from March 19, March 20 and April 13. The April 9 press release also cites the University of Frankfurt research.
CNS has gained about 28% in the past month, while Moleculin Biotech has gained 88% and WPD has fallen 10%. The S&P 500 SPX, +0.42% has gained 13% in the same period.
