Class Claims Filed Against Biotech Company Over Exaggerated COVID-19 Vaccine Promises

Elizabeth DiNardo, Esq. | Associate Counsel


On August 24, 2020, class claims for violations of the federal securities laws were filed in federal court in the Northern District of California against biotech company Vaxart Inc. (“Vaxart”). A group of securities holders alleged that Vaxart engaged in artificially inflating the company’s stock price by announcing false and misleading information concerning the company’s COVID-19 oral recombinant vaccine candidate.

In the complaint, named plaintiff Kirk Himmelberg details how Vaxart, a San Francisco-based company, never successfully developed a vaccine in its 16-year history. The plaintiff points out that at the start of 2020, the company had only 14 full-time employees and a market capitalization of $17 million. Not long into the process of developing a potential vaccine to combat COVID-19, Vaxart began periodically announcing positive news bulletins regarding the progress of the vaccine, causing the company’s share price to skyrocket, increasing from $0.33 a share to $2.92 by June 2, 2020.

During this time, fellow defendant Armistice Capital LLC (“Armistice”), a hedge fund focused on the healthcare and consumer sectors and long-time major shareholder of Vaxart, amended its existing warrant agreement with Vaxart, allowing it to potentially exercise its warrants on approximately 21 million shares of Vaxart stock immediately. By June 3, 2020, Armistice held stock and warrants equaling approximately 20% of all outstanding stock. During subsequent weeks, defendants issued millions of dollars in favorable stock options to Vaxart’s senior executives.

On June 25, 2020, Vaxart announced that it had entered into a memorandum of understanding with Attwill Medical Solutions Sterilflow LP, to enable production of a billion or more tablet COVID-19 vaccines doses annually. After the announcement, the company’s share prices rose to $6.26 per share. On June 26, 2020, Vaxart issued another press release announcing that its COVID-19 vaccine was the only tablet-form treatment to be selected for the U.S. Government’s Operation Warp Speed. This information caused share prices to rise to $8.04, and continue to climb to $11.49, and subsequently increase to $14.30. Meanwhile, on June 8, 2020, Armistice exercised all of its 20.8 million warrants, only to then sell 27.6 million shares in Vaxart between June 26 and June 29, thereby reducing its overall ownership in Vaxart from 29% to 0.2% and profiting approximately $200 million.

On July 25, 2020, the New York Times article exposed the defendants’ scheme and revealed that despite Vaxart’s announcement that it was not among the companies selected to receive significant financial support from Operation Warp Speed, the exposé caused Vaxart share prices to plummet.

Plaintiff is seeking to represent a class made up of those who purchased or otherwise acquired securities of Vaxart at an inflated price before the New York Times article from July 25, 2020 was published. The suit brings causes of action for violation of Section 10(b) of the Exchange Act and SEC Rule 10b-5 and for Violations of Section 20(a) of the Exchange Act.

The case is: Kirk Himmelberg v. Vaxart Inc. et al., Case No.: 3:20-cv-05949, in the U.S. District Court for the Northern District of California.


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