NEW YORK, Aug 15, 2020 (GLOBE NEWSWIRE) – Pomerantz LLP announces that a class action lawsuit has been filed against Co-Diagnostics, Inc. ("Co-Diagnostics" or the "Company") (NASDAQ: CODX) and some of its officers . The class action lawsuit, filed in the U.S. District Court for the Utah District, Central Division, and indexed at 20-cv-00481, is directed to a class composed of all persons and entities other than defendants, who have co-purchased or otherwise have acquired. Diagnostics Securities between February 25, 2020 and May 15, 2020, both dates inclusive (the “Class Period”), to seek damages caused by Defendants violating federal securities laws and for remedial action under the Sections 10 (b) and 20 (a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 therein against the Company and some of its chief officers.
If you are a shareholder who purchased Co-Diagnostics securities during the class period, you have until August 17, 2020 to request the court to appoint you as the lead plaintiff for the class. A copy of the complaint is available at www.pomerantzlaw.com. To discuss this promotion, contact Robert S. Willoughby at email@example.com or 888.476.6529 (or 888.4-POMLAW) toll free ext. 7980. Those who inquire by email are encouraged to give their Provide postal address, telephone number and the number of shares purchased.
(Click here for information on how to participate in the class action.)
Co-Diagnostics, Inc., a molecular diagnostics company, intends to manufacture and sell reagents that are used in diagnostic tests and that function by detecting and / or analyzing nucleic acid molecules. It is also intended to sell third-party diagnostic equipment as stand-alone laboratory systems.
The complaint alleges that defendants have persistently, knowingly and willfully misrepresented their flagship product, a COVID-19 diagnostic test, in order to increase the price of Co-Diagnostics stock, while officers and directors have cheap options exercised and their shares in the market. Their fraudulent misrepresentation and disregard for the rationale behind the falseness of their statements with hindsight cost investors millions of dollars to lose.
The story goes on
In the late morning and early afternoon of May 14, 2020, third parties revealed amazing information about Co-Diagnostics' supposedly 100% accurate test.
The Salt Lake Tribune ("Tribune") reported that TestUtah.com, using tests developed by Co-Diagnostics, "refused to participate in a collaborative experiment with other major laboratories in Utah to confirm each other's quality." In addition, the Tribune found that TestUtah's tests (from Co-Diagnostics) “have a higher limit of detection – that is, they require more viruses to produce a positive result – than most other coronavirus tests approved for sale in the US, according to one Analysis of the life science publication BioCentury. “This meant Co-Diagnostics' tests likely had a much higher false-negative reporting rate, meaning that potentially thousands of infected people were inaccurately informed that they did not have the disease, an observation that coincided with previous concerns about the disease lower rate of positive test results agreed by TestUtah.
The Tribune article also expressed concern about TestNebraska.com and TestIowa.com's testing services, which also used co-diagnostics tests.
Also on May 14, 2020, Iowa Governor Kim Reynolds made a public statement: “I am pleased to announce that the State Hygienic Lab completed the validation process for Test Iowa yesterday with a high score of 95 percent Accuracy for determining positives and has reached 99.7 percent accuracy for determining negatives. “These results did not agree with the statements made by Co-Diagnostics on May 1, 2020.
In fact, Defendant Brent Satterfield ("Satterfield"), Ph. D., Chief Science Officer of Co-Diagnostics, himself recently admitted that the lower positive rates for Co-Diagnostics tests "certainly make us all scratch our heads a bit." “And that the tests correctly identify 95% of the truly positive results – a massive departure from what Co-Diagnostics claims to be 100% accurate, as the tests are intended to be performed among hundreds of thousands or even millions of people.
Due to the release of third-party information that cast serious doubts on Co-Diagnostics' bold claims about 100% accuracy, the stock price began to fall, closing the day on May 14, 2020 at $ 22.13 per share, after hitting an intra-day low of $ 18.35 per share, a price decline of more than 38% in a matter of hours.
At that point, Co-Diagnostics could possibly have revised its claims of 100% test accuracy, but not because Co-Diagnostics released earnings and financial data for the first quarter of 2020 to the public after close and a planned investor call for the same evening.
Co-Diagnostics reported that it had record sales and that the start-up had finally reached profitability after nearly seven years. However, it did not address the claims regarding the accuracy or sensitivity of the test, or corrected the previous statements made by Defendant Satterfield about 100% accurate testing.
Rather, the call from The Gazette, a Cedar Rapids, Iowa publication, on TestIowa.com was described as "more like Thanksgiving with drunk uncles – dogs barking, people cursing, and someone moaning." The newspaper also noted that “(n) one of Co-Diagnostics' or Nomi Health's press releases about the Logix Smart tests showed how many tests were selling for how much, and so far all three testing initiatives in Iowa, Nebraska and Utah kept the tests and the results a secret. "
On the same day, the FDA issued a press release regarding test accuracy. Another, much larger, pharmaceutical company had created a diagnostic test for COVID-19 that was increasingly being scrutinized for obvious inaccuracies in public. The FDA announced to the public that “(t) the FDA is studying a variety of sources to identify and understand potential patterns or significant problems with the use of the Abbott test. No diagnostic test is 100% accurate Therefore, due to performance characteristics, sample handling, or user error, it is important to investigate samples and determine the cause of suspected incorrect results so that important problems can be resolved quickly. “(Emphasis added).
Based on the numerous third-party sources uncovering serious issues that were known or should have been known before May 14, 2020, the stock price continued to fall to $ 17.07 per share on May 15, 2020, or a decrease from 22 .86% of the previous day's closing price.
By May 20, 2020, a statistician, Zhiyuan Sun, wrote an article specifically about Co-Diagnostics' supposedly 100% accurate COVID-19 test. Sun stated:
"In May, Co-Diagnostics announced that the COVID-19 in vitro test had 100% accuracy, 100% specificity (probability of preventing a false negative error) and 100% sensitivity (probability prevent a false positive error) has errors), as independently verified in laboratories around the world.
Initially, Co-Diagnostics concluded that the test was 100% effective in all three diagnostic dimensions (specificity, accuracy, and sensitivity) based on studies with small sample sizes. For example, laboratory tests on the Logix test kit conducted in Australia included approximately 100 COVID-19 positive patients and 100 COVID-19 negative patients. With such a small sample size, a low error rate of 1% to 2%, for example, can be very difficult to detect. In the study itself, it was explicitly stated that the test could actually be between 96% and 98% effective and not between 100%.
Furthermore, the test environment is by no means indicative of the actual prevalence of COVID-19 in the population at this point in time of the pandemic. Among the test samples, 50% contained SARS-CoV-2, and apparently nowhere near half of the people in the world had been exposed to the coronavirus at this point. "But wait a minute!" the intelligent reader might say. "Nothing in the world is perfect. So who cares if the test results are 1% or 3% different? The 97% potency is still an A-Plus. You are just the devil's advocate, Zhiyuan!" Unfortunately, this is one of those cases where it is important to pay attention to the devil in detail. In fact, a 1% or 3% error rate can make an in vitro test nearly unusable. Here's why.
For the sake of argument, let's assume that the true sensitivity of Logix is 98% and the true specificity is also 98%. In other words, the probability that the test will return a false positive is 2%, and the probability that the test will return a false negative is also 2%. Both values are stated directly as likely in studies that cite Logix's range of action. They are valid assumptions as the test has not been fully reviewed by the FDA or other regulatory agencies. It is also common knowledge that the number of people who have the virus is likely to be significantly higher than the official figures due to insufficient virus tests for the COVID-19. For example, it is estimated that up to 4.1% of Los Angeles County's residents have COVID-19 antibodies. Let's use this value of 4.1% in our calculations as a measure of the prevalence of COVID-19 (a lower prevalence would affect the test even more). Assuming 1 million people get the Logix test, 41,000 should test positive for persistent SARS-CoV-2 infection. However, if the test gives a false negative result 2% of the time, only 98% of those 41,000 – 40,180 – will show positive.
On the flip side, a 2% error rate of 959,000 people who actually were negative for the virus would give 19,180 cases of false positives – people who don't have the disease, despite the test claiming it does. In total, 59,360 people get positive results, but only 40,180 of them would actually be positive. This gives a predictive value of 67.7%.
In other words, if the Logix test works only as well as it does in this scenario – and is correct 98% of the time – there is still one 1-in-3 Chances are the test will show you have COVID-19 even though you don't! As you can see, a false positive error rate of 32.3% is not very good at all. This problem becomes even worse if we assume the same prevalence but lower Logix's potential sensitivity and specificity estimates to 95% for both. In this scenario, the probability of a false positive result increases to 55.2%! While the results are surprising, they use the basics of conditional probability. Here is a calculator in case you want to try it out for yourself. In addition, a New York University study of COVID-19 in vitro tests was recently developed by Abbott Laboratories (NYSE: ABT) found they were largely inaccurate and unacceptable for use in patients. Note that in previous research, these tests were also advertised with a sensitivity of 100% and a specificity of 99.9%. Unfortunately, this only shows how difficult it is to develop an accurate test for diseases with a low prevalence rate like COVID-19. "
Co-Diagnostics knew that even a highly accurate test – like 96%, 98%, or even 99% – was not the same and not nearly as valuable as a 100% accurate test. This is because a 100% accurate test would have set Co-Diagnostics significantly apart from other, larger, and more reputable competitors that have put COVID-19 tests on the market. In addition, the widespread use of a COVID-19 test that is minimally inaccurate can have extremely detrimental public health consequences. Co-Diagnostics knew this and deliberately issued statements to the public to ward off truthful analyzes and scientific skepticism about the supposed miracle test.
The Pomerantz firm, with offices in New York, Chicago, Los Angeles and Paris, is recognized as one of the leading law firms in corporate, securities and antitrust litigation. Founded by the late Abraham L. Pomerantz, dean of class action lawsuit, Pomerantz pioneered class action lawsuits. Today, more than 80 years later, the Pomerantz company continues its tradition and fights for the rights of victims of securities fraud, fiduciary violations and corporate misconduct. The company has reclaimed numerous millions of dollars in damages on behalf of class members. See www.pomerantzlaw.com
Robert S. Willoughby