Chembio Investors Sue After FDA Questions Covid Antibody Test

Chembio Diagnostics Inc. allegedly misled investors by claiming its coronavirus antibody test was “100% accurate” when it wasn’t, according to a would-be class complaint filed in New York federal district court.

The diagnostic solutions firm told investors that its test “provides high sensitivity and specificity” in the months before the Food and Drug Administration identified concerns about the test’s accuracy, the complaint filed Thursday in the U.S. District Court for the Eastern District of New York said.

Chembio’s test was “one of the first antibody tests authorized by the FDA” during the Covid-19 pandemic, the complaint said. But the regulator revoked its emergency use authorization for the test June 16 due to a “higher than expected rate of false results.”

The FDA also questioned whether the test’s benefits outweigh its “known and potential risks,” the investors said.

The company’s share price fell more than 60% by the time markets closed June 17, the complaint said.

Causes of Action: Exchange Act §10(b)—Using a manipulative or deceptive device or contrivance for a securities transaction in violation of SEC rules (15 U.S.C. §78j); SEC Rule 10b-5—Employing a device, scheme, or artifice to defraud, making untrue statements or omitting facts, or engaging in any act, practice, or course of business which operates as a fraud or deceit (17 C.F.R. §240.10b-5).

Relief: Damages with interest; attorneys’ fees; court costs.

Potential Class Size: Hundreds who acquired Chembio stock between April 1 and June 16.

Response: Chembio didn’t immediately respond to a June 19 request for comment.

Attorneys: Kaplan Fox & Kilsheimer LLP represents the investors.

The case is Chernysh v. Chembio Diagnostics Inc., E.D.N.Y., No. 20-cv-02706, complaint filed 6/18/20.