What happened
Veru (VERU 3.53%) has found itself the target of a short-seller, and as a result the biotech company's shares took a more than 12% hit on an otherwise upbeat Monday for the wider stock market. That short-seller didn't mince words about its concerns with the company, which clearly left investors quite spooked about its future.
So what
Culper Research, an activist short-seller that in its words "seek[s] to expose companies which have misrepresented their operations, failed to disclose significant risks, misappropriated capital, possess accounting irregularities, or otherwise deceived investors," published a blistering report on its short position in Veru.
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In a 10-tweet thread digesting the report and posted on Monday, Culper accused Veru of "glaring anomalies" in its phase 3 clinical trial of coronavirus drug sabizabulin. Among its raft of accusations, Culper wrote that the trial is significantly smaller than those conducted for other COVID drug candidates and demonstrated a worryingly high mortality rate.
The researcher is also highly unimpressed with the executives guiding the company. In the tweet thread, Culper wrote that "Veru's top ranks harbor a history of alleged sham science, failure, and misrepresentation" and are "a team of alleged frauds and failures who now tout a COVID-19 drug."
The publication of the report and the tweet thread come hot on the heels of the news that the Food and Drug Administration (FDA) has set a pre-Emergency Use Authorization (EUA) meeting date to discuss that phase 3 study data. This is set for next Tuesday, May 10.
Now what
Veru has not yet officially responded to Culper's accusations, which are worrying. The rather eclectic biotech -- it has a female contraceptive product, FC2, on the market, and is developing cancer drugs -- has attracted much interest because of the apparently promising sabizabulin. Investors could turn away from the company in droves if the researcher's allegations have merit, however.
