According to the Complaint, Chembio Diagnostics, Inc. purports to be a leading point-of-care (POC) diagnostics company focused on detecting and diagnosing infectious diseases. The Company claims its patented Dual Path Platform (DPP) technology platform, which uses a small drop of blood from the fingertip, provides high-quality, cost-effective results in approximately 15 minutes.
In light of the COVID-19 pandemic, the Company focused on the development and commercialization of a serological or antibody test. Chembio’s antibody test was one of the first antibody tests authorized by the FDA during the COVID-19 public health emergency. Throughout the Class Period, Defendants represented that its DPP COVID-19 serological POC test for the detection of IgM and IgG antibodies aided in determining current or past exposure to the COVID-19 virus, that its test provides high sensitivity and specificity, and was 100% accurate.
Based on Defendants representations, during the Class Period the Company’s stock increased from a closing price on March 31, 2020, the day before the Class Period begins, of $5.12 per share, to a Class Period high of $15.54 per share on April 24, 2020.
On June 16, 2020, after the market closed, the U.S. Food and Drug Administration (“FDA”) issued a press release disclosing that it had revoked the Company’s Emergency Use Authorization (“EUA”) for the Company’s DPP COVID-19 Igm/IgG System. As a result of disclosure of the FDA letter, Chembio shares declined from a closing price on June 16, 2020 $9.93 per share to close at $3.89 per share on June 17, 2020, a decline of $6.04 per share, or over 60%, on heavier than usual volume of over 25 million shares.
The Complaint alleges that during the Class Period, Defendants engaged in a scheme to deceive the market and a course of conduct that artificially inflated Chembio stock price and operated as a fraud or deceit on Class Period purchasers of Chembio stock by misrepresenting the efficacy of the Company’s DPP COVID-19 test. As a direct result of the public revelations regarding the truth about the condition of Chembio’s business and the negative adverse factors that had been impacting Chembio’s business during the Class Period, the price of Chembio’s stock materially declined. This drop removed the inflation from Chembio’s stock price, causing real economic loss to investors who purchased the stock during the Class Period.