[UPDATE 5-28-2020: After both companies issued similar press releases on May 27, laying out more specifically the timeline for the drug to get approval, trading in both companies has resumed on 28 May].
The Nasdaq has halted trading on CNS Pharmaceuticals and Moleculin Biotech pending further information from the companies related to a drug candidate for the coronavirus illness COVID-19.
Moleculin Biotech is based in the Rice Military area of Houston and went public in June 2016. CNS is based in the Galleria and completed its IPO in November 2019.
The Securities and Exchange commission temporarily halted trading on May 5 of the two companies. That temporary halt was due to expire on May 15, until the Nasdaq stepped in. The SEC also halted trading of Vancouver-based WPD Pharmaceuticals, which is traded on the Canadian Stock Exchange. However, WPD will resume trading on the CSE.
University of Frankfurt research
The saga began on March 11 when independent researchers at the University of Frankfurt posted a paper on a website, for peer review. The research found that 2-deoxy-D-glucose (“2-DG”) was able to reduce replication of SARS-CoV-2, the virus that causes COVID-19, by 100% in in vitro testing.
Three companies linked by common shareholder
On March 23, 2020 CNS announced that it had entered into an agreement with WPD for the development of several preclinical drug candidates, including WP1122. The founder and largest shareholder of CNS, Dr Waldemar Priebe, is also the founder and largest shareholder of WPD too.
WPD had previously licensed rights to a portfolio of drug candidates, including WP1122, from Moleculin Biotech for certain regions. Dr Priebe is one of the largest shareholders of Moleculin. He is also the chair of the Scientific Advisory Board of that company.
By day, Dr Priebe is also the Professor of Medicinal Chemistry, Department of Experimental Therapeutics at MD Anderson Cancer Center.
CNS states that WP1122 is a biologically inactive compound that can be metabolized in the body, to produce a form of 2-DG. The March 23 press release stated that WP1122 was being tested for a range of viruses, including SARS-CoV-2.
On April 8, Moleculin issued a press release touting the Frankfurt research. CNS issued its version of the press release on April 13.
Market capitalization rockets
Prior to the March 23 announcement, CNS had a market cap of $24 million. After the April 13 press release, it was $60 million. Likewise for Moleculin Biotech, the market cap rocketed from $24 million to $89 million.
The SEC is concerned that CNS and certain unnamed third parties may have overstated the status of development of WP1122, the status of testing the drug’s impact on COVID-19 and the ability to expedite regulatory approval of any such treatment.