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SEC Puts the Kibosh on 3 Penny Stocks Hawking a Miracle Anti-Coronavirus Drug

Since early February, the U.S. Securities and Exchange Commission has issued a series of warnings to investors to beware of companies hawking miracle cures to the disease known as COVID-19. Surely everyone — the SEC included — is certainly eager to see a cure to the disease, which has claimed more than 257,000 lives, found.

Still, there’s an old adage that warns us that “if something sounds too good to be true, it probably is.”

So far, the SEC has felt compelled to halt trading in the shares of no fewer than 29 separate publicly-traded companies that are suspected of having made false or misleading statements about the efficacy of cures they’re supposedly working on.

The latest entries onto this ignominious list: CNS Pharmaceuticals (CNSP), Moleculin Biotech (MBRX), and WPD Pharmaceuticals (WCOTF) — three unprofitable, revenue-less, sub-$100 million market capitalization microcaps trading for penny-stock (below $5) prices.

As reported Tuesday, the SEC halted trading in the shares of all three companies Monday, saying it has “questions regarding the accuracy and adequacy of information in the marketplace about the company and its securities.” Specifically, all three companies are apparently involved in working up a drug candidate labeled WP1122, which is being touted as a cure to COVID-19.

In an April 13 CNS press release, CNS describes WP1122 as a “prodrug” that, once ingested and metabolized by a patient, will produce in vivo something called 2-deoxy-D-glucose, or “2-DG.” Supposedly, 2-DG has been shown in independent research conducted at the University of Frankfurt, Germany (and have you ever noticed how miracle drugs always seem to be verified effective somewhere too far away to conveniently check?) to “reduce replication of the coronavirus by 100% in in vitro testing,” reports Marketwatch. (By the way, the “research” has not been peer-reviewed).

In a statement, CNS CEO John Climaco stood by “the accuracy and adequacy of information the company has released into the marketplace regarding the company and its product candidates.”

Be that as it may, perhaps you are wondering how three separate companies came to be involved in developing one and the same, hitherto unheard of coronavirus cure — even one as miraculous as WP1122 — in the first place? Well, the story goes like this:

Once upon a time, Moleculin Biotech developed a portfolio of drug candidates that might (or might not) be good for something or other. At some point, WPD licensed the rights to develop these drugs, and at some other point, CNS wandered into the picture and signed an agreement to help WPD with that development, promising to pay WPD about $1 million to move WP1122 through a successful Phase 2 study, in return for WPD’s promise to share in 50% of any eventual net sales of the drug once it passes that Phase, passes Phase 3 as well, and is eventually approved for sale on the market.

Thus was this tangled web weaved.

Now, thanks to the SEC, it appears that the jig is up. It only remains to be seen whether shareholders in the three companies will cry “foul” — or thank the regulators for protecting investors from misinformation, and the pie-in-the-sky promises of penny stocks.

In reaction, Maxim analyst Jason McCarthy noted, “Effective immediately, Maxim Group is temporarily suspending coverage of Moleculin Biotech, Inc. (MBRX) and removing the rating and price target due to the Order of Suspension of Trading of MBRX shares issued by the Securities and Exchange Commission (SEC) on May 1, 2020.”

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