Co-Diagnostics, Inc. Wins Dismissal of Class Action Lawsuit

Rhea-AI Summary

Co-Diagnostics (CODX) has secured a significant legal victory as the United States District Court for the District of Utah granted complete dismissal of a securities class action lawsuit on March 4, 2025. The lawsuit, filed by Gelt Trading on June 15, 2020, alleged violations of Securities Exchange Act sections regarding the company's May 1, 2020 press release about its Logix Smart® COVID-19 test.

The plaintiff claimed that CODX's statement about '100% sensitivity and 100% specificity' was misleading to investors, suggesting the test was perfectly accurate. However, the Court ruled in favor of CODX, concluding that the plaintiff failed to demonstrate loss causation, as none of the three alleged corrective disclosures effectively 'corrected' the May 1 press release or impacted the stock price.

BakerHostetler, representing CODX, successfully argued that the supposedly contradictory information was already known to the market and reflected in the stock price. This dismissal allows the company to focus on its core mission of expanding global access to high-quality molecular diagnostics.

Positive

• Complete dismissal of securities class action lawsuit reduces legal liability
• Removal of potential financial burden from litigation
• Legal validation of company's COVID-19 test marketing claims

Negative

• Potential for plaintiff to file an appeal
• Legal expenses incurred from defending the lawsuit

SALT LAKE CITY, March 6, 2025 /PRNewswire/ -- Co-Diagnostics, Inc. (Nasdaq: CODX) (the "Company" or "Co-Dx"), a molecular diagnostics company with a unique, patented platform for the development of molecular diagnostic tests, today announced that on March 4, 2025, the Securities & Governance Litigation Team at BakerHostetler, the legal firm retained to represent the Company, won complete dismissal on summary judgment of a Section 10(b) securities class action that had been pending against the Company in the United States District Court for the District of Utah. See Gelt Trading, Ltd. v. Co-Diagnostics, Inc. et al., Case No. 2:20-cv-00368-JNP-DBP (D. Utah). 

On June 15, 2020, Plaintiff Gelt Trading, Ltd. filed a securities class action against Co-Diagnostics, Inc. and certain of the Company's current and former directors and officers alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.

At issue was the Company's May 1, 2020, press release, which disclosed, among other things, that the Company's Logix Smart® COVID-19 test demonstrated "100% sensitivity and 100% specificity"—well-defined scientific metrics—across independent evaluations. Plaintiff alleged that the May 1 press release was false and/or misleading because it conveyed to investors that the Logix Smart test was "100% accurate" (i.e., perfect), allegedly causing the Company's stock price to be artificially inflated. Plaintiff alleged that this artificial inflation was removed, and investors suffered losses, when the Company's stock price dropped on May 15 following three disclosures that allegedly revealed the May 1 press release to be false ("Alleged Corrective Disclosures"). 

BakerHostetler was retained to replace prior counsel after the motion to dismiss was denied and the case was in the early phases of discovery. On summary judgment, BakerHostetler argued that Plaintiff could not establish any genuine issue of material fact supporting liability as to any element of its Section 10(b) claim—falsity, scienter, reliance, loss causation, or damages. BakerHostetler also argued that Plaintiff's experts' testimony—which related to clinical testing and loss causation—should be excluded on summary judgment under Daubert.

On March 4, 2025, after oral argument, the Court granted Defendants' Daubert motion to exclude the testimony of Plaintiff's loss causation expert and granted summary judgment for Defendants, concluding that Plaintiff could not demonstrate loss causation. The Court held that none of the three Alleged Corrective Disclosures actually "corrected" the May 1 press release, either because they did not discuss the Company's Logix Smart test, or because the allegedly contradictory information was long known to the market and already baked into the Company's stock price. Accordingly, Plaintiff could not establish that the May 1 press release was the cause of Plaintiff's or the class's losses. Having reached this conclusion, the Court declined to address the other summary judgment arguments or Daubert motions.

The Company regards this dismissal as a tremendous victory and is optimistic about its chances of prevailing in any appeal Plaintiff might file. The Company looks forward to putting the matter behind it, as it moves ahead with its mission of increasing the availability of high-quality molecular diagnostics on a global scale.

About Co-Diagnostics, Inc.:
Co-Diagnostics, Inc., a Utah corporation, is a molecular diagnostics company that develops, manufactures and markets state-of-the-art diagnostics technologies. The Company's technologies are utilized for tests that are designed using the detection and/or analysis of nucleic acid molecules (DNA or RNA). The Company also uses its proprietary technology to design specific tests for its Co-Dx PCR at-home and point-of-care platform and to identify genetic markers for use in applications other than infectious disease.

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SOURCE Co-Diagnostics

FAQ

What was the outcome of the class action lawsuit against Co-Diagnostics (CODX)?

The lawsuit was completely dismissed on March 4, 2025, by the United States District Court for the District of Utah, ruling that the plaintiff failed to demonstrate loss causation.

What were the allegations in the Gelt Trading lawsuit against CODX?

The lawsuit alleged that CODX's May 1, 2020 press release about their COVID-19 test's '100% sensitivity and 100% specificity' was misleading to investors by suggesting perfect accuracy.

Why did the court dismiss the securities class action against CODX?

The court ruled that none of the three alleged corrective disclosures actually 'corrected' the May 1 press release, and the supposedly contradictory information was already known to the market.

When was the original securities class action filed against CODX?

Gelt Trading filed the securities class action against Co-Diagnostics on June 15, 2020.