In the early, anxious days of the COVID-19 pandemic, a handful of politically connected Utah companies mounted a high-profile effort to thwart the spread of the virus.
They initially planned to volunteer their business acumen to secure coronavirus tests and promote and perform testing, but soon shifted to a more lucrative approach: Claiming an initial $5 million in no-bid state contracts for Nomi Health. Other Utah companies won subcontracts with Nomi.
The TestUtah initiative, lauded by state leaders, served as a springboard to win contracts in other states.
Public health officials felt usurped almost immediately in Utah, emails show, and within weeks, Nomi’s decisions were under scrutiny. There were questions about both the accuracy of the tests it chose, from Utah company Co-Diagnostics, and the expertise of the community hospital Nomi selected to process them. After just four months, health officials regained influence and forced Nomi to stop using both.
Now, a continuing investigation offers a deeper look at the trajectory of the TestUtah effort and specifically of Co-Diagnostics. Boosted by the pandemic, the small Salt Lake City company turned a profit in 2020 for the first time since it went public in 2017, netting more than $42 million and enjoying a surging stock price.
It also benefited from the political influence of tech insiders, who reached out to Sen. Mitt Romney’s office for help gaining necessary approvals from federal regulators. These insiders also reached out to then-Lt. Gov. Spencer Cox to prod state health officials.
Finally, it drew inquiries from the federal Securities and Exchange Commission, The Salt Lake Tribune has learned.
The SEC sought information from the Governor’s Office of Management and Budget, the Utah of Department of Health and Co-Diagnostics, according to government emails obtained by The Tribune and public filings.
Any findings and the status of that investigation are among the legal and ethical questions still unresolved today, as three pending federal lawsuits (consolidated into a class-action and two other complaints from six) accuse Co-Diagnostics of “manipulative and deceptive practices.”
Co-Diagnostics’ stock price leaped from $.88 a share in early 2020 to nearly $30 within six months of the start of the pandemic. And its revenue skyrocketed — from $214,974 in 2019 to $74.5 million in 2020, an increase of almost 35,000%.
CEO Dwight Egan earned $1.46 million in salary, bonuses and stock options in 2020, more than three times higher — an increase of $1 million — than the previous year. He has sold more than $1.8 million worth of shares in the past seven months, SEC filings show.
Co-Diagnostics and Nomi Health did not respond to interview requests.
But Co-Diagnostics has long defended the quality of its tests and denied wrongdoing. And Nomi Health has said TestUtah provided a fast and simple testing process early in the pandemic and continues to offer important access to residents.
Help with an early hurdle
In 2019, Co-Diagnostics lacked a major customer and was operating at a loss of roughly $6.2 million. Most of its earnings came from the sales of equipment and tests to mosquito abatement districts. As the coronavirus was spreading in early 2020, Co-Diagnostics jumped ahead of the competition, gaining an early approval for its PCR test for COVID-19 from the European Union. PCR tests — or polymerase chain reaction tests — detect and replicate strands of a virus’s genetic material, and must be processed by a lab.
The next hurdle was getting the federal Food and Drug Administration to approve its request for emergency use authorization to sell its tests in the United States.
For its submission, Co-Diagnostics had to provide its own validation of its test. But the company didn’t have the equipment to do that, said Robyn Atkinson-Dunn, then the director of Utah’s Public Health Laboratory.
The state lab already was inundated with coronavirus tests, but Atkinson-Dunn offered its instrumentation to Co-Diagnostics, she said in an interview. When the scheduled date arrived in late March 2020 for Co-Diagnostics to use the equipment, however, no one from the company showed up. Instead, Atkinson-Dunn said she later learned Co-Diagnostics went to the lab in Timpanogos Regional Hospital, based in Orem.
“That immediately raised eyebrows for us at the lab and the diagnostic community because Timpanogos is a small regional hospital,” she said.
Gov. Gary Herbert’s office planned an early April announcement of TestUtah, an initiative that was meant to help crush the coronavirus curve and that included testing, data collection and analysis and more, and companies including Co-Diagnostics, Nomi Health, Qualtrics and Domo.
But by the end of March, the FDA still hadn’t granted the emergency use authorization for Co-Diagnostics’ tests, Atkinson-Dunn said.
She and others wondered why, so she said she contacted an FDA official who told her the agency had concerns because Co-Diagnostics tests were manufactured in China. Atkinson-Dunn said she interpreted that to mean it was going to be a while before the FDA approved the emergency use authorization of its test.
Earlier that month, Co-Diagnostics told Utah reporters that its Salt Lake City lab could produce 50,000 COVID-19 tests a day, and described additional manufacturing capacity at a plant in India. The Tribune could not independently verify that Co-Diagnostics tests were being manufactured in China, and Co-Diagnostics did not return calls or emails requesting clarification.
FDA scientists had gone back and forth with the company since at least February, seeking more information, emails obtained in a records request show.
Silicon Slopes turns to friends in high places
On March 27, 2020, Co-Diagnostics asked for help from David Elkington, the founder of InsideSales.com (now known as XANT) and a board member at Silicon Slopes, a nonprofit that promotes startups and the tech industry in Utah. Elkington was acting as a liaison between TestUtah and state officials.
Denny Crockett, who oversaw Co-Diagnostics’ business development for infectious disease, sought Elkington’s intervention with Romney’s office to get Co-Diagnostics the emergency authorization it needed for U.S. sales to start.
The emails began on that Friday afternoon with Cecilia Hutchins, who oversaw regulatory affairs for Co-Diagnostics, expressing frustration to Kelvyn Cullimore, the CEO of nonprofit trade association BioUtah. Co-Diagnostics had sent the final submission for emergency authorization to the FDA less than a week earlier, she acknowledged, “however, we have been working from 12 to 16 hours a day, even 20 hours at times, in order to meet the demands of our customers. Many of our customers are simply waiting for an answer from the FDA.”
Crockett passed Hutchins’ email to Elkington, writing, “You’re welcome to share with Senator Romney’s staff. We are definitely on it, the last thing we want to do is get the FDA upset by being to [sic] pushy, but time is of the essence here.”
He continued: “I also think that they may be slower in responding to groups like ours who are not a ‘known entity’ such as Thermo Fisher or Bio Fire,” referring to well-established testing companies. BioFire also is based in Salt Lake City.
Elkington went to Matt Waldrip, then Romney’s chief of staff, and another aide.
“It sounds like the approval is imminent and a little push might be what we need,” he wrote to Waldrip, according to emails obtained through a records request.
Romney’s team immediately reached out to the FDA, and later that afternoon, the Romney aide copied the agency’s response into an email back to Elkington. The FDA couldn’t provide an update specifically on Co-Diagnostics’ submission, it said.
But the response from the agency pointed out that, under its current rules, companies could begin distributing tests as soon as a validation was complete, while they awaited FDA authorization.
The aide asked, “Are you aware of whether the state is taking a more cautious approach to this and waiting until full [emergency use authorization] approval is granted before allowing tests to be used?”
A spokeswoman for Romney said his office was not available for comment.
Elkington shared the FDA’s go-ahead for Co-Diagnostics to distribute its tests with Kristen Cox, director of the Governor’s Office of Management and Budget, and later, with then-Lt. Gov. Spencer Cox, who is of no relation to Kristen Cox and who served as leader of the state’s Coronavirus Task Force.
Spencer Cox forwarded it to Dr. Angela Dunn, then the state epidemiologist, and Nate Checketts, testing coordinator for the Utah Department of Health.
Atkinson-Dunn suggested that Timpanogos Regional Hospital be cautious about using Co-Diagnostics tests because the FDA had not authorized emergency use.
“I understand that UDOH shut down the efforts of Timp Hospital to test because of concern over the FDA’s approval of the Co-Diagnostic test. I reached out to Senator Romney’s team and they went straight to the FDA and were told that the preliminary approval is sufficient and couldn’t understand why we shut them down,” Spencer Cox wrote. ”See the email below. Please give this information to whoever needs it at Health and let’s get them the green light to continue today. Please tell your teams that we need to move heaven and earth to get more testing.”
On April 2, the state announced the launch of TestUtah. The next day, Co-Diagnostics received the FDA’s emergency approval.
“When the EUA approval came through I was shocked,” Atkinson-Dunn said. “It sounded like there was no way it was on anyone’s radar, and there were too many questions about China.”
Audra Harrison, a spokeswoman for the FDA, said in an email the agency cannot comment specifically on any interactions with companies.
A week later, the first questions about the test’s validity arose, Atkinson-Dunn said. Utah health officials were seeing early data that TestUtah’s results were different than those from other test providers.
Atkinson-Dunn was later demoted because she was unwilling to send a share of coronavirus test samples, from a temporary glut at the state health lab, to Timpanogos Regional Hospital, after a federal inspection found its lab out of compliance with federal rules. She has since left the state health department.
Other state officials decided the issues at the Orem lab were not disqualifying and noted the hospital had agreed to fix them.
An ‘important and disturbing’ email from SEC
On a Wednesday morning in late April 2020, Tom Hudachko — communications director for the Utah Department of Health — received an inquiry from an unlikely place: the Securities and Exchange Commission.
Tiantong “Tian” Wen, an attorney in the SEC’s Enforcement Division, explained that her team was interested in TestUtah, according to an email obtained by The Tribune. SEC investigators wanted to know what companies won contracts or subcontracts to provide tests for the initiative, Wen wrote.
In his reply, Hudachko explained the contracts were awarded through the Governor’s Office of Management and Budget, not the state health department. He looped in a handful of top aides to Herbert and Spencer Cox, telling Wen that they could speak about the contracts.
Paul Edwards, a former policy and communications adviser to Herbert, was among those copied on Hudachko’s response. Edwards forwarded it to Herbert’s chief of staff, Justin Harding, and the governor’s general counsel, Ron Gordon.
Edwards also offered his thoughts: “Important and disturbing.”
Wen, who was in New York, quickly responded to Hudachko and the other aides, including Edwards and Miranda Jones Cox, an analyst in the Governor’s Office of Management and Budget and daughter-in-law of the office’s director, Kristen Cox.
“We are also interested in understanding the number of tests that one member of the initiative, Co-Diagnostics, has supplied so far,” Wen wrote.
Miranda Jones Cox responded, telling Wen the state did not have a contract with Co-Diagnostics, but instead with Nomi Health, she later wrote in an email to Kristen Cox.
As the workweek came to a close that Friday, Kristen Cox shared the correspondence with Harding and Edwards. Harding responded the following Monday, admonishing Kristen Cox for how Miranda Jones Cox had handled Wen’s requests. Miranda Jones Cox said she had treated them as similar to a media inquiry.
”This was an investigator with the SEC and should have involved the input of Counsel before proceeding,” Harding said.
After this story published online, Gov. Spencer Cox told reporters he had not been contacted by the SEC, and added, “I sure as hell was going to use every test I could get…”
A month before the SEC reached out in Utah, its Enforcement Division had set up a coronavirus steering committee to combat fraud, tasking two dozen senior attorneys and division leaders to uncover misconduct.
The goal was to find companies falsely claiming to have items in high demand, such as personal protective equipment, therapeutics or COVID-19 tests, Steven Peikin, the division’s co-director at the time, told The Tribune.
“We put some stuff on the fast track to try to stop the worms from crawling out from under rocks,” Peikin said. “It happens in every national emergency, every medical crisis, national disasters.”
While communicating with the FDA to ensure that investigators weren’t inhibiting legitimate efforts to bring therapeutic drugs or other critical products to market, the division was moving faster than usual on fraud investigations. SEC cases generally take roughly 24 months from case opening to the first filing of charges, Peikin said.
Meanwhile, state officials were already dealing with a new complication involving Co-Diagnostics.
Co-Diagnostics claims ’100% clinical sensitivity’
By mid-April, state data showed the rate of positive results among people tested at TestUtah sites was less than half of what it was for patients tested elsewhere in the state.
Dr. Bert Lopansri, a specialist in infectious diseases and microbiology at Intermountain Healthcare, saw the data as part of his service on the state’s task force on coronavirus testing. He sent an email about the “potential public health disaster” to Checketts, its chairman.
“What alarms me the most is that they [TestUtah] are expanding collection and testing with these unknowns about how their test performs. If correct, I urge you to halt their testing until we understand why their results differ so much from what other labs are reporting,” Lopansri wrote in the April 14 email, which was reported by The Tribune on April 30.
Co-Diagnostics executives defended their test, even as the FDA said no test was 100% accurate.
In a May 1 news release, Co-Diagnostics Chief Science Officer Brent Satterfield insisted: “In countries where we have been evaluated against other tests, we have consistently and repeatedly achieved 100% clinical sensitivity and specificity. And you can’t do better than that.”
That same day, Silicon Slopes also came to the defense of Co-Diagnostics in an unsigned post on the blogging platform Medium, echoing the company’s assurance that its tests were completely accurate. Later that week — eight days after her initial email — Wen followed up on exactly that point.
“We wanted to circle back with you because we are also interested in speaking with someone who might be able to speak to the concerns that have been raised about the reliability of the tests manufactured by Co-Diagnostics,” she wrote to Hudachko.
Wen’s email set off another flurry of exchanges among Utah officials, as Hudachko forwarded it to the same top aides as before, emails show. He wrote that he had also forwarded it to the Utah Attorney General’s Office.
“FYI – The SEC looped back with me today,” Hudachko wrote to the top aides. “I have not responded, and don’t know if I will.”
Edwards responded to Hudachko, and included Gordon, the general counsel in the governor’s office.
“Requests from the SEC should be understood as legal inquiries rather than communications requests,” Edwards wrote.
It’s unclear whether Wen or anyone else from the SEC spoke with Gordon or anyone from the Utah Attorney General’s Office.
Nomi contracts grow, Co-Diagnostics gets sued
The questions dogging Nomi Health and Co-Diagnostics didn’t slow them down. Nebraska, Tennessee, Iowa and Florida followed Utah’s lead and signed testing contracts with Nomi Health worth at least $80 million. By May 5, 2020, Co-Diagnostics could produce 3 million tests a week and had customers in nearly 50 countries, CEO Egan said then. Egan did not respond to a request for comment.
But in Tennessee, signs soon surfaced that the tests weren’t as sound as the company and its executives claimed. Tennessee Health Commissioner Lisa Piercey told lawmakers as much in December 2020.
Tennessee officials negotiated with Nomi to pay $6 million on its $26 million contract, buying its way out of the deal in June 2020.
Utah health officials also halted the use of Co-Diagnostics tests at state sites. When they updated contracts in summer, they rejected Nomi’s pitch to continue to work with Timpanogos Regional Hospital. And they left the choice of PCR tests to Fulgent Therapeutics, the California lab that won the contract. It opted to provide its own kits, which it now sends to ARUP Laboratories in Salt Lake City.
Today, Co-Diagnostics’ stock price hovers around $8 per share as investors continue to pursue claims against the company, alleging its executives knowingly made willful misstatements about its COVID-19 diagnostic test.
Cayman Islands-based Gelt Trading contends those misstatements served to pump up the company’s stock price while executives sold off shares they’d purchased at low prices, dumping them onto the stock market before the share price tumbled. Investors lost hundreds of thousands of dollars, according to the lawsuit.
“Unlike many securities fraud cases, the Co-Diagnostics fraud is blunt and simple to understand,” the Gelt lawsuit asserts. Attorneys for Gelt Trading did not return calls for comment.
Three former state and federal regulators who now defend clients against SEC investigations said in interviews that the high number of news releases issued by Co-Diagnostics — more than 52 between late January 2020 and January 2021 — could be seen as evidence of attempts to boost the stock price.
The volume of releases “bears investigation,” said Keith Woodwell, a former director of the Utah Division of Securities.
An SEC spokesman said the agency does not confirm nor deny the existence or nonexistence of investigations. A Utah Department of Commerce spokesman had no comment on whether the state Division of Securities was investigating Co-Diagnostics.
Co-Diagnostics reported in its annual report in March 2021 that it had received an inquiry from the SEC. But it added: “To the best of our knowledge, no governmental authority is contemplating any proceeding to which we are a party or to which any of our properties or businesses are subject, which would reasonably be likely to have a material adverse effect on the Company.”
It has sold more than 10 million COVID-19 tests worldwide.
Satterfield, Co-Diagnostics chief scientific officer, repeatedly emphasized the test’s accuracy before he left the company in February 2021.
The 2021 Utah Legislature introduced legislation mandating that no-bid emergency contracts last no longer than 30 days in most cases, or 60 days during natural disasters. The measure, HB43, was signed into law in March. It also requires Utah to post the emergency contract online within 14 days of the procurement.
And in the end, the number of tests Co-Diagnostics provided to Utahns — and the number of tests performed by Nomi Health — may surprise some.
From TestUtah’s beginnings in April 2020 through July 2020, when its Utah partnership with Co-Diagnostics ended, providers statewide conducted well over a half-million coronavirus tests — for a total of 623,677, according to state health department data.
TestUtah completed 72,021 of those. Since the inception of the pandemic, TestUtah has conducted fewer than than 10% of all tests in the state. Through May 2021, Nomi has been paid nearly $15 million for testing, including sample collections, its mobile units and other costs, according to the Utah Department of Health. That’s more than any other company that contracted with Utah for testing, although ARUP and Fulgent only do test processing.
“Nomi Health has been, and continues to be, a critical partner in Utah’s pandemic response,” said Rich Saunders, executive director of the state Department of Health, who is leaving soon to join the governor’s senior staff. “As a state, we would not be where we are today without the contributions of all of our partners, and that certainly includes Nomi Health and the TestUtah initiative.”
Note to readers: Clint Betts, a co-founder of Silicon Slopes, is on the board of the nonprofit Tribune. His term ends June 30, 2021.