Garden City company Beyond Air covered up defects in device used to treat cancer patients, lawsuit says

A Garden City-based medical device and biopharmaceutical company is accused of concealing life-threatening defects with its key product from the Food and Drug Administration and from its hospital clients, retaliating against employees who sought to disclose the problems and misappropriating assets to mask major financial losses, according to a lawsuit filed last week.

The complaint, filed Sept. 8 in Nassau County Supreme Court and seeking class-action status, names Beyond Air Inc., its former chief executive Steven Lisi, ex-chief financial officer Douglas Larson and Robert Carey, a member of the company's board of directors.

The plaintiffs, David Wegman, Jeff Wiggins and Joseph Mona, were or continue to be investors in Beyond Cancer, an oncology business affiliated with Beyond Air, a publicly traded company.

The three men contend they lost most of their financial investments when Beyond Air's management "looted" Beyond Cancer to "cover up" the failures of their signature product: LungFit PH, an inhaled nitric oxide generator sold to hospitals and approved by the FDA to treat critically ill patients, including infants. 

Studies have shown that nitric oxide therapy in some newborns with respiratory failure can improve the levels of oxygen in their blood and reduce the need for extracorporeal membrane oxygenation or blood pumped outside the body to a heart-lung machine, which is the standard treatment.

"Beyond Air solicited investments in Beyond Cancer from plaintiffs and the class members," the suit states. "Unbeknownst to plaintiffs, Beyond Air would later use Beyond Cancer, including its cash and other assets, to fund the LungFit cover-up, including by masking the losses Beyond Air incurred as a result of the LungFit PH device’s concealed failures."

The suit makes claims of breach of fiduciary duty, fraud, negligent misrepresentation, unjust enrichment and violations of the federal RICO Act and is pursuing damages of at least $10 million.

Multiple messages left with the company and with Lisi and Larson, who are no longer affiliated with Beyond Air, were not returned. 

Newsday reported in 2024 that Lisi, who left the company this year, was among the highest paid executives on Long Island with a pay package of $6.9 million.

In November 2021, Beyond Air announced the formation of Beyond Cancer to move its oncology business into a separate entity, allowing for new funding and to accelerate the development of treatment that would use an ultrahigh concentration of nitric oxide for solid tumors, the company said at the time. 

Beyond Air maintained an 80% equity interest in the new subsidiary while Beyond Cancer raised $30 million for the remaining 20% equity ownership from private investors, including the three plaintiffs, the suit states.

The company touted the LungFit PH device, which creates nitric oxide from ambient air, as a significant advance over using nitric oxide from heavy pressurized tanks.

But a pair of federal whistleblower lawsuits, cited in the state suit and filed last year by former Beyond Air employees, contend the company withheld that the devices' circuit board had frequently overheated and that they were providing inaccurate readings to clinicians.

Both former employees — Jeffrey Griebel, director of clinical services, and Kori-Ann Taylor, its head of marketing — contend they were terminated after raising concerns about the device, while two other employees resigned because of legal and ethical concerns, the state suit states.

Taylor alleged in her suit that LungFit PH devices "had a failure rate of over 60%," but the company concealed that information from federal regulators, hospitals and shareholders.

"Not only has Beyond Air been covering up deficiencies with its devices, it failed to provide complete and accurate information to the FDA — and Beyond Air fired those who complained or wanted to warn the customers," the state suit alleges.

The FDA did not respond to requests for comment.

The state suit contends Beyond Air used Beyond Cancer's bank accounts, and charged the subsidiary exorbitant management fees, to satisfy its own debts and then fired an independent auditor that raised concerns about the practice.

With Beyond Air refusing to fund trials of its tumor therapy, and amid ongoing concerns about the company's banking practices, Beyond Cancer's chief executive, chief medical officer and chief operating officer all resigned, the state suit says.

Earlier this year, Beyond Air, whose stock price is now at $3.18 per share, reported it had regained compliance with NASDAQ's minimum bid price requirement.

Beyond Cancer's net assets were $2.6 million as of March 31, 2025, compared to its initial valuation of more than $150 million, the state suit contends.

"We look forward to having our class certified and getting justice for Beyond Air’s victims," said Richard Haddad, a Manhattan attorney representing the investors in the suit.

By Robert Brodsky

robert.brodsky@newsday.com@BrodskyRobert

Robert Brodsky is a breaking news reporter who has worked at Newsday since 2011. He is a Queens College and American University alum.