The agency alleges that Brooke Wagner, 44, a former vp of corporate communications at Indevus Pharmaceuticals, improperly relied on insider info when he sold shares of the biotech, which is based in Lexington, Ma., in May and June 2008. The SEC claims Wagner sold the stock after learning during a company conference call with the FDA that the agency planned to delay approval for Nebido, a testosterone replacement drug being developed by the company.
In its suit, the SEC claims the call took place on May 30 and that Wagner's trading occurred over the next few days. Ironically, he allegedly assembled Indevus employees three days later that no trading in Indevus stock should take place because it would violate securities laws. The agency alleges he avoided losses of $43,000 by selling the stock before the news was released publicly on June 4, but also pocketed $21,000 by selling short. The SEC is seeking a return of Wagner’s “ill gotten gains” plus interest and is also asking for a civil penalty to be levied against Wagner (here is the lawsuit). Indevus has since been acquired by Endo Pharmaceuticals (background).
3 Comments
This is common.
Knowledgable FDAers are often see movement in stock prices immediately after significant communications with companies, or announcements by CEOs of their intentions to purchase stock shortly after internal review progress meetings.
Under the FDA Amendment Act of 2007 we are now required to begin communications with sponsors at set points during the review cycle to inform them so they can work on any deficiencies.
Clearly a lack of any major deficiencies can tip people off.
I've often wondered whether hedge funds that focus on biotech and/or pharmaceuticals in their investment strategies engage in this sort of thing (thinks "of course they do - catching them's the tricky thing")? What with their massive portfolios, this sort of information would be worth, well, a mint.
Matt
Just for the record -- this one is VERY far beyond the pale. Almost Carrie-Cox like, in fact!
Almost ALL public companies have written policies that flatly-PROHIBIT officers of the company from shorting the company's securities at ANY time -- something this knucklehead apparently did, right after learning material adverse information(!).
There is scienter slathered all over this guy's trades. He gave a speech to his reports about not engaging in insider trading -- then traded for his own account -- selling short, in fact.
The SEC would have had to be blind to miss these footprints in the snow. . . .