Two former senior employees, and the husband of a third former employee, of Ariad Pharmaceuticals —acquired earlier this year by Takeda Pharma—have been charged with illegal insider trading related to selloffs of the company’s stock in advance of announcements that lowered the share price.
The U.S. Securities and Exchange Commission yesterday charged Maureen Curran, Ariad's former senior director of pharmacovigilance and risk management; Susan Dubuc, the company’s former associate director of pharmacovigilance and risk management; and Harold Altvater, whose wife was an Ariad employee. All have been charged with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
Without admitting or denying the SEC's allegations, Curran and Dubuc have entered into settlements with the agency that are pending court approval. The SEC continues to seek permanent injunctions, disgorgement with prejudgment interest, and civil penalties against Altvater.
According to an SEC complaint, Curran avoided $9420 in losses by selling Ariad stock in December 2012, after attending meetings with the FDA and had learned material nonpublic information regarding a forthcoming decision by the agency to require Ariad to include a safety warning on its product label for its FDA-approved leukemia drug Iclusig® (ponatinib). After Ariad announced the FDA decision on December 14, 2012, its stock price fell 21% that day, from $23.88 to $18.93 per share.
Ariad's insider trading policy expressly prohibited employees from trading while in possession of “material” nonpublic information, the SEC noted.
The SEC defines insider trading as illegal when it concerns the buying or selling of stock “while in possession of material, nonpublic information about the security,” thus breaching a fiduciary duty or other relationship of trust and confidence. Insider trading violations may also include “tipping” such information, securities trading by the person “tipped,” and securities trading by those who misappropriate such information.
“A matter is ‘material’ if there is a substantial likelihood that a reasonable person would consider it important,” according to an SEC Staff Accounting Bulletin published August 12, 1999.
The SEC alleged that Dubuc tipped off relatives in October 2013, one day before Ariad publicly announced a pause in all clinical trials for Iclusig. Shares of Ariad plunged 69% on the announcement, to $5.24. Before alerting her relatives—which spared them from $2888.10 in losses—Dubuc had received a “blackout notice” from Ariad's CFO that prohibited all employees and their family members from trading in Ariad's stock, the SEC contended.
Soon after the pause, Ariad withdrew Iclusig from the U.S. market, leading to the layoff of 160 employees. Iclusig returned in 2014 with a boxed warning and a narrower patient indication.
According to an SEC complaint, Altvater avoided losses and obtained insider profits totaling $102,026.30 by illegally trading Ariad stock based on material nonpublic information about the company’s dealings with the FDA. Altvater learned that information, the agency contends, from his wife, a former employee, in advance of company announcements about the safety profile and FDA approval status of Iclusig. The trades in question occurred three times between October 2013 and January 2014.
Altvater is accused of purchasing shares ahead of a positive announcement and selling shares ahead of negative announcements. He also advised a friend to trade Ariad stock based on nonpublic information learned from Altvater's wife, enabling the friend to obtain profits of $4188, the SEC added.
Under their settlements, Curran will be required to pay disgorgement of $9420, prejudgment interest of $1408.58, and a civil penalty of $9420. Dubuc will be required to pay disgorgement of $2888.10, prejudgment interest of $310.48, and a civil penalty of $2888.10. The settlements would permanently bar Curran and Dubuc from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.
Ariad became an indirect wholly owned subsidiary of Takeda Pharmaceutical in February after Takeda completed its $5.2 billion acquisition of Ariad.