Dive Brief:

• The former CFO of pharmaceutical company Immunomedics was charged with insider trading for telling his girlfriend and three family members that the Food and Drug Administration had halted the company’s breast cancer drug trial because of evidence of its effectiveness.

• As the company’s finance chief, Usama Malik was subject to a blackout period about the FDA’s decision. By sharing the news with his contacts, his girlfriend Lauren Wood and the others made close to $90,000 in stock gains. 

• "Public company executives have a duty to safeguard material nonpublic information and must not use it for their personal benefit, as we allege Malik did by tipping Wood and his family members," said Joseph Sansone, chief of the SEC’s Market Abuse Unit.

Dive Insight:

In a meeting between Immunomedics (IMMU) and the FDA in March of last year, the federal agency agreed the trial should be halted because of compelling evidence that the company’s drug for treating metastatic triple-negative breast cancer, called Trodelvy, was effective. 

Later on the day of the call, Malik tipped his contacts. “When Malik learned of the . . . study’s successful results and the FDA’s decision to allow the company to halt its trial on April 2, 2020, he was living with Wood in Washington, D.C. and he tipped the good news to Wood,” the SEC said in its complaint. 

Wood, a former company employee as its head of patient experience, had “extensive experience in the pharmaceutical industry and understood that successful clinical trials are likely to result in an increase to the company’s stock price,” the SEC said. 

In addition, she “had been subject to IMMU’s insider trading policy and knew that its employees were prohibited from using non-public company information for personal gain.”

Malik’s calls to his three relatives spurred them to either open an account and buy shares or buy shares from an existing account.  

The share price of the company’s stock climbed 99.79% immediately following publicly released news of the halted trial. 

The SEC filed its complaint in the U.S. District Court for the District of New Jersey charging Malik and Wood with violating antifraud provisions in federal securities laws and seeking against them a permanent injunction and civil penalty and, for Malik, an officer and director bar.

Separately, the U.S. Attorney’s Office for the District of Jersey has announced criminal charges against Malik and Wood.