Pharma

Public ethics group calls for SEC inquiry into Navidea short seller

A public ethics group is calling on the U.S. Securities and Exchange Commission to investigate […]

A public ethics group is calling on the U.S. Securities and Exchange Commission to investigate a hedge fund manager who made headlines last year for being an outspoken short seller of Navidea Bioscience‘s (NASDAQ:NAVB) stock.

Citizens for Responsibility and Ethics in Washington (CREW) said it’s looking into whether investors such as Martin Shkreli of MSMB Capital sought to influence government regulators with the hopes of manipulating markets and moving stock prices, according to a statement from the group.

The scrutiny of Shkreli is part of a larger examination of Wall Street investors’ attempts “to insert themselves into the regulatory process,” according to CREW.

Shkreli filed a citizen’s petition with the U.S. Food and Drug Administration in June that requested the agency deny Navidea’s (at the time the company was called Neoprobe) request for a review of a drug candidate due to what he views as flaws in clinical trials.

“Mr. Shkreli is not a medical expert, yet tried to foist his medical views on the FDA and the investor community to depress drug company stock prices and line his own pockets,” said Anne Weismann, CREW’s general counsel.

Shkreli not surprisingly doesn’t see things that way and called CREW’s allegations “not logical and circuitous.”

“We feel the SEC loves short sellers because they balance rampant speculation, in this case, in speculative biotechnology companies, with sober reality,” he said in an email.

This isn’t the first time Shkreli has attracted CREW’s attention. In July, the group filed a Freedom of Information Act request for records pertaining to Shkreli’s interactions with the FDA. Now, the call for an SEC inquiry is apparently the result of what the group uncovered through that request.

In Shkreli’s defense, he was always open about the fact that he was shorting Navidea, his logic for doing so and that he stood to profit if the FDA refused to review the company’s drug candidate. (The FDA agreed to review the lymph node-mapping drug, Lymphoseek, in October. It could be approved by the FDA as soon as this summer, though Shkreli has predicted that it’ll be rejected.)

Whether Shkreli’s interactions with the FDA stemmed from genuine concern about the design of Navidea’s clinical trials, or simply a desire to enrich himself, is obviously an open question. But we know which side of that debate Navidea investors would take, as many have accused Shkreli of manipulating the company’s share prices for his own gain, and their detriment.

The stock lost about 40 percent of its value in the months after Shkreli began speaking out against the company.

Regardless, Shkreli said he’s no stranger to public scrutiny, and he struck a defiant tone in asserting that he wouldn’t hesitate to similarly speak out against companies in the future.

“My opinion on healthcare companies will never be quieted, not by the companies I criticize, the SEC or any regulatory agency, or any not-for-profit special interest group,” he said. “I will opinionate on whatever I please until the day I [die]. The financial transactions I enter into, I will treat similarly.”

[Photo from flickr user Images_Of_Money]

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