Pharma

GOP congressman arrested on biotech insider trading charges

Rep. Christopher Collins was already under investigation for relationship with Australia's Innate Immunotherapeutics.

The FBI arrested a Republican congressman from New York on insider trading charges relating to his membership on the board of directors of an Australian biotechnology firm.

Rep. Christopher Collins, whose district is in western New York and includes the towns of Geneseo and Lancaster, was charged with securities fraud, wire fraud and making false statements to the FBI. Also facing charges are his son, Cameron, and Stephen Zarsky, the father of Cameron’s fiancée. The charges relate to an alleged insider trading scheme involving the three men and six unnamed co-conspirators – including the younger Collins’ fiancée – stemming from the elder Collins’ membership on the board of Melbourne, Australia-based Innate Immunotherapeutics. Christopher Collins had already been under investigation by the Office of Congressional Ethics in relationship to his holding 16.8 percent of Innate’s stock and his promotion of the company. Cameron Collins had held a 2.3 percent stake in Innate.

According to the indictment, posted online by a reporter from Buzzfeed, Collins passed negative results from a Phase IIb clinical trial of Innate’s drug, MIS416, in secondary progressive multiple sclerosis, to his son, who then sold nearly 1.4 million shares in the company over several days before the results were made public. Innate CEO Simon Wilkinson had obtained the trial results on June 22, 2017, and passed them to board members, before they were announced on June 27. Merck KGaA’s Novantrone is approved for SPMS, and several drugs used to treat relapsing forms of MS – which can include patients with SPMS – are also used, according to the National Multiple Sclerosis Society.

“We will answer the charges filed against Congressman Collins in Court and will mount a vigorous defense to clear his good name,” a statement by Collins’ attorneys read. “It is notable that even the government does not allege that Congressman Collins traded a single share of Innate Therapeutics stock. We are confident he will be completely vindicated and exonerated.”

Innate had been running the double-blind, placebo-controlled Phase IIb study of MIS416, with 93 patients at seven sites in Australia and New Zealand, according to ClinicalTrials.gov. However, despite optimism leading up to the company obtaining the trial data, the company said on June 27 that an initial analysis showed that the drug had failed to provide any significant benefit to patients in terms of neuromuscular function – one of the co-primary endpoints, along with safety – or patient-reported outcomes. Following the news, Innate’s stock – in Australian dollars – dropped from $6.40 (US$4.74) to 62 cents (US$0.46) on the Australian Stock Exchange. Innate’s stock also trades on the over-the-counter exchange in the US.

As late as June 21, the day before the results came in, the company had announced that it had received clearance from the Food and Drug Administration for an Investigational New Drug application in order to conduct clinical studies of the drug that would pass FDA scrutiny for approval in the US.

When Innate CEO Simon Wilkinson obtained the results, the ASX issued a trading halt on Innate’s stock at the company’s request, as is common practice when companies prepare to release material information, but the shares continued trading on the OTC market in the US. After Wilkinson shared the results with board members, Collins allegedly called his son, who then placed several orders with his brokerage firm to sell his shares given that they were held on the OTC market, whereas Christopher Collins’ shares were held on the ASX. In total, the indictment states, the defendants and co-conspirators avoided $768,000 in losses they would have otherwise incurred had they wanted until the results became public.

Photo: bpperry, Getty Images

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