The Securities and Exchange Commission sued 13 people Thursday in one of the first insider trading cases to allege that drug researchers illegally provided inside information on the results of a clinical trial.
Dr. Milton Mutchnick, the lead investigator for a hepatitis drug developed by Alpha 1 Biomedicals Inc. and licensed by SciClone Pharmaceuticals Inc., agreed to settle SEC charges without admitting or denying guilt. His wife, Renee, agreed to settle on the same terms.
Robert Sickles, an attorney representing Mutchnick, said his client settled the charges to avoid a protracted legal battle.
Rangarao Panguluri, an assistant to Mutchnick, was charged in a separate SEC complaint. He has yet to settle the charges, said Thomas Newkirk, an attorney in the SEC’s enforcement division. Panguluri’s attorney could not be reached for immediate comment.
According to the SEC allegations, the Mutchnicks and Panguluri learned on April 25, 1994, that patients treated with hepatitis drug Thymosin alpha 1 fared no better than patients given a placebo.
These results jeopardized the drug’s chances for approval by the Food and Drug Administration.
That evening, Mutchnick and Panguluri told 10 friends, family members, and business associates that the drug had failed the clinical trial, according to the SEC.
These individuals proceeded to sell all of their stock in Alpha 1 and SciClone prior to the announcement of the failed test, thereby avoiding losses of about $300,000, the SEC said.
