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Former Immunomedics executive charged with insider trading around trial data

Early in the spring of 2020, Immunomedics was waiting for the Food and Drug Administration to decide on accelerated approval of the company’s breast cancer therapy. It was the closest the company had come to an approved medicine in its nearly four decade-long history.

Accordingly, the company imposed a trading “black out” on its executives, including Malik, while the FDA’s deliberations continued.

But in late March of that year, the monitoring committee overseeing a late-stage study of the drug — meant to confirm its benefit in an aggressive form of breast cancer — recommended the company request the FDA’s permission to analyze the trial’s results early. On an April 2 call, that same committee recommended, and the FDA agreed, to end the study because data showed the drug was benefiting patients.

Malik, as one of Immunomedics’ top executives, was quickly informed. Twenty minutes after learning of the drug’s success, the SEC and New Jersey Attorney’s Office allege, Malik made a nine-second call to Wood, with whom he was living at the time. (Wood had also previously worked at Immunomedics as senior director and head of patient experience.)

Several hours later, according to the charges, Wood placed an order to buy 7,000 shares of Immunomedics, an order that was filled the next morning, April 3, at a price of approximately $9.20 per share.

Days later, on April 6, Immunomedics announced the results and study halt, sending shares in the company soaring to nearly $19 apiece. Wood held onto her shares, as well as shares she has previously bought using stock options granted to her through her employment at the company.

On April 22, the FDA approved Immunomedics’ drug on an accelerated basis, sending the company’s share price even higher. Wood later sold her option-acquired shares in May and the shares she had bought on Malik’s alleged tip in July, realizing gross profits or more than $213,000 on the latter sale.

That same month, the Financial Industry Regulatory Authority, a group that acts as a self-regulator for brokerages and markets, contacted Immunomedics as part of an investigation into trading around the trial announcement. In response to FINRA’s inquiries, Malik concealed his relationship and contacts with Wood, the SEC and attorney’s office said.

Malik also called three relatives on the night of the April 2, allegedly to inform them of the study results.

The SEC is seeking to bar Malik from serving as an officer or director in the future as well as penalties from both Malik and Wood. The securities fraud charges from the district attorney’s office carries a potential penalty of up to 20 years in prison and a $5 million fine.

Later in 2020, Immunomedics was acquired by Gilead for $88 a share, or $21 billion, two months after Wood had sold her shares for roughly $40 each.

Insider trading charges in biotech are not entirely uncommon, with executives from Ariad Pharmaceuticals and Sangamo Therapeutics accused of doing so in recent years. More famously, former U.S. Representative Chris Collins was charged and arrested by the Federal Bureau of Investigation on insider trading charges related to the Australian biotech Innate Immunotherapeutics.