AVEO Pharmaceuticals will pay $4 million and neither admit nor deny fraud charges brought by the Securities and Exchange Commission (SEC).
The SEC brought fraud charges against the Massachusetts-based biotech company and three former executives for misleading investors about the company’s efforts to obtain Food and Drug Administration (FDA) approval for its flagship developmental drug to treat kidney cancer.
The SEC alleges that AVEO Pharmaceuticals Inc. concealed the FDA’s level of concern about Tivozanib in public statements to investors by omitting the critical fact that FDA staff had recommended a second clinical trial to address their concerns about patient death rates during the first clinical trial.
When the FDA made public months later that it had recommended an additional clinical trial, the company’s stock price declined 31 percent.
AVEO never conducted an additional trial, and the FDA later refused to approve Tivozanib.
AVEO agreed to pay a $4 million penalty to settle the SEC’s charges without admitting or denying the allegations in the complaint filed today in federal court in Boston.
The SEC’s case continues against three of the company’s former officers: CEO Tuan Ha-Ngoc, chief financial officer David Johnston, and chief medical officer William Slichenmyer.
Aveo is being represented by William Paine of WilmerHale in Boston.
Ha-Ngoc is being represented by James Carroll of Skadden Arps in Boston.
Johnston is being represented by John Sylvia at Mintz Levin Cohn Ferris Glovsky and Popeo in Boston
And Slichenmyer is being represented by Daniel Tighe of Prince Lobel Tye in Boston.
“We allege that AVEO and its executives hid from investors the reality of their communications with the FDA on Tivozanib while suggesting they had identified a simpler route to FDA approval,” said Paul G. Levenson, Director of the SEC’s Boston Regional Office. “Companies must be forthcoming about their communications with regulators so investors can make informed investment decisions while knowing what challenges may lay ahead.”
The SEC alleged that AVEO raised $53 million in a public offering of its stock in January 2013 while failing to disclose that the FDA staff had explicitly recommended during a May 2012 meeting that AVEO conduct an additional clinical trial for Tivozanib.
AVEO and its officers understood that the FDA’s concerns were serious and an additional clinical trial is an expensive and time-consuming proposition. While AVEO went so far as to design a second trial and present trial designs to the FDA, it was never conducted.
In corporate communications, AVEO and its officers suggested that they intended to satisfy the FDA by presenting new analyses of the data that had been gathered in the previous clinical trial.
In doing so, AVEO concealed the FDA staff’s level of concern about Tivozanib’s impact on patient survival and the recommendation that AVEO conduct a second clinical trial.
The SEC alleged that Ha-Ngoc and Johnston knowingly approved and certified a press release and public filings that failed to disclose the FDA staff’s recommendation for an additional clinical trial.
Johnston also made public statements during investor conferences suggesting the FDA staff had asked only for an explanation of the survival results.
In reality, the FDA staff had recommended a second trial.
The SEC alleged that Slichenmyer misled investors in an investor conference call when he falsely stated he could not “speculate” on what the FDA “might be thinking” and “might want [AVEO] to do in the future.” He actually knew that the FDA staff had recommended an additional trial.