So begins the scrutiny. Less than two weeks after Vertex Pharmaceuticals ($VRTX) corrected misstated interim results of a cystic fibrosis trial, Sen. Charles Grassley wants the SEC to look into company officials' stock transactions that took place before the true data were released.
Concerned that two company directors and 5 execs unjustly profited from stock sales, Grassley penned a letter to the SEC to call for scrutiny of the transactions. As quoted by The Boston Globe, he wrote: "Despite Vertex's explanation, it could appear that these Vertex executives potentially took advantage of the spike in the stock knowing the news of the clinical data being overstated would be made public eventually, which in turn would negatively affect the stock value."
Cambridge, MA-based Vertex's stock jumped 55% after the incorrect data were revealed on May 7, when the company trumpeted impressive preliminary results of a Phase II study of its experimental VX-809 and Kalydeco, saying, for instance, that 46% of 37 patients had boosted lung function of 5% or more after treatment. The company later discovered that, due to a third-party contractor's mistake, the efficacy figures were overstated and that 35% of patients, not 46%, had actually experienced the improvement. Vertex revealed the correction on May 29, prompting a steep fall in its stock price.
Company officials sold off stock while the market was valuing the shares based on the erroneous information. Yet those stock sales in question were either pre-planned based on the stock reaching a certain price or met company guidelines, Vertex spokesman Zach Barber told Bloomberg. However, if Grassley, an Iowa Republican, gets his way, the SEC will probe those sales further. The SEC has yet to say whether it plans to mount an investigation of the transactions.
Despite the less impressive efficacy results, Vertex has said that it plans to advance the combo treatment for CF, a genetic disorder that causes the lungs to fill with sticky mucus, into Phase III development. For now, the company will move forward with that program with potential heat from the SEC and a suspicious--and powerful--U.S. senator looming.
- check out the Globe's article
- read Bloomberg's coverage
- and Pharmalot's report