Clovis Oncology has settled SEC allegations that its executives misled investors about the efficacy of rociletinib in a filing to raise $298 million. Patrick Mahaffy, who remained CEO despite the scandal, is paying $250,000 to get out from under allegations that he played a prominent role.
The allegations date back to 2015. In May of that year, Clovis presented data linking EGFR inhibitor rociletinib to a 60% objective response rate (ORR). The data dialed up expectations for rociletinib, also known as Roci, but the picture inside Clovis allegedly changed shortly after the data drop.
On July 7, the SEC alleges (PDF) Mahaffy and then-CFO Erle Mast learned that Clovis’ FDA filing for Roci would put the unconfirmed ORR at 42%. At that point, the confirmed ORR came in at 31%. The following day, Clovis claimed Roci achieved a 60% ORR in a filing to raise $298 million, without saying that the result was unconfirmed
“Mahaffy and Mast formally approved, in writing, the filing of the Prospectus Supplement with the SEC and the use of the roadshow presentation that both referenced the ASCO 2015 60% ORR,” the SEC wrote in its complaint. “These documents gave investors the false impression that Roci’s ORR continued to be 60%.”
The situation reached a head in November. In the SEC’s telling of events, Clovis learned that the FDA disagreed with its ORR calculation on Nov. 9. By the FDA’s reckoning, the actual ORR languished in the 20s. The day after hearing from the FDA, Clovis cited the 60% ORR at an investor conference. Six days later, Clovis revealed that the FDA put the ORR at 28%, precipitating a 70% drop in its stock price.
Clovis emerged with a battered stock price, a tattered reputation and, according to the SEC, a bank balance boosted by stock sales made on the basis of lies. The money enabled Clovis to bring PARP inhibitor Rubraca to market.
Mahaffy is paying $250,000, a fraction of his annual pay packet, to settle his part of the case. Mast is getting off the hook with a $100,000 payment. The SEC settlement hits Clovis—and, by extension, its investors—the hardest. Clovis is paying the SEC $20 million.