Fore fires CEO Malik after SEC insider trading charges during his time as Immunomedics CFO

MAlik
Usama Malik was chief financial officer of Immunomedics from 2018 to 2020. (Fore Biotherapeutics)

The U.S. Securities and Exchange Commission (SEC) charged Usama Malik with insider trading during his time as chief financial officer of Immunomedics, a biopharma he helped lead to a $21 billion exit via a Gilead Sciences acquisition last year.

The charges spurred his current employer, Fore Biotherapeutics, to fire him as CEO and director. The SEC action did not relate to Fore, but the biotech showed Malik the door once it was made aware of the charges on Wednesday, the company said in a statement

The securities fraud count could lead to 20 years in prison and a $5 million fine.

Gilead declined to comment.

The charges stem from stock trades made after Malik was privy to an FDA decision about one of Immunomedics' investigational drug trials, which it publicly disclosed April 6, 2020. That day, Immunomedics said the FDA had allowed it to halt the study of a breast cancer drug because it proved effective in trial data. The drug in question, sacituzumab govitecan, had a storied history of its own that involved multiple executive departures, FDA rejections and an eventual revival. The drug, which got branded as Trodelvy, snagged a full breast cancer nod from the FDA this April.

Malik was one of the first and only Immunomedics employees familiar with the material nonpublic information about the drug before the April 6, 2020, news, according to the U.S. Attorney's Office for the District of New Jersey. He allegedly tipped his partner at the time, Lauren S. Wood, with whom he lived. Wood was also formerly involved with Immunomedics as head of corporate communications. 

The situation then gets trickier. Malik also tipped three family members. And that violated a trading "black-out," which prohibited Malik and any persons living in his household from buying Immunomedics stock. 

The SEC alleges that Wood, two of the family members and the spouse of the third family member all bought Immunomedics stock after the tip from Malik. Once Immunomedics disclosed the FDA's decision, the company's share price nearly doubled. As a result of the rising stock price, Wood gained $67,060 and the family members made a combined $21,000. 

The U.S. Attorney's Office said Wood more than doubled her investment after selling her shares, resulting in gross profits of $213,618. She returned $65,000 to Malik, the agency said.

Malik and Wood were arrested Dec. 1 for their roles in the insider trading scheme, acting U.S. Attorney Rachael Honig said Thursday.  

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Malik failed to disclose to the Financial Industry Regulatory Association that Wood was his romantic partner and lied about not having communicated with her during the relevant period, the SEC said. The complaint was filed in the U.S. District Court for the District of New Jersey. 

As a result, the SEC charged Malik and Wood with violating the antifraud provisions of federal securities laws. The agency also seeks permanent injunctions and civil penalty against both individuals. Additionally, the SEC seeks to bar Malik from being an officer and director. 

Malik is out the door at Fore as a result. He joined the company in February, when it rebranded from NovellusDx after it transitioned from a diagnostics startup to a cancer therapeutics biotech. The company raised $57 million to lead a BRAF-targeted drug from Daiichi Sankyo through the clinic. 

Fore will now be led by former Bayer Pharma CEO Dieter Weinand, who is currently chairman of Fore. He becomes executive chairman and assumes Malik's duties as the company undergoes a permanent CEO search. 

"Public company executives have a duty to safeguard material nonpublic information and must not use it for their personal benefit, as we allege Malik did by tipping Wood and his family members," said Joseph Sansone, chief of the SEC’s Market Abuse Unit, in a statement.