Kitov opens up about fraud allegations, resumes trading

Flag of Israel
Israeli biotech Kitov is under investigation by the local securities authority

Kitov Pharmaceuticals has provided its first substantial statement on the securities investigation it faces. Local media broke news of the probe into disclosures about its lead candidate earlier this week—prompting a stock trading halt—but Kitov initially said little about the allegations.

Now, Kitov has said it thinks the formal investigation by the Israeli Securities Authority (ISA) relates to the Data Monitoring Committee (DMC) appointed to perform an interim analysis of results from a phase 3 trial of KIT-302, a candidate incorporating the active ingredient in Pfizer’s osteoarthritis drug Celebrex. The DMC’s job was to analyze data on the first 150 patients enrolled in the trial and decide how many more subjects the study needed to recruit to show statistical validity. The trial took place at 10 locations in the United Kingdom. 

In December 2015, Tel Aviv, Israel-based Kitov reported the trial met its primary endpoint at the interim analysis, freeing it of the need to enroll more patients. As Kitov sees it, everything was above board.

“The decision as to whether or not to add additional patients was based upon the statistical analysis of the data performed by an independent statistician in accordance with the FDA’s requested and approved method as part of the Special Protocol Assessment,” Kitov CMO J. Paul Waymack said in a statement. “Statistical analysis of the preliminary data collected in the phase 3 study showed that the study met the pre-specified criteria the FDA required for stopping patient enrollment and completing the final statistical analysis.”

However, the development process and related disclosures Kitov made to investors have caught the attention of investigators at ISA. Israeli business newspaper Calcalist published a local language report on the case on Monday, in which it discussed the questioning of Kitov CEO Isaac Israel by investigators and ISA's interest in statements made by the company. Investigators are reportedly looking at the statements Kitov made from December 2015 to March 2016, and when it raised cash in July 2016.

Statements made at those times describe the the phase 3 and role of the DMC in similar terms as those used by Waymack this week. The statement provided by Waymack on Thursday followed a two-line release acknowledging the existence of the ISA investigation on Tuesday.

Kitov made the fuller statement at the request of Nasdaq. The company’s stock resumed trading on the exchange on Thursday—having been halted since Monday—and closed down 14%. Trading in Israel, where the stock fell 36% before being halted, is due to resume on Sunday.

Investor concerns stem, in part, from the potential for the investigation to disrupt Kitov’s plans to seek FDA approval for KIT-302. Kitov has sought to downplay these concerns, stating it still expects to file for approval by the end of the first quarter.