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The NY Times today reported that a 15-year veteran chemist at the US Food and Drug Administration (FDA) has been charged with using confidential and proprietary information about pending drug applications to buy and sell pharmaceutical and biotechnology company stock.

According to a criminal complaint filed by the US Justice Department, Cheng Yi Liang, 57 and his son Andrew made millions trading stocks on inside information since 2007. The criminal lawsuit alleges that the Liangs traded stocks in five pharmaceutical and biotechnology companies that had drug applications under review at the agency. Cheng Yi Liang’s job gave him access to a password protected-database that tracked the progress of new drug applications. Some of the companies leveraged by the Liangs included Vanda Pharmaceuticals, Clinical Data, Momenta Pharmaceuticals, Middlebrook Pharmaceuticals and Progenics. The Securities and Exchange Commission (SEC) simultaneously filed a civil securities fraud lawsuit against Cheng Yi Liang. 

The elder Liang is accused in the criminal complaint of “of using the FDA database to get an early look at F.D.A. decisions on companies developing drugs and then working with his son to trade on that knowledge, buying stock ahead of good news and selling it before bad news was announced. Both complaints assert that the defendants made just under $2.3 million in direct profits and avoided an additional $1.3 million in losses”. Further, the S.E.C. complaint accused FDA employee Liang of illegally trading ahead of more than two dozen F.D.A. announcements involving drug applications by 19 companies.

The case is noteworthy because, according to the Times article “it is uncommon for insider-trading investigations to involve FDA, despite the significant amount of market-moving information that passes through the agency each year. The agency maintains a rigorous ethics code and imposes significant restrictions on stock ownership and trading by its employees.”  The good news is that insider trading at FDA is rare and that a majority of its employee maintain ethical and moral standards that are consistent with the mission of the agency which is to supply the American public with safe and efficacious medicines. However, while the Liangs got caught, it does not mean that other less-than- scrupulous employees at FDA have also not benefited from less sophisticated insider trading schemes than those employed by the defendants. After all, FDA employees are human like the rest of us and the temptation to “get rich quickly” can be overwhelming especially during hard financial times.

Until next time...

Good Luck and Good Job Hunting (try FDA, there is at least one open position that needs to be filled)

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As many of you may recall, in 2001, Sam Waksal, founder and former CEO of the biotechnology company ImClone was convicted (along with his good friend Martha Stewart) for fraud and insider trading of ImClone stock. Waksal, who was released from prison in late 2008 and lived in a half way house for several months had kept a relatively low profile until earlier this month. Rumor has it that Sam along with Richard Mulligan, PhD a Harvard professor and former ImClone director and Dr. Larry Witte, a current executive vice president in the ImClone division of Eli Lilly are attempting raise about $50 million for the privately-held new venture called Kadmon. Other reports indicate that Waksal and other members of the Kadmon team are putting up $50 million as well. 

According to insider reports the company will ostensibly focus on cancer and infectious disease targets and—taking a page out of the Cubist, Celgene and Sepracor play books—re-purpose once promising drug candidates discarded by other companies. To that end, according an article in TheStreet, the company's drug research programs include a "statin inhibitor for influenza" from a "leading Ivy League university" along with a variety of monoclonal antibodies for use as targeted cancer treatments, similar to Erbitux. Kadmon is also eyeing several existing cancer-focused drug companies, one of which already has a marketed product, as acquisition targets, according to the prospectus. For those of you who may be wondering about whether or not Waksal can legally start another biotechnology company, an agreement with the Securities and Exchange Commission bars Waksal from serving as an officer in a publicly traded company, but as previously mentioned, Kadmon is a private venture.

Whether you like Waksal or not, his track record in the biotechnology industry speaks for itself. Unlike the vast majority of his rivals, Waksal shepherded a molecule from discovery through commercialization. That molecule, a monoclonal antibody called Erbitux, became a multibillion dollar a year treatment for certain forms of colorectal cancer. More importantly, Waksal was one of the first to recognize that humanized monoclonal antibodies directed against certain cellular receptors could be used to treat a variety of oncology indications—a concept that is driving a large portion of discovery and product development in the oncology space. For those of you who may not know, Eli Lilly purchased ImClone two years ago for $7.0 billion dollars after a very public and acrimonious fight over the sale price of ImClone erupted between Carl Icahn, ImClone’s Chairman, and Jim Cornelius, CEO of Bristol-Myers Squibb (BMS). ImClone and BMS co-marketed Eribitux prior to the sale.

Waksal has been in and around the biotechnology industry for over 30 years and many consider him to be one of the early industry pioneers. Unfortunately, despite his dubious past, Waksal represents a dying breed of visionaries whose entrepreneurial spirit and unorthodox approach to new drug development is largely responsible the biotechnology industry’s current largess. Like other ex-felons Waksal did his time and like all Americans he is entitled to a second chance.

Let’s hope that Sam learned a few things during his incarceration and is smarter and wiser for his second and possibly final act. I wish Waksal success in his new venture and I hope that he and his team still possess the insight, creativity and tenacity required to discover and develop innovative oncology and infectious diseases drugs.

Until next time....

Good Luck and Good Job Hunting!!!!!!!

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