2:08 PM
Aug 08, 2018
 |  BC Extra  |  Politics & Policy

Rep. Collins indicted with insider trading in biotech shares

A grand jury charged Rep. Christopher Collins (R-N.Y.) Wednesday with insider trading in shares of Australian biotech Innate Immunotherapeutics Ltd. (ASX:IIL) by alerting family members of a clinical trial failure before the results were made public.

According to the indictment filed with the U.S. District Court for the Southern District of New York, Collins was a member of Innate's board and held about 16.8% of the company's stock at the time of the alleged offense. On June 22, 2017, Innate's CEO sent an email alerting board members that the company's sole candidate, MIS416, had failed in a Phase II trial to treat multiple sclerosis, four days before the results became public. Collins sent a reply email saying, "Wow. Makes no sense. How are these results even possible???"

The lawmaker then allegedly tipped the MIS416 failure to his son, who owned 2.3% of Innate shares. His son allegedly used the information to sell his shares in Innate and tip off other relatives owning Innate stock before the biotech announced the results in a press release on June 26, 2017. Innate lost 92% of its value the next day.

According to the court document, Collins’ son and related co-defendants and co-conspirators were able to avoid over $768,000 in losses. Collins did not trade himself, as he was "virtually precluded from trading his own shares for practical and technical reasons." For one, he was already under congressional investigation regarding his holdings in, and promotion of, Innate. Collins’ shares lost millions of dollars in value when the MIS416 results were released.

The indictment also alleged that Collins and co-defendants lied to an FBI special agent about their inside knowledge of the trial results.

Collins, his son and his son's fiancée's father were charged with 13 counts of securities fraud, wire fraud, conspiracy to commit fraud and false statements.

Former HHS Secretary Tom Price admitted to investing in Innate during his confirmation hearing when accused by Democrats of exploiting his position in Congress to make unethical stock purchases in biomedical companies that benefited from his legislative activities. While he acknowledged his participation in Innate's private placement, Price denied an accusation that it was a “sweetheart deal.” Price, who resigned as HHS secretary in September 2017, is not named in Wednesday's indictment (see "Price Bobs and Weaves on Drug Prices").

Collins resigned from Innate's board on May 4, 2018. Collins represents New York's 27th Congressional District. His attorneys released a statement Wednesday that they plan to "mount a vigorous defense" against the charges in court.

MIS416 is an immunostimulant comprised of caspase recruitment domain family member 15 (NOD2; CARD15) and toll-like receptor 9 (TLR9) ligands. It was Innate's only candidate in development prior to its March acquisition of Amplia Therapeutics Pty Ltd. (Melbourne, Australia), when it gained two preclinical cancer candidates targeting focal adhesion kinase (FAK).

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