Senator Charles Grassley is upping the ante on the controversy surrounding the Vertex pharmaceutical executives who cashed in on overstated clinical trial data — see my blog from last week. According to The Boston Globe, which broke the Vertex story, Grassley has written to the Security Exchange Commission about his concerns that top Vertex executives may have profited from a dramatic jump in the company’s stock price after it announced preliminary data from a clinical trial of a cystic fibrosis drug. Weeks after that initial data was released, Vertex announced that they had overstated the trial’s findings — oops.
As The Globe reported last week, several top Vertex executives, including the executive vice president of global research and development (who no doubt oversaw the trial) made millions of dollars when they sold the stock after the release of the initial findings (which sent Vertex stock soaring). Vertex spokesman said the stock was sold as the result of a pre-existing trigger that allows shareholders to automatically sell shares when it reaches a certain price. Even so, the fishy timing of the stock sales raises the question of whether these executives knew that the preliminary trial results were erroneous and waited several weeks to correct them in order to maximize their profits. If so, that smacks of insider trading and stock manipulation.
Grassley apparently agrees. In his letter to the Securities Exchange Commission, he wrote:
“Despite Vertex’s explanation, it could appear that these Vertex executives potentially took advantage of the spike in the stock knowing the news of the clinical data being overstated would be made public eventually, which in turn would negatively affect the stock value.”
Grassley didn’t actually come out and call for an SEC investigation, but he waxed about the agency’s “important mission to protect investors and maintain market integrity” and asked the SEC to keep him posted should it decide to investigate the matter. Let’s hope it does!