For 4 critical months in 2015, Clovis $CLVS and its executives led by CEO Patrick Mahaffy maintained that their cancer drug roci had performed beautifully in clinical trials, with a 60% efficacy rate that blew the analysts away. That’s what they told investors, raising $298 million with a fat stock price in July of 2015.
And, according to the SEC, Mahaffy knew it was a lie. He and former CFO Erle Mast were told earlier that the efficacy had shrunk considerably, but that wasn’t their public line. And when they disclosed the truth in November, their share price plunged 70%.
Today, though, they’re getting away with a slap on the wrist.
Without any admission of guilt, the SEC is letting Mahaffy — still CEO of Clovis — off with a $250,000 penalty. Mast is paying $100,000 penalty, and disgorging principal and interest he made selling the company stock during that period totaling $454,145.
Clovis, or its investors, are paying $20 million to settle the claims.
Last year Mahaffy was provided a compensation package worth $8.7 million. In 2015, when he was accused of misleading investors, he took home a $5.7 million package.
He’s never responded to requests for comments.
It was apparent years ago that Clovis had been gilding the lily on their data.
Setbacks happen in biotech. But some of the experts who watched this drug say this was not the usual kind of clinical reversal that can easily occur in a risky field like drug development. Clovis execs had been purposely misleading investors with a false portrait of the data, they claimed.
“I feel that the efficacy data have, consistently and repeatedly, over many years, been misrepresented,” R&D expert Kapil Dhingra told me months later after he wrote an analysis of the data for Annals of Oncology. “This is not simply a case of gray zones, this is black and white untrue presentation of the data. And it is not just a minor misrepresentation (such as photoshopping a western blot image etc that can get a basic scientist in trouble); the true efficacy is about half of what they represented.”
Image: Patrick Mahaffy, by Kathryn Scott Osler GETTY
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