The hot water that Clovis $CLVS has been in with the SEC for the past two years is beginning to boil.
The biotech today alerted investors that the SEC has filed a Wells Notice, signaling its intention to bring civil actions against current and former execs at the cancer drug biotech. The SEC filing did not specify what actions it will face, but Clovis did say it plans to contest any charges.
Clovis’ 10-K has spotlighted an ongoing investigation by the SEC and the Justice Department into an ugly incident in late 2015 centered on their now defunct lung cancer drug rociletinib, saying it was cooperating with the feds on their probe.
Here’s what happened:
With shares pumped to about $100, Clovis stunned investors in late 2015 when it suddenly slashed the response rate on rociletinib for non-small cell lung cancer to 34% for the 625-mg dose arm, and 28% for the 500-mg dose arm, a plunge of more than 20 points. The news put the drug—until then positioned as a promising rival to Tagrisso (AZD9291) backed with peak sales projections of $3 billion—at a distinct disadvantage, and the subsequent rout eviscerated the biotech’s share price.
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, run by well-known CEO Patrick Mahaffy, 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.”
The FDA made short work of Clovis’ application, rejecting the marketing bid after a panel of experts shook their heads over a risky safety profile and a poorly defined profile of efficacy data. Clovis then dumped the drug rather than try to mount a new study, and turned their attention to a late-stage PARP therapy, winning an OK for Rubraca. Just yesterday it won an expanded OK to sell the drug as a maintenance therapy.
Regulators, though, have a rep for being slow and steady on the enforcement front. And they’ve evidently stayed focused on Clovis.
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