A former Puma Biotechnology executive has been charged with making more than $1.1 million in illicit profits by trading in the company’s shares ahead of positive news about its breast cancer drug.
The U.S. Securities and Exchange Commission said Robert Gadimian, 46, learned sensitive, nonpublic information about two trials involving the drug neratinib by virtue of his position as senior director of regulatory affairs. He worked on, among other things, the drug production process and regulatory and clinical issues.
Gadimian allegedly purchased about $511,000 in Puma stock and options between August 2013 and July 2014, realizing approximately $1,161,000 in profits when he sold his holdings after the company announced positive trial results.
According to the SEC’s civil complaint, he admitted during Puma’s internal investigation that he acted out of “greed.” In a parallel case, a federal grand jury in Boston has indicted him on seven criminal counts of securities fraud and insider trading.
“We allege that Gadimian used valuable confidential information about his employer’s drug trials to trade illegally and enrich himself,” Antonia Chion, associate director in the SEC’s Division of Enforcement, said in a news release.
Puma, a development stage biopharmaceutical company, hired Gadimian in November 2011. According to the SEC, he traded on inside information that indicated neratinib was performing well in two trials — I-SPY 2 trial and the 3004 trial — that the trials had reached key milestones, and that, as a result, neratinib was more likely to be a lucrative drug for Puma.
When Puma announced the I-SPY 2 trial results on Dec. 4, 2013, its stock price soared 68%. A day later, Gadimian allegedly sold his Puma stock for about $95,000 in profits.
The positive 3004 trial results were disclosed on July 22, 2014, sending Puma’s stock up 295%. Gadimian is accused of immediately selling all of his Puma options and most of his stock for about $1,006,000 in profits.
When Gadimian was interviewed in October 2014 for the internal investigation, the SEC said, he “admitted that he traded Puma securities without preclearance and during blackout periods, and that he traded because of ‘greed.’”