Cambridge-based Aveo settles fraud charges with SEC for $4 million
- Aveo Pharmaceuticals will pay $4 million to settle charges with the Securities and Exchange Commission, which accused the company of misleading investors about the FDA's review of its cancer drug. In public statements, Aveo and its executives allegedly failed to disclose the FDA's recommendation for a second phase 3 trial to address patient death rates in the first trial.
- The FDA made its recommendation for further study of the drug, Tivozanib, in May 2012. Eight months later, Aveo raised $53 million in an IPO without ever disclosing the FDA's guidance. Tivozanib was later rejected by the agency.
- Three Aveo executives are still under investigation for fraud and the SEC's case against them continues.
Aveo never conducted the second trial and, despite knowing the FDA's concerns, executives at the company suggested publicly they would only need to present new analyses of the existing data.
The FDA later disclosed its recommendation for a second trial and Aveo's stock plunged 31%. Coupled with the eventual rejection of tivozanib, Aveo was forced to lay off much of its staff, according to the Boston Business Journal.
"We allege that AVEO and its executives hid from investors the reality of their communications with the FDA on Tivozanib while suggesting they had identified a simpler route to FDA approval,” said Paul G. Levenson, the director of the SEC’s Boston Regional Office.
The SEC also charged former Aveo CEO Tuan Ha-Ngoc, former chief financial officer David Johnston, and former chief medical officer William Slichenmyer with fraud and its case against the three continues.
Both Ha-Ngoc and Johnston approved press releases which failed to properly disclose the FDA's recommendations. In an investor conference call, Slichenmyer told investors he was unable to "speculate" on the FDA's thinking and on what the agency "might want [Aveo] to do in the future." However, he allegedly knew a second trial had been recommended at that time.
Aveo, now going by Aveo Oncology, incurred a net loss of $15 million last year. The company plans to begin a phase 3 U.S. pivotal study of tivozanib for treatment of renal cell cancer at some point, possibly in the second quarter this year.
- Boston Business Journal Feds charge Cambridge drug firm, former execs with misleading investors
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