Physician Charged with Insider Trading on Drug Trial

A physician was charged with illegally sharing the disappointing outcome of a clinical trial with a hedge-fund manager, the Wall Street Journal reported. The fund manager sold about six million shares of stock just before its share price plunged on the news.

A French physician was charged with illegally tipping off a hedge-fund manager concerning the results of a clinical trial by Human Genome Sciences Inc., the Wall Street Journal reported. As a result of the information, the fund manager sold about six million shares of the Rockville, Md., drug developer.

In a civil complaint, the U.S. Securities and Exchange Commission alleged that Dr. Yves M. Benhamou provided an unnamed hedge-fund manager with inside information about a disappointing clinical trial data on the hepatitis C drug Albuferon, including that one in which a participant died, the Journal reported.

Criminal charges were also brought against Dr. Benhamou, a liver disease specialist who served as a paid consultant to the U.S. hedge-fund manager, the Journal said.

In 2007, Human Genome Sciences claimed that Albuferon could become the choice treatment for hepatitis, the Journal said. But after higher doses had a negative impact on some of the patients, the company said in January 2008, that it would cut the dosage in the clinical trial due to a safety issue. As a result, its share price plunged 44%. Mr. Benhamou allegedly provided the information to the portfolio manager starting in November 2007, the Journal reported.

This isn’t the first time regulators have cracked down on insider trading involving clinical trials. In a past report, the Journal covered the lengths to which some biotech stock analysts will go to obtain insider information, including signing up as patients in trials and even pretending to be physicians.

Human Genome Sciences shares (NASDAQ: HGSI) were trading at $26.21 early Wednesday. Read more about the charges here.