The SEC alleged that beginning in July 2015 and over the course of a four-month period, CEO Patrick Mahaffy and his team at Clovis boasted that their investigational lung cancer drug sported a 60% efficacy rate. The company went on to raise $298 million in a public stock offering.
In truth, Clovis’ drug had an efficacy rate of 28%. When the company finally went public with that information in November of 2015, its stock price collapsed. Clovis stopped development on the drug in May the following year.
Clovis agreed to pay a $20 million penalty to the SEC, according to the commission, and Mahaffy will pay a $250,000 penalty. According to the terms of the settlement, the defendants did not admit or deny the allegations that they purposefully misled investors.
“Biopharma companies cannot mislead investors about efficacy results,” Stephanie Avakian, co-director of the SEC’s division of enforcement, said in prepared remarks. “As we allege here, the data available to Clovis and its executives should have alerted them to the inaccuracy of the claims about the effectiveness of its developmental drug.”