Jury finds former Aveo CFO misled investors
A federal jury in Boston found the former chief financial officer of Aveo Pharmaceuticals liable for civil securities fraud Tuesday for misleading investors about the Cambridge biotech company’s prospects to win approval of a kidney cancer drug candidate.
The US District Court jury concluded that David Johnston concealed from investors that the Food and Drug Administration had expressed concerns about the drug candidate, known as tivozanib.
Johnston told investors that the drug was moving toward approval. In fact, the FDA was telling the company it had deep concerns about how the trial had been designed and said the way the company was comparing tivozanib with another medicine on the market was fundamentally flawed. The agency in 2013 rejected an application to approve the medicine.
In 2016, the Securities and Exchange Commission charged the biotech, Johnston, and two former executives with fraud.
In a statement issued after the verdict Tuesday, Stephanie Avakian and Steven Peikin, co-directors of the SEC’s division of enforcement, said the outcome “makes clear that a company and its officers are required to be honest in their public communications, including about matters as critical as communications with regulators about approval of a key product.”
The SEC charged Johnston, Aveo, the company’s former chief executive, Tuan Ha-Ngoc, and chief medical officer William Slichenmyer in the scandal.
Aveo agreed to pay a $4 million penalty to settle SEC charges without admitting or denying the allegations in the complaint.
The SEC obtained final judgments against Ha-Ngoc and Slichenmyer in March. Ha-Ngoc and Slichenmyer were ordered to pay civil penalties of $80,000 and $50,000, respectively.
Aveo, now called Aveo Oncology, is still pursuing approval of tivozanib. After encouraging results from late-stage clinical trials, the company said this month that it intended to apply for FDA approval within the next six months.
Michael P. Bailey, CEO of the company since 2015, said at the annual J.P. Morgan Healthcare Conference in San Francisco in January that Aveo was “truly a turnaround story.”