U.S. Securities and Exchange Commission
Litigation Release No. 21794 / December 23, 2010
Securities and Exchange Commission v. One or More Unknown Purchasers of Options of InterMune, Inc., 10 Civ. 9560 (GBD) (S.D.N.Y.) (filed Dec. 23, 2010)
Court Freezes Assets Linked to Suspicious Securities Purchases Ahead of EU Committee for Medicinal Products for Human Use Recommendation Regarding InterMune, Inc. Drug Esbriet
On December 23, 2010, the U.S. District Court for the Southern District of New York entered a Temporary Restraining Order freezing assets and trading proceeds of certain One of More Unknown Purchasers of Options of InterMune, Inc. (the "Unknown Purchasers") and prohibiting the Unknown Purchasers from disposing of the options or any proceeds from the sale of the options. The Commission filed a complaint alleging that the Unknown Purchasers engaged in illegal insider trading in call options of InterMune between December 7 and December 13, 2010, prior to the public announcement on December 17 that one of InterMune's development drugs, Esbriet, had been recommended for approval by the European Union's Committee for Medicinal Products for Human Use ("CHMP"). InterMune is a biotechnology company headquartered in Brisbane, California focused on developing and commercializing innovative therapies in pulmonology and hepatology. Its common stock is listed on The NASDAQ Stock Market (symbol: ITMN). The options at issue traded on the Chicago Board Options Exchange and the Philadelphia Stock Exchange. The Commission's complaint alleges that the Unknown Purchasers, through their insider trading, violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint seeks permanent injunctive relief, the disgorgement of all illegal profits, and the imposition of civil monetary penalties.
The Complaint alleges that the Unknown Purchasers bought a total of 637 call options contracts. According to the Complaint, the purchases on December 7 and 8, 2010 of four hundred of the option contracts cleared through UBS Securities LLC and the option contracts are currently held by UBS Securities LLC or UBS Securities Ltd. The Complaint further alleges that the options purchased comprised 100% and 57.2%, respectively, of the volume of transactions in the options series over these two days of trading. According to the Complaint, the purchases on December 13, 2010 of the remaining 237 options contracts cleared through Barclays Capital in New York and the options contracts are currently held by Barclays Capital. The Complaint further alleges that the options purchased comprised approximately 66% of the volume in the series over that day's trading.
The Complaint alleges that, after the announcement of CHMP's recommendation, the price of InterMune's stock rose materially, approximately 144%, and the prices of the InterMune options at issue increased by as much as 466%. The Complaint further alleges that, as a result, the Unknown Purchasers were in a position to realize total profits of approximately $912,000 from the sale of their calls following the announcement.
The Court's Temporary Restraining Order prohibits any disposition whatsoever of the call options for the stock of InterMune Inc., or proceeds from the sale or exercise of any such call options. In addition, the Order requires the Unknown Purchasers to identify themselves, imposes an expedited discovery schedule, and prohibits the defendants from destroying documents.
See Also: SEC Complaint