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U.S. Securities and Exchange Commission


Litigation Release No. 23503 / March 29, 2016

Securities and Exchange Commission v. AVEO Pharmaceuticals, Inc., et al., Civil Action No. 1:16-cv-10607-NMG (D. Mass. March 29, 2016)

The Securities and Exchange Commission today announced fraud charges against a Massachusetts-based biotech company and three former executives for misleading investors about the company's efforts to obtain Food and Drug Administration (FDA) approval for its flagship developmental drug to treat kidney cancer.

The SEC alleges that AVEO Pharmaceuticals Inc. concealed the FDA's level of concern about Tivozanib in public statements to investors by omitting the critical fact that FDA staff had recommended a second clinical trial to address their concerns about patient death rates during the first clinical trial. When the FDA made public months later that it had recommended an additional clinical trial, the company's stock price declined 31 percent. AVEO never conducted an additional trial, and the FDA later refused to approve Tivozanib.

AVEO agreed to pay a $4 million penalty to settle the SEC's charges without admitting or denying the allegations in the complaint filed today in federal court in Boston. The SEC's case continues against three of the company's former officers: CEO Tuan Ha-Ngoc, chief financial officer David Johnston, and chief medical officer William Slichenmyer.

According to the SEC's complaint:

  • AVEO raised $53 million in a public offering of its stock in January 2013 while failing to disclose that the FDA staff had explicitly recommended during a May 2012 meeting that AVEO conduct an additional clinical trial for Tivozanib.
  • AVEO and its officers understood that the FDA's concerns were serious and an additional clinical trial is an expensive and time-consuming proposition. While AVEO went so far as to design a second trial and present trial designs to the FDA, it was never conducted.
  • In corporate communications, AVEO and its officers suggested that they intended to satisfy the FDA by presenting new analyses of the data that had been gathered in the previous clinical trial. In doing so, AVEO concealed the FDA staff's level of concern about Tivozanib's impact on patient survival and the recommendation that AVEO conduct a second clinical trial.
  • Ha-Ngoc and Johnston knowingly approved and certified a press release and public filings that failed to disclose the FDA staff's recommendation for an additional clinical trial.
  • Johnston also made public statements during investor conferences suggesting the FDA staff had asked only for an explanation of the survival results. In reality, the FDA staff had recommended a second trial.
  • Slichenmyer misled investors in an investor conference call when he falsely stated he could not "speculate" on what the FDA "might be thinking" and "might want [AVEO] to do in the future." He actually knew that the FDA staff had recommended an additional trial.

The SEC's complaint charges AVEO, Ha-Ngoc, Johnston, and Slichenmyer with violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, AVEO with violating Exchange Act Section 13(a) and RulesĀ 12b-20, 13a-1, 13a-11, and 13a-13 thereunder, and Ha-Ngoc and Johnston with violating Exchange Act Rule 13a-14. The settlement with AVEO is subject to court approval. The SEC is seeking disgorgement plus interest and penalties, permanent injunctions, and officer-and-director bars against Ha-Ngoc, Johnston, and Slichenmyer.

The SEC's investigation was conducted by Susan Cooke Anderson and Michele T. Perillo of the Enforcement Division's Market Abuse Unit in the Boston Regional Office. The SEC's litigation will be led by Rachel E. Hershfang and Ms. Anderson.



Modified: 03/29/2016