June 28, 2017
By Mark Terry, BioSpace.com Breaking News Staff
For several years, Rep. Chris Collins, Republican from New York, has been urging his colleagues, friends and family to invest in an Australian biotech company, Innate Immunotherapeutics (IIL). They probably don’t appreciate the tip now—after a devastating clinical trial failure, the company’s share price dropped more than 90 percent yesterday. Collins is believed to have lost $17 million in investments, although he reportedly sold no stock.
Collins is on Innate’s board of directors and is the company’s largest investor, with a 16.8 percent stake in the company. Earlier this year, his holdings were worth about $45.5 million, which after yesterday’s plunge are worth about $1.5 million. Innate Immunotherapeutics is currently trading for $.045 (Australian Dollars) per share.
Collins and Innate created more than a little controversy—of the type all too familiar to critics of the Trump administration—earlier this year when it was discovered that Tom Price, the secretary of Health and Human Services, had invested in Innate in 2015 and 2016 while he was a member of the House of Representatives. At least four other GOP House representatives did as well.
Price had bought the shares at a discounted rate via special offerings. Since Collins is on the board and his family owns about 20 percent of company stocks, there were accusations of insider trading about Price and the other House buyers.
The Washington Post wrote, “Price was forced to sell his stock in Innate earlier this year—and tripled his profits in the process—after he was nominated to become HHS secretary. The department determined the investment was a conflict of interest. Price invested about $10,000 in 2015 and between $50,000 to $100,00 in the company last year. Records show he sold the shares in February for between $265,000 and $550,000, according to records filed with the federal Office of Government Ethics. Since stock purchases and sales must only be reported in ranges, his profits were ranged between $154,983 and $489,981.”
Damian Garde, for STAT, wrote, “There’s little doubt why they jumped in: Collins, an early and vociferous supporter of President Trump, has been similarly enthusiastic about Innate, bragging of how many millionaires he’d made by promoting the company.”
Yesterday, Innate announced that the drug, MIS416, did not show clinically meaningful or statistically significant affects in patients with secondary progressive multiple sclerosis (SPMS). It was a Phase IIb trial to evaluate the drug’s efficacy, safety, tolerability and pharmacodynamics compared to placebo.
“These results are a shock and definitely not what we were expecting based on our previous clinical experience with MIS416 and the reporting of treatment benefits we have received from many compassionate use patients over an extensive eight-year period,” said Simon Wilkinson, Innate’s chief executive officer, in a statement. “These data will be as distressing to them as they will be for all the stakeholders who were relying on the outcome of this study.”
Although there are no indications that Collins unloaded stock—he has stated that he has not—Sean O’Neill, an analyst with The Motley Fool Australia wrote yesterday that there seemed to be a lot of trading activity prior to the announcement. He wrote that “suggests that somebody with knowledge of the results was front-running the announcement. That’s something I’d hope the regulator will be looking closer at.” He also said that Innate stock “looks extremely risky and I would avoid it at all costs.”
In a statement, Collins said, “For those that invested in Innate, including me, we all were sophisticated investors who were aware of the inherent risks. For every successful drug, there are countless numbers that fail. That’s how today’s system works.”
Aside from Price, Collins’ House colleagues apparently had not sold off Innate stock. If that’s the case, they may not be as calm as Collins appears to be. And if they sold off shares shortly before Tuesday’s announcement, there are a lot of questions in their future.
