FIRST CIRCUIT UPHOLDS CONVICTIONS OF PHARMA EMPLOYEES

On Friday, the First Circuit Court of Appeals upheld the insider trading convictions of two biotech employees finding that the pieces of evidence at trial "fit neatly together" to show that the insiders profited by trading stock based on nonpublic information.

U.S. Circuit Judge Thompson rejected attempts by former Akebia Therapeutics Inc. (“Akebia”) biostatistician Schultz "Jason" Chan and former Merrimack Pharmaceuticals Inc. (“Merrimack”) biostatistician Songjiang "Sam" Wang to secure the acquittals they didn’t get at trial.

Chan allegedly learned of positive results from a clinical trial of Akebia's treatment for chronic kidney disease in his first weeks at the company.  He and Wang allegedly exchanged text messages around that time, and Wang then purchased Akebia's stock before the news became public.  

Wang allegedly received weekly clinical trial data on Merrimack's pancreatic cancer treatment that would have ultimately been used in the company's final report on the trial. During that period in 2013 and 2014, Chan allegedly made large purchases of Merrimack stock.

A jury convicted Chan and Wang of securities fraud in 2018 after a two-week trial.  On appeal, the court noted that while the jury lacked specific evidence showing the friends told each other to buy stock, it found there was enough evidence to suggest the two profited by exchanging insider information.  On that basis, the First Circuit affirmed the convictions.

The case is U.S. v. Chan et al., Nos. 18-2232, 18-2233, 19-1910 and 19-11, in the U.S. Court of Appeals for the First Circuit.  A link to the opinion can be found here.