Federal authorities have charged a former Pfizer employee and his close friend Thursday with illegally traded shares based on non-public trial results on the pharmaceutical company’s Covid antiviral pill Paxlovid.
The Justice and the Securities and Exchange Commission both announced respective insider trading allegations Amit DagarPfizer’s senior statistical programming leader at the time of the transactions, and his friend Atul Bhiwapurkar.
Dagar, who helped manage and analyze Paxlovid’s clinical trial data, and Bhiwapurkar “participated in an insider trading operation to gain illegal profits from insider trading options” about the then-unreleased Paxlovid results in November 2021, the DOJ said.
The two individuals bought their Pfizer call options a day before the data went public. After the results of the trial were published, Dagar and Bhiwapurkar sold their call options and generated “significant profits” totaling more than $350,000, the DOJ said in a statement. Edition.
“The allegations in this case relate to the personal conduct of a former Pfizer employee in violation of company policy,” a Pfizer spokesperson told CNBC. “Pfizer is cooperating with the government’s investigation.”
Dagar, 44, of Hillsborough, New Jersey, was arrested Thursday morning and charged with four counts of securities fraud, each of which carries a maximum sentence of 20 years in prison, the DOJ said. He was also charged with conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison.
Bhiwapurkar, 45, of Milpitas, Calif., was also arrested early Thursday and charged with two counts of securities fraud and one count of conspiracy to commit securities fraud, the DOJ said.
Patrick Smith, a lawyer representing Dagar, said his client denies the allegations and “looks forward to defending himself in court”.
Smith also said that “no one at Pfizer ever” told Dagar the results of the Paxlovid trial.
Michael Bachner, a lawyer for Bhiwarpukar, said his client denies insider trading and based his decisions on publicly available information about the drug’s efficacy.
Bhiwarpukar “intends to vigorously defend these allegations,” Bachner said.
On Nov. 4, 2021, Dagar learned that a mid-stage Paxlovid trial produced positive results a day before they were due to be made public, the SEC’s complaint alleges.
The study found that Paxlovid reduced hospitalization or death by 89% compared to placebo in non-hospitalized, high-risk adults.
Dagar’s supervisor informed him via chat that the trial “had its outcome” and that there would be “a press release tomorrow.” Dagar replied with “oh really” and “a little exciting,” the suit alleges.
Within hours of that exchange, Dagar purchased “short-term, out-of-the-money” call options from Pfizer. An out-of-the-money call option allows a person to buy a stock at a price higher than the current market price.
Prior to that day, Dagar had never used his brokerage account to trade Pfizer options and had not traded the company’s stock since 2018, the complaint alleges.
Dagar reportedly shared the successful results with Bhiwapurkar, who bought similar calling options in Pfizer and tipped off another friend not named in the complaint.
Pfizer’s share price rose almost 11% after the company issued the Paxlovid data on November 5, 2021.
Dagar, who bought $8,380 worth of Pfizer call options, generated a daily profit of about $214,395, the SEC said. That’s a return on investment of about 2,458%, according to the bureau.
Bhiwapurkar, who bought $7,400 worth of call options, generated an overnight profit of about $60,300, the SEC said.
The unnamed person whom Bhiwapurkar tipped generated a daily profit of about $29,770 according to the allegations.
“As alleged in our complaint, Amit Dagar misused his access to confidential clinical research results to enrich himself and his friend, Atul Bhiwapurkar,” Joseph Sansone, head of the SEC’s Market Abuse Unit, said in a press release.
“Dagar and Bhiwapurkar allegedly used this information by trading out-of-the-money call options to generate huge one-day returns. Thanks to our oversight, the defendants must now face the consequences of their greed,” he continued.