Martha Stewart was not the only ImClone shareholder to get out before the stock tanked last winter.
According to the House Energy and Commerce Committee, 46 ImClone directors, officers and employees sold $244 million worth of shares in the two months before the Food and Drug Administration rejected ImClone’s application to sell a new cancer-fighting drug, Erbitux.
Sales by ImClone founders Harlan and Samuel Waksal accounted for $165 million of the total. The remaining directors, officers and employees sold $79 million worth during the period. It is not illegal for insiders to sell shares, but it is illegal if they sell because of information not available to the public.
ImClone stock had been trading in the $60 to $70 range just before the FDA’s Dec. 28 rejection of Erbitux. By the end of January, the stock was below $20 a share. It closed Wednesday at $7.02.
Seventy percent of the sales were made by officers and directors on Oct. 29 in response to a tender offer from Bristol-Myers Squibb for 20% of ImClone. Much of the rest took place in December, by which time some senior ImClone senior managers had reason to believe that the FDA would reject the Erbitux application. ImClone did not return calls seeking comment Wednesday evening.
In August, Sam Waksal was indicted on charges of illegal inside trading, obstruction of justice and bank fraud, stemming from his attempts to sell more ImClone stock the day before the FDA announcement. Prosecutors are investigating whether Waksal’s broker tipped Stewart to sell her shares.
The Waksals’ stock sales and sales by a few directors and officers were known. The House Energy and Commerce Committee’s research is the first to show widespread selling by officers and employees in the weeks ahead of the FDA announcement. The panel has a hearing today. ”If all of these people really believed that Erbitux was the next miracle drug, then why were they selling instead of buying?” says committee spokesman Ken Johnson. ”The real miracle is that so many people got rich at a company that never turned a profit.”
”Sam Waksal was not the only one at the helm,” says Rep. Jim Greenwood, R-Pa., head of the committee’s investigations panel. ”Clearly, ImClone’s officers and directors will have a lot to answer for as well.”