January 11, 2010 / 8:45 PM / 10 years ago

UPDATE 2-Former Indevus VP charged with insider trading

* Former Indevus executive charged with insider trading

* Wagner settles with SEC, agrees to pay $133,122.49

* Wagner was VP Corporate Communications

* Wagner sold shares and also sold shares short

(Recasts lead, adds details on fine, background in


By Toni Clarke and Svea Herbst-Bayliss

BOSTON, Jan. 11 (Reuters) - U.S. financial regulators charged a former executive at Indevus Pharmaceuticals with illegally trading on information that approval of the biotechnology company’s experimental drug would be delayed.

The executive, Brooke Wagner, agreed to pay $133,122.49 in penalties and disgorgement to settle civil charges he earned $21,000 in illegal profits, the Securities and Exchange Commission said.

Wagner, the company’s former vice president of corporate communications, neither admitted nor denied guilt, his lawyer Robert Peabody said.

The case was brought by the SEC’s Boston office and comes less than than three months after federal agents filed insider trading charges against Raj Rajaratnam, the founder of hedge fund firm Galleon Group.

Since Rajaratnam’s arrest in October, 20 people have been charged in criminal and civil cases in what has been called the biggest insider-trading case in decades.

Regulators charged that Wagner, 44, sold all of the Indevus shares he owned in his personal brokerage account on May 30, 2008, after learning the U.S. Food and Drug Administration would delay the approval of Nebido, the company’s experimental testosterone replacement therapy.

By selling Indevus stock before the company disclosed this negative news publicly, Wagner avoided losses of about $43,000. He also made a sizable profit by selling Indevus stock “short” or betting the share price would fall.

Indevus was acquired by Endo Pharmaceuticals Holdings Inc (ENDP.O) last year.

Wagner, who lives in Andover, Massachusetts, worked for Lexington, Massachusetts-based Indevus from August 2005 through June 30, 2008. His job was to write and review press releases and handle inquiries from investors, the media and the public.

In August 2007, Indevus submitted an application to market Nebido with the FDA. The FDA set a date of June 27, 2008, to act on the application, the SEC said in its suit.

On the morning of Friday, May 30, 2008, Indevus representatives, including Wagner, participated in a telephone call with FDA staff about Nebido. The FDA indicated it had concerns about a side-effect of Nebido and was seeking additional data before making a decision on whether to approve the drug.

Shortly after the call, Wagner logged onto his personal account from his computer at Indevus’s offices to sell the 12,500 Indevus shares he owned. He also logged into an investment account for the benefit of one of his children and sold all the Indevus holdings in that account, which amounted to 1,050 shares, the SEC said.

Later, he entered an order to sell short 5,000 shares of Indevus.

On Monday, June 2, 2008, Wagner sold an additional 2,000 shares short. By the middle of that day, Wagner’s supervisor said the company had no additional data to give the FDA and it would make a public announcement about the FDA’s concerns and expected a delay in the approval process.

After the close of the market on Tuesday, June 3, Wagner assembled all available support staff at Indevus who might field calls from investors and the press and told them a press release would be issued the following day. Wagner also told the staff that because they were now in possession of material non-public information they could not trade in Indevus stock.

The press release was issued prior to the market opening on June 4. By the close of the day, Indevus shares had dropped 69 percent to $1.26 a share. (Reporting by Toni Clarke and Svea Herbst-Bayliss; editing by Andre Grenon)

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