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MarketWatch MarketPulseSep 18, 2018
SEC fines Clovis Oncology Inc., executives $20.8 million for lying about cancer drug effectiveness
Clovis Oncology Inc., will pay $20 million to settle charges by the Securities and Exchange Commission that it misled investors about the effectiveness of the company's developmental lung cancer drug, rociletinib, or Roci, according to an SEC press release. Its CEO Patrick Mahaffy, and Erle Mast, the company's former CFO, also settled charges. Over a four-month period starting in July 2015, the company and Mahaffy used its investor presentations, press releases, and SEC filings to inaccurately state that the drug was effective 60% of the time, meaning that in 60% of patients Roci caused targeted tumors to shrink, despite knowing actual results were much lower. Clovis raised approximately $298 million in a public stock offering in July 2015, but its stock price dropped by 70% in November 2015 after disclosing the true effectiveness rate, 28%. The company stopped development of the drug in May 2016. The defendants did not admit or deny the allegations. Mahaffy agreed to a $250,000 penalty and Mast agreed to pay a $100,000 penalty and to pay back $454,145, in proceeds from selling Clovis stock during the relevant period at the inflated prices.

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