SEC FREEZES TRADER ASSETS FOR ALLEGED INSIDER TRADING IN ONYX PHARMA STOCK

FROM:  SECURITIES AND EXCHANGE COMMISSION 
SEC Freezes Assets of Insider Traders in Onyx Pharmaceuticals

On July 3, 2013, the Securities and Exchange Commission obtained an emergency court order to freeze the assets of traders using foreign accounts to reap approximately $4.6 million in potentially illegal profits by trading in advance of the Sunday, June 30, 2013 announcement that Onyx Pharmaceuticals, Inc. had received, but rejected an acquisition offer from Amgen, Inc.

The SEC alleges that unknown traders took risky bets that Onyx’s stock price would increase by purchasing call options on June 26, 27 and 28, the three trading days before the announcement. Through quick, cross country coordination between the agency’s Los Angeles and New York offices, the SEC took emergency action to freeze the traders’ assets before courts closed for the holiday.

According to the SEC’s complaint filed in federal court in Manhattan, on June 30, 2013 Onyx announced that it had received, but rejected, an unsolicited proposal from Amgen to acquire all of Onyx’s outstanding shares and share equivalents for $120 per share in cash. The Announcement also stated that Onyx’s board of directors rejected Amgen’s proposal and that Onyx had authorized its financial advisors to contact potential acquirers who may have an interest in a transaction with Onyx. Amgen’s $120 per share price offer represented a 38% premium to Onyx’s closing share price on Friday June 28, 2013. The complaint further alleges that as a result of the announcement, Onyx’s share price increased from a close of $86.82 on over 51% on Monday July 1 compared with the prior trading day’s closing price, and that the trading volume of its stock increased by over 900% that day. The complaint alleges that the traders, as a result of these well-timed trades, collectively earned a profit of approximately $4.6 million in just three days.

The SEC alleges that certain unknown traders were in possession of material nonpublic information about the offer to acquire Onyx at a substantial premium over the stock price at the time they purchased Onyx call options, many of which were out-of-the-money, in the three trading days before the announcement. According to the complaint, the timing and size of the trades were highly suspicious because they constituted large increases over the historical volume for those call options purchased.

The emergency court order obtained by the SEC freezes the traders’ assets related to the Onyx call options transactions and prohibits the traders from destroying any evidence. The SEC’s complaint charges the unknown traders with violating Section 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rule 10b-5. In addition to the emergency relief, the Commission is seeking a final judgment ordering the traders to disgorge their ill-gotten gains with interest, pay financial penalties, and permanently bar them from future violations.

FORMER INTERMUNE, INC., OFFICER CHARGED WITH INSIDER TRADING BY SEC

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION

SEC Charges Former Officer of Intermune, Inc. with Insider Trading


On June 6, 2013, the Securities and Exchange Commission charged Bruce W. Tomlinson, the former vice president of finance, principal accounting officer, and controller of InterMune, Inc., a pharmaceutical company based in Brisbane, California, with having tipped his friend and former business associate, Michael Sarkesian, about material nonpublic information concerning the progress of InterMune’s application before a European Union regulatory body to market its drug Esbriet in the EU.


According to the Commission’s complaint filed in the U.S. District Court in the Northern District of California, in March 2010, InterMune submitted its marketing application to the European Medicines Agency. The complaint further alleges that an EMA advisory subcommittee, the Committee for Medicinal Products for Human Use ("CHMP"), began assessing the application and communicating with InterMune. By mid-November 2010, in the course of his employment, Tomlinson allegedly had become privy to material non-public information about the increasing probability that the CHMP would render a positive opinion and faster than had been publicly anticipated by InterMune. The complaint alleges that on November 17, 2010, Tomlinson emailed Sarkesian that, amongst other things, the European regulatory review process appeared "to be moving faster and better" than anticipated and that this impacted on "Company wide strategic decisions." On the basis of that information, Sarkesian allegedly directed the purchase of 400 out-of-the-money call options on InterMune common stock through a brokerage account held in the name of Quorne Limited in advance of a December 17, 2010 announcement that the CHMP had rendered a positive opinion. The price of the options increased over 500% on the news, resulting in $616,000 in alleged imputed profits.

Without admitting or denying the allegations of the complaint, Tomlinson has consented to entry of a final judgment permanently enjoining him from further violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, prohibiting him from serving as an officer or director of a public company for a period of five years, and ordering him to pay a civil penalty of $616,000. Based on the anticipated entry of a final judgment, Tomlinson has also consented to the issuance of an order in a separate administrative proceeding pursuant to which he would be suspended under Rule 102(e)(3) of the Commission’s Rules of Practice from appearing or practicing before the Commission as an accountant with a right to apply for reinstatement after five years.

A consent judgment was previously entered against Sarkesian and Quorne Limited pursuant to which, amongst other things, the defendants, without admitting or denying the Commission’s allegations, were ordered to disgorge $616,000.