Sanjay Valvani, the hedge fund manager who was indicted last week for allegedly paying a former US Food and Drug Administration official for inside information on product approvals, was reportedly found dead Monday night.
Valvani was found by his wife at his Brooklyn, N.Y., home with a neck wound, Reuters reported. Also recovered were a suicide note and a knife.
Valvani, 44, had worked at Visium Asset Management and had been accused by federal prosecutors of paying a monthly retainer to Gordon Johnston, who once worked as a deputy director of the FDA’s Office of Generic Drugs, for tips. The scheme, which ran from 2005 through 2011, focused on two generic drugs that were being reviewed by the agency for marketing approval.
One example involved an application to sell a generic version of Sanofi’s Lovenox blood thinner. Johnston, 64, passed information to Valvani, who traded shares of two drug makers likely to be affected by an approval and made a $24.8 million profit, the US Department of Justice claimed.
Johnston, who ultimately received hundreds of thousands of dollars for the information, pleaded guilty to securities fraud and three other crimes, as did another former Visium employee named Christopher Plaford who traded on the information and was also charged with securities fraud and mismarking securities. The US Securities and Exchange Commission also filed lawsuits against all three men.
The episode highlights an ongoing problem of insider trading in the pharmaceutical industry. The issue has raised concerns in connection with clinical trial work, as well as deal-making and the FDA approval process, which some fear can be distorted by such activities. Also last week, an employee of a small biotech was charged with securities fraud.
As we noted previously, in either late 2009 or early 2010, Valvani instructed Johnston to obtain information about the status of generic Lovenox applications, according to the feds. One was being developed by Momenta Pharmaceuticals (MNTA). Johnston did so by reaching out to an FDA contact who shared what the feds described as “highly confidential” information kept in what the agency calls Tracking Documents.
Over the next several months, Visium bought a large amount of Momenta stock and shorted Sanofi (SNY) shares — which means buying stock and making a bet it will drop. In July 2010, the FDA approved the Momenta drug and denied a Sanofi effort to prevent the approval. Momenta stock then jumped nearly 100 percent, while Sanofi stock dropped. Johnston also provided information about two other generic Lovenox applications, and Valvani made a $7 million profit on Watson Pharmaceutical stock. Watson, which is now part of Allergan (AGN), was one of the other two companies developing generic versions of Lovenox.
Visium, which last week disclosed plans to shut operations, had placed Valvani on leave earlier this year after it announced that it was under investigation.