The SEC charged Yves M. Benhamou, M.D., a French medical doctor and researcher, with tipping a hedge fund manager material, non-public information concerning a clinical trial conducted by Human Genome Science, Inc. (HGSI) for the drug Albumin Interferon Alfa 2-a (Albuferon), a potential drug to treat hepatitis-C. The tip occurred in advance of HGSI's public, negative announcement.
Benhamou was a member of the Steering Committee overseeing the clinical trial of Albuferon. The SEC stated that he learned about two serious adverse events, including one death, occurring during the third phase of the trial. According to the SEC, he tipped material, non-public information about the trial to the portfolio manager of a hedge fund in stages upon learning of each new negative development. The portfolio manager, based on the confidential formation provided by Benhamou, ordered the sale of the entire position of HGSI stock held by six health care-related hedge funds that he co-managed (approximately 6 million shares). These sales occurred during the 6 week period prior to HGSI's public announcement on January 23, 2008 that it was reducing the dosage in one arm of the trial. Two million shares were sold in a block trade just before the markets closed on January 22. HGSI's share price dropped 44% to $5.62 by the end of the day on January 23, 2008. As a result of the sales, the hedge funds avoided losses of at least $30 million.
Benhamou was charged with violating the antifraud provisions of the securities laws.
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