The Securities and Exchange Commission today filed fraud charges against a Massachusetts-based biopharmaceutical company that exaggerated how many new patients actually filled prescriptions for an expensive drug that was its sole source of revenue.
Aegerion Pharmaceuticals, now a subsidiary of Novelion Therapeutics, has agreed to pay a $4.1 million penalty to settle the charges that it misled investors on multiple occasions in 2013. The SECs complaint alleges that Aegerion told investors that the number of unfilled prescriptions for Juxtapid was not material and the vast majority of patients receiving prescriptions ultimately purchased the drug. The SEC alleges that Aegerions records reflect that it was actually around 50 percent of prescriptions that resulted in actual drug purchases.
By no ones math is 50 percent a vast majority, said Paul Levenson, Director of the SECs Boston Regional Office. When companies publicly discuss their financial data, they must be truthful. Whether they supply hard numbers or give broader descriptions, they cannot mislead investors.
According to the SECs complaint, Juxtapid is used to treat a rare and potentially life-threatening genetic condition that causes extremely high cholesterol. In 2013 and 2014, it was priced at approximately $250,000 to $300,000 annually per patient. Following Juxtapids introduction in 2013, investors and investment analysts had little financial data to estimate Aegerions future revenues from sales of the drug.
Aegerion allegedly provided details on the number of Juxtapid prescriptions during several subsequent earnings calls, but this data alone was insufficient for analysts and investors trying to forecast the companys future revenues because only prescriptions that were actually filled converted into sales. According to the SECs complaint, it wasnt until October 2014 that Aegerion disclosed to investors that the conversion rate was actually in the range of 50 to 60 percent. But Aegerion allegedly failed to reveal to investors even then that the conversion rate had hovered around 50 percent since 2013.
The SECs complaint, filed in federal court in Boston, charges Aegerion with violating Sections 17(a)(2) and (3) of the Securities Act of 1933. Aegerion agreed to the settlement without admitting or denying the allegations. The settlement is subject to court approval.
The SECs investigation, which is continuing, is being conducted by Emily R. Holness, Dawn A. Edick, Ruth Anne Heselbarth, Rachel Hershfang, Marc Jones, and Amy Gwiazda of the Boston office. The SEC appreciates the assistance of the Federal Bureau of Investigation.