The Australian biotech firm in which Health and Human Services (HHS) Secretary Tom Price made a controversial investment announced Tuesday that the single drug it has under development does not appear to have any clinical benefits to trial patients.
The stock of the company, Innate Immunotherapeutics, is plummeting. It has dropped more than 90 percent since the news, and commentators speculate that it could be heading to zero. That’s because the company’s only real asset was the experimental drug meant to provide treatment to people suffering from a severe form of multiple sclerosis.
Price was one of a handful of American investors who purchased stock of the company last year in a transaction known as a “private placement.”
The deal was controversial because of Price’s position as a powerful member of Congress, combined with his track record of attempting to intervene in regulatory processes that could affect companies in which he held stock. Critics raised questions as to whether Price, Rep. Chris Collins (R-NY), and the other private placement investors had been given a sweetheart deal, because they obtained the stock at a small discount to what it was trading for on the Australian exchange.
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While there is no evidence that Price took explicit steps to interfere on Innate Immunotherapeutic’s behalf, the company’s stock spiked after news of the private placement broke.
Price wasn’t the only participant in that deal with direct access to the levers of regulatory power. Collins sits on the company’s board and, along with his family members, is the biggest shareholder. Other investors included a powerful Washington, D.C., lobbyist.
After Price assumed leadership of HHS, he sold his stock in medical companies, including Innate Immunotherapeutics. Price made out well in the deal. He tripled his initial investment of $94,000 for a sale price of about $320,000, earning a profit of at least $225,000, according to his public disclosures.
Price might have benefited from the controversy surrounding his investment in the company—it forced him to sell while the stock was high, well before the thrashing it received this week.