A Securities and Exchange Commission lawsuit against Aveo Pharmaceuticals Inc. and three former officers highlights the need for biopharma companies to tread carefully in public disclosures about their interactions with FDA on investigational drugs.

On March 29, SEC filed a civil complaint alleging fraud claims against the Cambridge, MA-based company (now known as Aveo Oncology) and three former executives in connection with the company's disclosures during 2012 and 2013 about tivozanib, a tyrosine kinase inhibitor in development for renal cell carcinoma.

Aveo and the former employees failed to disclose that FDA staff explicitly recommended in May 2012 that the company conduct an additional clinical trial due to a negative survival trend in the lone Phase III trial, the complaint alleges.

FDA's recommendation for a new trial did not become public until April 30, 2013, when the agency released its briefing book ahead of an Oncologic Drugs Advisory Committee meeting on tivozanib.

In the interim, Aveo raised approximately $53.8m through a public stock offering, according to the complaint.

"One of the takeaways is to be careful what you're telling the market about the status of your clinical trials and any concerns raised by the FDA," – former SEC enforcement official Douglas Paul

SEC alleges that Aveo and the individual defendants publicly suggested they intended to satisfy FDA's concerns about the overall survival trend by re-analyzing existing data and failed to disclose that the company had started designing a second trial.

“We allege that Aveo and its executives hid from investors the reality of their communications with the FDA on tivozanib while suggesting they had identified a simpler route to FDA approval,” Paul Levenson, director of SEC’s Boston regional office, said in a press release. “Companies must be forthcoming about their communications with regulators so investors can make informed investment decisions while knowing what challenges may lay ahead."

Renewed Interest In Pharma

The Aveo case is "a warning shot to companies on what they say," said Douglas Paul, a partner in the Washington, DC office of Hogan Lovells and a former branch chief in SEC's enforcement division.

"One of the takeaways is to be careful what you're telling the market about the status of your clinical trials and any concerns raised by the FDA," Paul said. "I think that's the biggest takeaway."

Paul said there seems to be increased SEC interest in the biopharma industry right now, particularly with regard to claims brought under the Foreign Corrupt Practices Act.

In October, Bristol-Myers Squibb Co. agreed to pay $14m to settle SEC claims that its joint venture in China violated the FCPA ([A#28151018001]). More recently, Novartis AG agreed to a $25m settlement of claims that its China-based subsidiaries violated the statute.

Paul said he wouldn't be surprised to see "a range of pharmaceutical cases coming down the road."

Aveo Settles, Individuals Don't

Aveo has agreed to pay a $4m civil penalty to settle SEC's charges without admitting or denying the allegations in the complaint, which was filed in the US District Court for the District of Massachusetts in Boston. The settlement is subject to court approval.

Aveo declined to comment on specifics of the pending settlement.

"Following the judge’s determination on the settlement, we hope to have this matter behind us and to be able to pursue our new strategy without being distracted by these claims," the company said. "This new strategy, which we implemented at the beginning of 2015, has allowed us to move Aveo's entire pipeline forward through partnerships, while retaining significant North American rights for all of our oncology therapeutics."

The oncology pipeline still includes tivozanib, which the company said it intends to move into a second Phase III study (TIVO-3) in renal cell carcinoma in the second quarter of 2016.

SEC's case continues against the three former executives: Tuan Ha-Ngoc, David Johnston and William Slichenmyer. The agency is seeking disgorgement plus interest and penalties, permanent injunctions and officer-and-director bars against all three individuals.

Ha-Ngoc was CEO from 2002-2015 and chairman from January 2015 until November. He currently is executive chairman of Kew Group Inc., a privately held oncology services company.

Ha-Ngoc's attorney, James Carroll, a partner in the Boston office of Skadden, Arps, Slate, Meagher & Flom, said his client "adamantly denies the assertions made against him and looks forward to a court determining that his conduct was at all times appropriate."

Johnston was Aveo's chief financial officer from 2007-2013. He currently is executive VP and CFO at ImmunoGen Inc.

“Mr. Johnston is understandably surprised and disappointed that the SEC has chosen to commence this action," said his attorney, John Sylvia, a member of the Boston office of Mintz, Levin, Cohn, Ferris, Glovsky & Popeo. "He is justifiably proud of his distinguished 35-year career built on personal integrity and the highest ethical standards and fully expects to be exonerated once the true facts are presented.”

Slichenmyer was chief medical officer from 2009-2014. He is currently a partner at Alacrita, a consulting firm.

His attorney, Daniel Tighe, a partner at Prince Lobel Tye in Boston, said Slichenmyer intends to vigorously defend the claims against him.

Big Reveal In AdComm Briefing Document

SEC's complaint focuses on several key regulatory events, including a pre-NDA meeting in May 2012 and public release of advisory committee briefing documents almost a year later.

At the pre-NDA meeting, FDA staff told the company they were concerned about results from the lone phase III trial, TIVO-1. Although the study met its primary endpoint for progression-free survival, it showed a negative trend for overall survival.

FDA said the trial's one-way crossover design and large proportion of patients from Central and Eastern Europe, where available therapies differed from those in the US, made it difficult to determine if patients taking tivozanib were dying sooner than those on the comparator drug, according to the complaint.

The agency recommended Aveo conduct a second large, randomized trial in a population comparable to that of the US to address these concerns.

Less than a month after the pre-NDA meeting, the company began running additional analyses of the existing TIVO-1 survival data to try to show that the negative trend resulted from the study's one-way crossover design, which led to some patients getting one drug while others got two, according to the complaint.

"Aveo also began designing a second large-scale, randomized trial, to be called TIVO-2. These efforts included drafting a study protocol and gaining approval from the board of directors on a budget for the study," SEC's complaint states. "TIVO-2 was projected to cost at least $83m and take approximately three years."

In July 2012, Aveo requested a meeting with FDA to discuss the second trial's design and the additional analyses of the TIVO-1 survival data. The company proposed that TIVO-2 would be started by the first quarter of 2013 and asked whether the study's timing and design were consistent with FDA's recommendation, according to the complaint.

On Aug. 29, FDA staff responded in writing and stated the agency "has significant concerns" about the proposed trial design and said it would not adequately measure overall survival. Two days later, Aveo cancelled the requested meeting, telling the agency it was not necessary, according to the complaint.

Less than a month later, the company submitted the tivozanib NDA, which included additional analyses of the survival data that were aimed at showing the adverse survival trend resulted from some patients having received one drug while others took two.

In a 74-day letter issued in December 2012, FDA accepted the NDA for review but said the overall survival results remained "a significant safety concern" that would be discussed by the Oncologic Drugs Advisory Committee.

FDA's briefing document for that meeting, released on April 30, 2013, included the disclosure about its pre-NDA meeting recommendation for a second randomized trial Also see "Approval Or New Study? That’s The Question For Tivozanib Panel Review" - Pink Sheet, 30 April, 2013.. "Aveo's briefing document did not mention this recommendation," the complaint states.

"The market reacted strongly" to FDA's disclosure, SEC said. "Aveo's stock price closed down 31% for the day, the largest one-day drop in the stock's history to that point." In addition, "analysts covering Aveo focused largely on the previously undisclosed FDA recommendation to do a second trial."

Communications Silent Or Misleading

Aveo endured a harsh panel review on May 2, 2013, with advisory committee members expressing anger and disappointment about the design and conduct of TIVO-1 ([A#00130506016]).

The panel voted 13-1 against approval ([A#14130502005]).

Two weeks after the meeting, Aveo was informed by development partner Astellas Pharma Inc. that it would not fund additional trials for tivozanib in renal cell carcinoma and would not seek European approval.

FDA issued a complete response letter in June 2013 ([A#14130611004]).

SEC's complaint alleges that between May 11, 2012 and Aug. 2, 2012, "the defendants did not make any public statements about the content of the pre-NDA meeting."

In subsequent press releases and comments to the investment community, the defendants said that FDA had expressed concerns about the overall survival trend and Aveo was conducting additional analyses for the NDA submission.

SEC alleges these statements were misleading because they failed to disclose the agency's recommendation for a new trial, thereby understating FDA's level of concern and misrepresenting its recommended approach to addressing that concern.

Aveo and its officers also did not disclose that the company was actively planning a second, large-scale trial during the 2012-2013 period, according to the complaint.

Details about a new Phase III trial are included in Aveo's most recent 10-K filing, made on March 15.

TIVO-3 will study tivozanib's use in third-line treatment of patients with refractory renal cell carcinoma. "The study will use PFS as the primary endpoint and OS as a secondary endpoint to support a request for regulatory approval of tivozanib as a third-line treatment and to address the overall survival concerns from TIVO-1 as a first-line treatment presented in the June 2013 complete response letter from the FDA," the filing states.

Tivozanib Communications Come Back To Haunt Aveo, Former Execs

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