Executive Trading in Health Care Stocks

PROPUBLICA, Ellis Simani and Robert Faturechi, June 24, 2023

Secret IRS records reveal dozens of highly fortuitous biotech and health care trades. One executive bought shares in a corporate partner just before a sale, and an investor traded options right before a company’s revenues took off, netting millions.

The case was a bold step for the Securities and Exchange Commission.

In 2021, the agency accused Matthew Panuwat of insider trading. Five years earlier, he had learned that his own company, a biopharma operation called Medivation, was about to get acquired. But instead of buying shares in his employer, he bought options in a competitor whose stock could be expected to rise on the news. The agency says he made $107,000 in illicit profits.

For the first and so far only time, the SEC filed a case that accuses an executive of using secret information from his own company to trade in the stock of a rival. “Biopharmaceutical industry insiders frequently have access to material nonpublic information” that impacts both their company and “other companies in the industry,” Gurbir Grewal, the commission’s director of enforcement, warned in announcing the case. “The SEC is committed to detecting and pursuing illegal trading in all forms.”

One of the cornerstones of the agency’s case against Panuwat is that Medivation had a policy that explicitly barred employees from buying or selling competitors’ stock based on company information not available to ordinary investors.

It wasn’t just Panuwat who risked violating Medivation’s policy, a trove of confidential IRS data obtained in recent years by ProPublica shows.

It was also his then-boss, CEO David Hung.

The records show Hung traded frequently in the stock and options of pharmaceutical companies, betting tens of millions of dollars on the rise or fall of shares of dozens of such firms, some of which were direct competitors with his company. Several of his trades came just before news about a rival that he could have learned about in his position as CEO. In one case, he traded ahead of news he personally announced.

The size of Hung’s trades dwarfs those that got his subordinate, who has denied any wrongdoing, in the crosshairs of the SEC.

Hung’s spokesperson acknowledged the CEO has learned nonpublic information about competitors, but denied that information ever informed any of his dozens of trades.