SEC Accuses Researchers of Trading on Inside Data

In what is believed to be the first case alleging insider trading by clinical researchers, federal regulators have accused several physicians and others of trading on insider information from researchers involved in developing an experimental drug to treat the liver ailment hepatitis B.

The Securities and Exchange Commission, in two complaints filed in federal court this week, accused the traders of selling stock in two firms whose futures hinged on the success of Thymosin, after learning that trials failed to prove that the drug was effective.

The SEC said an Anaheim physician, Rangarao Panguluri, learned that the drug wasn’t performing as expected while he worked at Wayne State University’s medical lab in Detroit. He and lead researcher Milton Mutchnick then alerted relatives and close associates, according to the complaints. The SEC said about $300,000 in losses were avoided by unloading shares of SciClone Pharmaceuticals Inc. of San Mateo, which was licensed to sell the drug, and Alpha 1 Biomedicals Inc. of Bethesda, Md., which was developing it.

Lawyers said Thursday that Mutchnick, his wife, Rene, and several others have settled. The Mutchnicks, who didn’t buy or sell the stock themselves, allegedly tipped relatives and friends who did. A lawyer for the Mutchnicks said the couple agreed to settle the case for $163,000, but admitted no wrongdoing. A lawyer for Panguluri, who has not settled, said his client didn’t break the law.