On May 25, 2012, I received an email from Len Zwelling:
Paul: It can’t get worse than having our President pushing his own stock on TV. Len
I clicked on the provided link to CNBC. What I saw was indeed difficult to process: a video of Ron DePinho, extolling the virtues of the stock of AVEO Pharmaceuticals Inc., a company he co-founded.
On the CNBC program “Closing Bell with Maria Bartiromo” May 18, DePinho brought up AVEO in the context of the upcoming meeting of the American Society of Clinical Oncology.
Here is a transcript of the appearance:
MARIA BARTIROMO: Are there companies out there, from an investment standpoint; for our audiences are obviously looking for money-making opportunities, trying to figure out how to capitalize on what’s going on in this marriage of health care and technology and biotech. Are there companies out there that you think are most promising, and also what is going to come out of this ASCO meeting, you think?
RONALD DePINHO: Well, the companies in the biotech sector, you have to be very careful because you have to really understand which companies are driven by good management, that are driven by the kinds of scientific advances that I’ve mentioned, and there are a few of them out there. Historically, of course, Genentech was one of the prime examples of this, more recently a company…
MB: They were the first to come out with that targeted…
RD: Right. Targeted. So you think about Herceptin and so on, those are very important advances. And, in fact, some of the most effective drugs have come out of the idea of using science to shepherd the cancer drug development.
A company that I was involved in founding—AVEO Pharmaceuticals, one of the more successful biotechs…
MB: That’s A-V-E-O…
RD: That’s correct… Has utilized, has exploited science-driven drug discovery, and it’s about to announce, or has announced already publicly, and will present in detail at ASCO, a very effective drug that has a superior safety profile for renal cell cancer, a major unmet need.
So these are massive advances in our ability to really do something about a disease that has long been very refractory.
I had to assure myself that I wasn’t hallucinating.
I was watching a Texas state employee, whose conflicts of interest stemming from the ownership and management roles in a company have been recognized but not waived, offer investment advice that would benefit him personally.
Clearly, DePinho wasn’t invited to the show to discuss AVEO. Rather, he was there as president of MD Anderson. AVEO was developing a drug called tivozanib, a tyrosine kinase inhibitor.
If approved—and renal cancer experts said that approval was not a sure thing—tivozanib at the time was vying to become drug No. 8 and the fifth drug in its class for the treatment of this relatively rare disease.
According to federal filings, DePinho and his family trust held 590,440 shares in AVEO. For three days preceding DePinho’s appearance on CNBC, AVEO’s stock price had been in a free-fall, trading at $11.28 per share just before DePinho went on camera.
The slide of per-share price, on a heavy trading volume, coincided with the announcement of top-line results from the company-sponsored clinical trial, which investors apparently interpreted as underwhelming.
However, following DePinho’s appearance, the share price started to climb back up, trading at about $12.73 when the market closed on May 31, making the DePinho holdings worth about $7.5 million.
While there is no way to attribute this bump in the price of AVEO’s stock to DePinho’s on-camera salesmanship, the video clip provided a remarkable opportunity to watch him juggle his multiple roles and business interests.
I called Gilman a few times over those few days. It was all off-the-record, of course. He didn’t see how DePinho could argue that AVEO was proposing a great pioneering therapy for renal cell carcinoma. It might have been a marginal improvement—if that.
Many of the things DePinho said on that show were highly debatable.
I called several of my sources who understand renal cancer. All concurred that that DePinho’s characterization of the AVEO drug as meeting a “major unmet need” was incorrect.
For one thing, the phrase echoes the term of trade “unmet medical need,” which describes the FDA criteria for awarding a Fast Track designation, which allows the agency to work closer with the sponsor to get an important drug on the market.
I called AVEO, and a company official told me that they weren’t applying for the
designation.
With eight drugs on the market, the renal cancer indication has more treatment options than most cancers.
In the pivotal trial, AVEO’s tivozanib beat an older generation TKI, sorafenib, which is all that can be said.
Alas, tivozanib efficacy data—a delay in progression—had triggered a selloff. There was talk about a “survival deficit”—i.e., that patients who received the drug died sooner than patients who received a competing therapy.
I couldn’t get anyone to discuss this in detail, so I decided to wait. The truth would come out soon enough, provided the company was serious about obtaining approval.
If the drug were indeed approved, the upside was uncertain. As the drug would be the eighth therapy and the fifth tyrosine kinase inhibitor used to treat a relatively rare cancer, it will never ring up the sales of a big indication drug like Avastin.
Since AVEO had no other drug in phase III trials, the company’s future would be uncertain.
By this time, I knew that this would be a long-running story, which would focus simultaneously on CPRIT and MD Anderson. I decided that I didn’t want to find a new bioethicist to quote on every DePinho story.
Getting new commentators up to speed would simply eat up time. So I deputized two experts in ethics: Art Caplan, director of NYU Langone’s Division of Medical Ethics, and Sheldon Krimsky, professor of Urban and Environmental Policy and Planning at Tufts University, who writes books on medical ethics.
“This kind of media appearances are highly morally suspect, because you are conflating a number of different roles that have to be kept separate,” Art said to me. “These include the role of a cancer researcher, the role as president of MD Anderson, the role as owner-investor in a company. This creates mixing of roles back-and-forth that cannot be mixed if you are to perform each of them in a responsible manner.
“Taking advantage of a platform to tout your company and its drugs means that you have to stay in that role and not move back and forth to other positions.”
Krimsky said something similar:
“At a time when the U.S. Public Health Service and major medical journals are ratcheting up conflict of interest guidelines, it is morally unconscionable that the head of a leading public medical center should have an equity interest in a company whose financial interests can be affected by research at the center. A director donning two hats will always give the appearance of having a conflict of interest.”
I circled back to Len Zwelling, too.
“It’s just shocking to see him blatantly advance his own interests,” Zwelling said. “Even Mendelsohn, who was amply compensated with ImClone stock for developing Erbitux and serving on the board, never acted as a pitchman for ImClone.
“He left it to Sam Waksal do that. And MD Anderson investigators continued to work with other EGFR receptors, including Iressa and Tarceva.”
Then Zwelling reminded me about the conflict of interest rules that came out of the ImClone imbroglio, rules that were for some odd reason not applied to DePinho.
I asked the company whether they engineered the interview.
“AVEO had nothing to do with Dr. DePinho getting booked on CNBC,” said Rob Kloppenburg, the AVEO vice president of corporate communications. “We think the best thing to do would be to discuss the impetus for the interview with his representatives at MD Anderson.”
Next, I contacted MD Anderson and emailed a series of questions for DePinho.
He called me within a few hours.
“I am a public official in a position of trust, and I should never comment on any of my personal holdings or give investment advice. It was a mistake for me to do so on the CNBC interview.”
DePinho blamed the medium.
“It was live TV,” he said. “It was a very fast-moving interview, which in the context of what Maria and I were talking beforehand, versus what we were talking on air, etc. It unfolded the way it did. And it will not happen again.”
I asked a question about conflicts of interest, but received a non-answer:
“This is something that is very heavily managed in academic institutions,” he said. “These are things that are very stringently examined at the level of systems and at the level of compliance, and these are things that have been examined in great detail with tremendous transparency.”
Clearly, the UT System was not managing conflicts of interest of the president of the largest cancer center in the world.
Just saying “I am sorry” is rarely enough in matters that involve publicly traded securities.
Why did DePinho say what he did? How well did the company’s only drug perform in clinical trials? Was the answer not communicated to DePinho, a member of the board of directors, and Chin, a member of the scientific advisory board? Answers to such questions don’t make themselves immediately obvious, but they don’t stay hidden for more than a few months.
The AVEO story had just begun to unfold.
For DePinho and Chin, the stakes were high: tivozanib was the closest thing they had to a successful therapy.
Nature itself had become an actor in the great Texas drama.
Here is what I didn’t know:
On May 7, 2012, eleven days before DePinho plugged AVEO stock, his wife Lynda Chin, the company’s co-founder, traveled to the Boston area to take part in a meeting of the company’s Scientific Advisory Board as it prepared to present clinical data to FDA.
The agenda of the May 7 meeting, which I would obtain later, consisted of three items, and “Discussion of TIVO-1,” the phase III trial of the tivozanib, was one of these items.
The trial compared tivozanib with sorafenib in 517 patients with advanced renal cell carcinoma. Investors who followed DePinho’s advice would have seen their holdings erode. The company’s development program for tivozanib collapsed as FDA noted that survival on the experimental arm was shorter than on the control arm.
“I did attend the May 7, 2012, AVEO Scientific Advisory Board meeting,” Chin said in an email, responding to my questions. “Due to SAB confidentiality requirements, I am unable to disclose confidential or proprietary AVEO information; you may wish to contact AVEO for further information.”
DePinho had said previously that he wasn’t aware of FDA’s views on the approvability of tivozanib when he appeared on CNBC.
This assertion would hold true if DePinho and Chin didn’t talk about business. This is, in fact, what Chin said in response to my questions: “I did not discuss the SAB meeting in question with Dr. DePinho.”
As an officer of the company, DePinho was required to report stock sales. Yet, according to disclosure forms filed by AVEO, he sold no stock during that period.
A year later, on May 2, 2013, the FDA Oncologic Drugs Advisory Committee sunk tivozanib for the saddest of reasons: survival in the experimental arm of the sole randomized trial supporting the application was worse than survival in the control arm.
In July 2013, AVEO received a subpoena from the Securities and Exchange Commission, seeking documents and information on development of tivozanib. Nothing else is publicly known about the status of SEC inquiry.
A shareholders suit—a standard outcome of a bad day before ODAC—is currently on appeal. Court documents are posted here.
In March 2015, Judge Denise Casper of the U.S. District Court for the District of Massachusetts held that plaintiffs had failed to make a case for holding DePinho responsible for the statements he made in the interview.
“They do not… allege his basis for knowing about the FDA concerns
and do not allege later statements or evidence suggesting knowledge of same,” the ruling states. “For these reasons, the Court concludes that sole statement by DePinho is insufficient for stating a claim against him, particularly in light of the absence of scienter.”
Scienter is defined as an “embracing intent to deceive, manipulate or defraud.”
The plaintiffs filed an amended complaint, but, in a ruling last November, the judge dismissed the case.
“The law requires that the inference of scienter ‘must be more than merely plausible or reasonable it must be cogent and at least as compelling as any opposing inference of non-fraudulent intent,’” the judge ruled.
