SEC charges former FibroGen CMO for false claims on clinical trial results

On September 5, the SEC filed charges against Kin-Hung Peony Yu, the former chief medical officer of FibroGen (FGEN) for allegedly making false and misleading statements about the cardiovascular safety of FibroGen’s then-primary drug candidate, roxadustat. According to the SEC’s complaint, during the period from November 2019 to March 2021, Yu misled investors with claims that the results of key studies established that roxadustat, a potential therapy for the treatment of anemia in chronic kidney disease patients, was superior in cardiovascular safety to the primary existing treatment. But Yu allegedly failed to disclose to investors that she had reverse engineered the results. Specifically, the complaint alleges that the initial analyses showed the treatment was, at best, comparable to the existing treatment and that, after viewing the initial results, Yu directed changes to make roxadustat appear superior. Yu is alleged to have made the false and misleading claims in a range of forums, including a high-profile industry presentation and accompanying press release, multiple SEC filings, an earnings call, and a published article in a leading industry journal. After Yu’s departure, new FibroGen management issued a corrective disclosure in an April 6, 2021 press release, in which they admitted that FibroGen’s previously disclosed results were based on post-hoc changes to the analyses and disclosed the less favorable initial results. The SEC’s complaint, filed in the U.S. District Court for the Northern District of California, charges Yu with violating the antifraud provisions of Section 17 of the Securities Act of 1933 and Section 10 of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint seeks permanent injunctive relief, an officer-and-director bar, disgorgement of ill-gotten gains plus prejudgment interest, and a civil penalty.