FDA Inside Trader Targeted MannKind

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Valencia biotech MannKind Inc. was among 19 small drug developers targeted by a U.S. Food and Drug Administration chemist, who allegedly used advance knowledge of the regulator’s decisions to profit from sharp fluctuations in the companies’ stock.

The Securities and Exchange Commission charged Cheng Yi Liang and his son, Andrew Liang, with using inside information about drug approvals on 27 occasions to reap more than $3.6 million in profits over a four-and-a-half year period. Many of the trades were done under names of other relatives.

MannKind was one of the last transactions. MannKind Corp. announced Jan. 19 that the FDA would not approve the Valencia biotech’s Afrezza insulin inhaler until the company conducts new human studies, which could delay the product’s approval by two years.

Liang, who investigators say had access to an internal FDA database of pending new drug applications, dumped 18,000 shares of MannKind stock on Jan. 4 when it was trading at $8.41. He thus avoided losses of $60,047 when shares fell as low as $5 the day after MannKind’s announcement.

The Liangs, who were arrested at their homes in Gaithersburg, Md. on Tuesday and later granted conditional release pending trial, also face conspiracy, securities fraud and wire fraud charges.

MannKind shares on Wednesday closed up 4 cents, or 1 percent, to $3.70 on the Nasdaq.

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