Closing the book on another quirky chapter in the life of Dendreon Corp.’s Provenge, two hedge fund analysts have each agreed to a six-month suspension and $25,000 civil penalty in a settlement with the SEC over statements made in 2010 regarding the cancer vaccine that the commission considered “materially misleading.”

Neither Marie Huber nor Jess Jones, analysts with two separate undisclosed hedge fund advisers at the time, acknowledged wrongdoing.

The chapter opened with the FDA’s approval of Provenge (sipuleucel-T). Huber, of Cambridge, Mass., drafted a report highly critical of the vaccine and purchased more than $235,000 of Dendreon put options with expirations in July and August 2010, according to the SEC. Although Dendreon (NASDAQ:DNDN) was selling in the low to mid $30s at the time, most of Huber’s options had a strike price below $25, with some as low as $10.

Huber also purchased options in her mother’s name and shared her report with family and friends, including Jones, of Reno, Nev. Jones subsequently purchased more than $40,000 of Dendreon put options with July and August 2010 expirations and strike prices ranging from $21 to $30. Huber and Jones made the trades without the approval of their firms, the SEC said.

The storyline intensified when the Centers for Medicare & Medicaid Services (CMS) asked for public comments on a national coverage analysis for Provenge June 30, 2010. Huber encouraged her firm to submit her report as a comment, the SEC alleged, but the report wasn’t submitted immediately. On July 12, 2010, five days before the expiration date of some of her Dendreon options, Huber gave Jones her report, documents relating to the report, a distribution list of email addresses and a draft email message. (See BioWorld Today, July 2, 2010.)

That night, using an email set up under a pseudonym, Jones leaked the report to a few people. The next day, he posted it anonymously on a blog and DNDN message board. Then on July 14, he attached the report to an email – set up under a second pseudonym – and sent it to more than 450 people affiliated with the financial, medical and pharmaceutical industries, the SEC said. The email message claimed the report “was written by a group of scientists and physicians whose concern for their safety has forced them into hiding.”

The email alluded to incidents in 2007 when two cancer experts, who had served on an FDA advisory committee that reviewed Provenge, reportedly hired bodyguards after being threatened because they had opposed the vaccine’s approval. “Every dissenting voice is squashed,” the email said. “This fear extended to the FDA reviewers, who stated if it doesn’t get approved this time, there will be bloodshed.”

The message concluded with a call to action, saying the recipients had a moral obligation to demand that the concerns raised in the attached report be investigated. “We cannot allow the big money invested in this drug to feed on the fear and desperation of cancer patients and their families to co-opt their voice to silence those very people that are trying to protect them,” the email said.

What was “materially” missing in the message, according to the SEC, was the fact that Jones and Huber, as the author of the report, had stock options and would profit if Dendreon shares plummeted by July 17, 2010. (The SEC didn’t address the findings of Huber’s report, a version of which was published in the Feb. 22, 2012, Journal of the National Cancer Institute.)

When the email was sent, Huber told her boss and colleagues that the report had been leaked somehow, so they needed to submit it to CMS immediately. The report was submitted July 15, 2010. That day, Dendreon experienced heavy trading, falling as low as $31.54 – a 7.2 percent drop.

Huber and Jones sold some of their options, with Huber making $2,841 and Jones realizing proceeds of $8,522, according to the SEC. Overall, however, the two suffered large losses because Dendreon didn’t drop as low as the strike prices on their other options.

While that chapter is now closed, the Dendreon saga continues. Earlier this year, the Seattle company reached a $40 million settlement in a securities class-action litigation. The suit, brought by an investor representing a class of individuals who purchased the company’s common stock between April 29, 2010, and Aug. 3, 2011 , claimed the biotech made false or misleading statements concerning the market launch of Provenge.

With Provenge facing competition in the prostate cancer space, Dendreon announced last month it would restructure following a third-quarter earnings miss. Although Provenge recently gained approval in Europe, shares of the company are a fraction of what they were in 2010, closing at $3.05 Wednesday. (See BioWorld Today, Sept. 18, 2013.)

President Weighs in on Bills

President Barack Obama made his views known Tuesday on two financing and patent bills pending a vote in the House.

On the one hand, he threatened to veto legislation that would exempt private equity fund advisers from SEC registration and reporting requirements.

The Small Business Capital Access and Job Preservation Act, H.R. 1105, which has broad bipartisan support, would undermine the advances in investor protection and regulatory oversight provided by Dodd-Frank, the administration claimed.

“H.R. 1105 represents a step backwards from the progress made to date, given that private equity fund advisers have been filing reports with the SEC for over a year,” according to the White House Office of Management and Budget (OMB).

But sponsors of the bill have a different perspective. H.R. 1105 would “reduce government mandates and unnecessary regulations implemented by the new Dodd-Frank law which inhibit private equity firms from investing private capital into small businesses,” Rep. Robert Hurt (R-Va.) said when he introduced the legislation earlier this year.

The president is taking a warmer view of the bipartisan Innovation Act, H.R. 3309, which he said builds on the patent reforms made in the 2011 America Invents Act. The legislation includes provisions that would protect inventors from frivolous litigation and patent trolls. (See BioWorld Today, Oct. 31, 2013.)

However, the administration sees room for improvement. The final bill should recognize the importance of judicial discretion in balancing competing interests, OMB said. The administration also has concerns about the provisions on post-issuance review proceedings and would like other provisions added to protect innovators, including transparency of demand letters and pre-litigation patent ownership.

The Biotechnology Industry Organization shares some of those concerns, saying the bill’s overly broad provisions “would continue to result in too many unintended and unknowable consequences for innovators.” The trade group also noted that some provisions “would erect unreasonable barriers to access justice for innovators.”