A Medical Device Daily
The Securities and Exchange Commission (SEC) reported the filing of a civil action in the U.S. District Court for the Southern District of New York against Burr McKeehan of Monarch Beach, California, and Joseph Fontanetta of Paramus, New Jersey, for engaging in unlawful insider trading in the securities of Animas (West Chester, Pennsylvania) before a Dec. 16, 2005, merger announcement with Johnson & Johnson (J&J; New Brunswick, New Jersey).
Animas, which designed, manufactured and sold products and services for patients with insulin-requiring diabetes, common stock was traded on the Nasdaq National Market System until February 2006, when the acquisition by J&J became effective.
The complaint alleges that Fontanetta, the CEO and board member of a privately-held medical instrumentation company, tipped material non-public information about Animas' merger to McKeehan, a retired podiatrist, two days prior to the merger announcement.
The complaint also alleges that Fontanetta either misappropriated or unlawfully received the material nonpublic information from a fellow board member at his company who was the husband of an Animas executive and privy to the merger negotiations.
The complaint further alleges that Fontanetta unlawfully tipped McKeehan during a phone call about the Animas merger. Specifically, he told McKeehan that Animas was going to be sold soon and that McKeehan would be making some money soon as a result.
Six minutes after the telephone call, McKeehan began purchasing Animas stock. In total, McKeehan purchased 30,000 shares of Animas stock.
On Dec. 16, 2005, the day of the merger announcement, Animas common stock closed at $24.03 per share, an increase of 32% over the previous day. As a result of his unlawful trading, McKeehan realized potential profits of $183,018.
The SEC's complaint alleges that by their conduct, the defendants violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and seeks permanent injunctions, disgorgement by McKeehan of his unlawful trading profits, together with prejudgment interest, and civil monetary penalties from McKeehan and Fontanetta.
In other legal news, the FDA has agreed to comply with the law and set a date to classify mercury amalgam as a substance that poses a health risk to pregnant women and unborn babies, and children. This follows on the heels of a lawsuit that was settled between Moms Against Mercury et al. v. Von Eschenbach, Commissioner, et al.
The FDA now must finish classification within one year of the close of the public comment period on its amalgam policy, that is, by July 28, 2009. The FDA also agreed to and, with uncharacteristic speed, already has changed its website on mercury amalgam — dramatically, according to one of the plaintiffs, Mercury Policy Project (Washington).
The American Dental Association (ADA; Washington) in a statement said it believes the settlement simply sets a definite deadline for the FDA to complete what it began in 2002 — a reclassification process for dental amalgam, a commonly used cavity filling material. As far as the ADA is aware, the FDA has in no way changed its approach to, or position on, dental amalgam.