WASHINGTON – Shares of the Australian biotech firm that Rep. Chris Collins touted to other members of the House and to leading Buffalo-area figures collapsed in value Tuesday after the company announced its once-promising new drug for multiple sclerosis had failed in clinical trials.
Innate Immunotherapeutics stock, valued as high as $1.77 a share in January, quickly fell to 5 cents a share at the close of trading on the Australian Stock Exchange.
Analysts in Australia said prospects for the company's future appears grim.
Innate's stock "looks extremely risky and I would avoid it at all costs," Sean O'Neill, an analyst at the Motley Fool website, wrote Tuesday morning.
O'Neill noted that the stock sell-off began Friday, two days after Innate announced in a press release it had been cleared to begin clinical trials on the drug in the United States.
The company asked that trading in the stock be halted after the sell-off began, and trading resumed Tuesday only after the announcement that its highly touted drug – its main product – had failed in second-round tests in Australia and New Zealand.
The unusual trading activity Friday "suggests that somebody with knowledge of the results was front-running the announcement," O'Neill said. "That’s something I’d hope the regulator will be looking closer at."
Collins told The Buffalo News Tuesday morning that he did not sell any of his shares in Innate before its price collapsed.
Statnews, a business news website, calculated that the Innate stock Collins still owns -- which was worth $45.5 million at its peak -- is now worth only $1.5 million. However, it is unclear how much money Collins invested in the company over the 15 years he has been involved with it.
In the United States, the Office of Congressional Ethics also may be interested in the unusual stock trading activity involving Innate last week. The Buffalo News reported last month that the office is investigating Collins' investment in Innate. Investigators received several complaints questioning whether Collins – who helped write legislation that speeds clinical trials and thus, theoretically, could benefit Innate – had engaged in insider trading.
Collins tipped off then-Rep. Tom Price, now President Trump's Health and Human Services secretary, about Innate last year. That prompted Price to invest in Innate, and that became a matter of some controversy at his confirmation hearing. Federal documents show that Price sold his Innate shares in February for $250,000.
But four Republican House members --Reps. Markwayne Mullin of Oklahoma, Billy Long of Missouri, Mike Conaway of Texas, and Doug Lamborn of Colorado -- bought Innate stock earlier this year nearer its peak price and may have lost much of their investment.
The stock's collapse resulted from a news release the company issued at the start of trading in Australia Tuesday.
The company's new multiple sclerosis drug , MIS416, "did not show clinically meaningful or statistically significant differences" in clinical trials, the company said.
"These results are a shock and definitely not what we were expecting based on our previous clinical experience with MIS416 and the reporting of treatment benefits we have received from many compassionate use patients over an extensive eight-year period," said Innate's chief executive officer, Simon Wilkinson.
"Compassionate use patients" are those allowed to take the drug as an experimental last resort in their treatment.
"These data will be as distressing to them as they will be for all the stakeholders who were relying on the outcome of this study," Wilkinson said.
Collins termed the drug trial failure "a shocker," but said he always made clear that investing in Innate was by no means a sure bet.
Asked what he would say to those whom he had told about Innate, Collins said: "Sophisticated investors know there's a risk. and as you now know that there was never any inside information that would indicate otherwise."
Only last week, the company issued its financial results for the year ending March 31. In addition to reporting a $7 million loss on revenues of only $1.8 million, the company said that, if its clinical trials failed, "it may be unlikely that the group could continue as a going concern. In such unfortunate circumstances the directors would most likely need to wind up the group's operations in an orderly and timely fashion."
That's by no means the outcome that Collins, R-Clarence, predicted. A longtime businessman before entering politics, Collins insisted that Innate was on the verge of a life-saving breakthrough for secondary progressive multiple sclerosis.
"What we’ve done and what we are doing is life changing and life-saving for potentially millions," he told the Rochester Democrat and Chronicle earlier this year. "I’m so proud of what this company is doing and without me, it wouldn’t exist. When they write my epitaph, it’s going to say Innate Immunotherapeutics, saving millions of lives. It’s not going to be member of Congress."
Now, though, it looks like Innate will be a big bust for Collins. According to the company's website, he owns 16.8 percent of the company's stock and is its largest shareholder. His son Cameron and daughter Caitlin each own 2.3 percent of Innate's shares, meaning the Collins family together owns about a fifth of Innate.
Collins said it was always clear that the company's future depended on a "double-blinded" study that tested the multiple sclerosis drug's effectiveness against a placebo. In a double-blinded study, neither the participants nor the researchers know whether a patient is getting the drug being tested or a placebo.
Anecdotal evidence from patients receiving the drug had been encouraging, Collins added. But what really matters, he said, are the real test results.
"For every successful drug, there are countess numbers that fail," he said in a statement. "That’s how today’s system works."
Still, Collins held out some hope for Innate.
"I am hopeful that Innate’s work will continue to help the individuals and families who suffer from this dreadful disease where, right now, there is no hope," he said.
The company had two private stock placements last year, and both Collins and Price – then a Republican House member from Georgia – bought Innate stock at a then-discounted price of 18 cents a share in the first such sale. So did Michael Hook, Collins' chief of staff, former Republican Rep. Bill Paxon and several leading figures in the Buffalo-area community, including former Buffalo Sabres coach Lindy Ruff.
Innate had a second private stock sale later last year in which Price and Hook bought additional discounted shares, as did several Buffalo-area business leaders, such as Brian Lipke of Gibraltar Steel.
And this year, several Republican members of the House invested in Innate, too, as stock skyrocketed in value amid the controversy over Collins' and Price's investment in the company.
It's unclear whether any of those investors lost money in Tuesday's stock collapse – or if they got out before Innate's announcement that its drug had failed.
One thing is clear, though, said "Money Morning," an Australian stock tip sheet.
"The news is dire for both the company and investors," Money Morning said.