SEC Enforcement Action Targets Insider Trading in the Pharmaceutical Industry
On December 22, 2025, the U.S. Securities and Exchange Commission (SEC) filed a complaint against several defendants for their roles in market manipulation schemes involving two pharmaceutical companies, Olema Pharmaceuticals, Inc. (Olema) and Opiant Pharmaceuticals, Inc. (Opiant). The SEC alleged that the defendants executed “pump and dump” campaigns in violation of Section 17(a) of the Securities Act of 1933 and Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934. The complaint further alleged separate violations of Section 10(b) and Rule 10b‑5 arising from an insider trading scheme involving these companies. This enforcement action highlights common securities law risks for biopharmaceutical companies and emphasizes the need for heightened vigilance as these companies pursue regulatory approval for new drugs.
Summary of SEC Complaint
One market manipulation scheme targeted Olema, a biopharmaceutical company that develops therapies for breast cancer. At the time, Olema was conducting a clinical trial to test one of their new drugs. After taking a large position in Olema’s common stock, the defendants allegedly impersonated physicians using fake email accounts that resembled trusted sources in the oncology field to obtain confidential information on the drug’s efficacy, adverse effects and trial protocols. The defendants then falsified favorable clinical trial results to release to the public and pump Olema’s share price. Under pseudonyms, the defendants published their falsified study on patient forums and social media, causing the stock to spike and allowing the defendants to sell their positions shortly before trading halted. Once Olema announced the study was fraudulent and trading resumed, the stock tanked to less than half its value before the false study was published.
The defendants also allegedly perpetrated an insider trading scheme. Defendant Kim, an investment banker in the health care M&A group at an unnamed firm, worked on deals involving the acquisitions of biopharmaceutical companies developing new drugs for cancer, allergy treatments and other therapeutic areas. Kim misappropriated material nonpublic information (MNPI) about those acquisitions and communicated this MNPI to his co-defendants, who acquired long positions in the target companies through common stock, call options and spread bets. The defendants then sold their positions once the acquisitions were announced and stock prices rose.
The defendants engaged in another trading scheme involving alleged market manipulation of the stock of Opiant, a biopharmaceutical company developing treatments for opioid overdoses. After allegedly receiving MNPI from Kim that Opiant was being acquired, the defendants purchased a large position in Opiant. When the transaction stalled and the stock price declined, the defendants sought to artificially inflate the stock by threatening Opiant management to accelerate the clinical trial release and using fake domains and email accounts to publish false information about the company. Through a news service and internet message boards, the defendants published a false announcement that Opiant was being acquired by Hikma Pharmaceuticals, Inc. Opiant’s stock surged following the false announcement, allowing the defendants to obtain a 30% return before trading halted.
Takeaways
While these matters are in their early stages, this enforcement action highlights the risks posed to biotech and pharmaceutical issuers by unscrupulous traders. Moreover, it emphasizes that these issuers must safeguard their MNPI and vigilantly monitor relevant sources for the circulation of unusual, unexpected or inaccurate market reports or conduct. Directors at pharmaceutical companies should ensure their companies have internal safeguards to diminish the risks of improper trading and deceptive information hitting the market. Institutional investors should view information not derived from the issuer with a healthy skepticism to avoid trading on false or misleading information.
