Former Chinook Board Member Indicted in $3.2B Novartis Acquisition Insider Trading Scandal

In a shocking turn of events, the Department of Justice (DOJ) has charged five individuals, including a former board member of Chinook Therapeutics, with securities fraud and insider trading in connection with Novartis' $3.2 billion acquisition of the biotech company in June 2023.

Insider Trading Allegations

Rouzbeh "Ross" Haghighat, who served on Chinook's board of directors at the time of the buyout, is at the center of the controversy. The DOJ alleges that Haghighat received confidential, nonpublic information about Novartis' plans to acquire Chinook in May 2023, including sensitive deal terms. He then allegedly used this information to purchase securities and tipped off four co-defendants: Bruce Haghighat, Kristyn Pearl, Fabio Sabzevari, and James Roberge.

According to the DOJ, the scheme resulted in illicit profits exceeding $600,000 for the group. Matthew Galeotti, head of the DOJ's Criminal Division, stated, "Securities fraud and insider trading distort our financial markets and disadvantage Americans who play by the rules." He added that the defendants allegedly reaped "hundreds of thousands in illicit profits" by trading on inside information.

Legal Consequences and Charges

Ross Haghighat faces severe legal repercussions, including:

• One count of securities fraud (maximum 25 years in prison)
• 16 counts of insider trading (up to 20 years in prison each)
• Two counts of conspiracy (up to 25 years in prison)

In light of the charges, Haghighat has resigned from his position as chairperson of Sernova Biotherapeutics' board of directors.

Novartis Acquisition and Drug Development

The $3.2 billion acquisition of Chinook by Novartis, which closed in August 2023, was aimed at expanding Novartis' kidney disease portfolio. The deal centered on atrasentan, an endothelin A receptor antagonist for IgA nephropathy (IgAN).

In October 2023, Novartis released topline findings from the Phase III ALIGN study, demonstrating that atrasentan significantly lowered urinary protein levels in IgAN patients. This data supported the drug's accelerated approval by regulatory authorities in April 2024, under the brand name Vanrafia. Full data from the ALIGN study is expected to support full approval in the future.

The insider trading scandal has cast a shadow over what was otherwise a significant development in the treatment of IgA nephropathy, highlighting the importance of maintaining ethical standards and transparency in pharmaceutical industry transactions.