Parallel to the recent news that the country’s top legal authority has ordered neoprene maker Denka Performance Elastomers to slash emissions at a plant in Louisiana, the Department and stock market regulator Securities and Exchange Commission announced that a former drug company manager has been charged with insider trading.

The three pharma dealings brought to light are loosely related and date back to 2020. In one of them, investigators spotlighted the circumstances under which then-bankrupt photography giant Eastman Kodak — with no prior experience in drugmaking — could win a 25-year government contract worth $765 million to produce Active Pharmaceutical Ingredients (APIs).

In a second case, they cleared up at least some of the circumstances under which a small generics supply company called Phlow was able to nail down a four-year $354 million contract to lead a nationwide effort to produce therapeutics for Covid-19.

Both the Kodak and the Phlow API projects were launched between May and August 2020, after then-President Donald Trump ordered the US International Development Finance Corporation to pursue loan agreements that would lead to onshore API manufacturing.

This week, authorities charged Andrew Stiles and his cousin Gray Stiles with insider trading, alleging that the pair netted more than $1.5 million on stock purchases made using nonpublic information about the contract awarded to Kodak.

Indicted pharma insider also advised Novavax

Separately, the SEC charged that Andrew Stiles, while working as a consultant to Novavax, used insider information to gain more than $45,000 by trading on nonpublic information about the company’s efforts to develop a Covid vaccine.

According to the SEC, Andrew Stiles made a profit of $553,000 by buying and selling stock in Kodak and also tipped off his cousin, who made $990,000 by trading on the same stock.

On the day that Kodak was announced as winner of the $765 million contract, the still-traded camera and film manufacturer’s share price soared from $2.62 to $43.45. By then, prosecutors say, Andrew and Gray Stiles had purchased roughly 140,000 shares of stock, including 10,000 shares each the day the deal was unveiled.

A few weeks earlier, Phlow had tapped for the lucrative contract that also included API production for the national stockpile.  The drugmaker’s contract contained an option for an expansion of up to 10 years to a total value of $812 million, which US pharma journals at the time said was among the most expensive in the history of US emergency preparedness efforts.

Phlow was to work with emergency preparedness agency Biomedical Advanced Research and Development Authority (BARDA) to build up a national API capacities stockpile after India declared a freeze on exports. Government-financed plants were planned to be built in several location.

Andrew Stiles had been working for Phlow when he learned of Kodak’s effort to secure the contract, according to the SEC’s documents. The venerable upstate New York firm was touting plans to repurpose facilities in Rochester, New York, and St. Paul, Minnesota, to produce APIs.

In the Kodak case, both cousins were charged with three counts of securities fraud, each of which is said to carry a maximum sentence of 20 years in prison. They also were each charged with one count of wire fraud and securities fraud, carrying a maximum sentence of five years in prison.

The SEC is now said to be seeking a permanent injunction, disgorgement and a civil penalty against the cousins and to bar them from working in the industry.

Over the course of a separate investigation, it earlier came to light that, when the contract was won, Kodak’s board had awarded the company’s executive chairman Jim Continenza options for 1.75 million company shares, and three other company managers received stock options worth $712,000 each.

Author: Dede Williams, Freelance Journalist