A new development in the ongoing Zolgensma data manipulation scandal has emerged, as reports reveal a senior Novartis executive sold approximately $1 million worth of company stock during a critical period between FDA notification and public disclosure of the data integrity issues.
The stock sale occurred after Novartis had informed the FDA about data manipulation problems in their spinal muscular atrophy gene therapy Zolgensma's approval application, but before this information became public knowledge. While Novartis maintains that the executive, reportedly a board member or executive committee member, had no material information about the data integrity issues, the timing has raised significant concerns about potential insider trading.
Regulatory Response and Investigation
The FDA's discovery of manipulated data in Zolgensma's approval documentation has prompted serious regulatory scrutiny. The agency learned that Novartis was aware of these issues prior to Zolgensma's approval in May but waited until June to report their findings. This delay has sparked demands from US lawmakers for severe punitive measures, including potential criminal, civil, and regulatory actions.
Sources indicate that the FDA has referred the case to its Office of Criminal Investigations, though the agency has not officially confirmed this development. Adding to the controversy, questions have surfaced regarding the FDA's October 2018 decision to withdraw a proposed regulation that would have mandated prompt reporting of suspected data falsification.
Corporate Response and Leadership Changes
In response to mounting pressure, Novartis has undergone significant organizational changes. The two AveXis executives who were in leadership positions during the data manipulation incident have been replaced. The company faces additional scrutiny from US Senate Finance Committee chairman Chuck Grassley, who has requested full disclosure of Novartis's internal investigation.
CEO Vas Narasimhan recently acknowledged in a company management call that the situation could have been handled more effectively. Novartis's initial defense centered on their desire to complete internal investigations before alerting regulatory authorities, a justification that has been met with skepticism from industry observers and regulatory bodies.
Impact on Corporate Governance
The sequential revelation of events has significantly impacted Novartis's corporate reputation, particularly regarding transparency and ethical governance. The company's handling of the situation, from delayed reporting to the controversial stock sale, has raised questions about internal controls and corporate oversight mechanisms.
The incident highlights the broader challenges pharmaceutical companies face in balancing corporate interests with regulatory compliance and public trust. As investigations continue, this case may lead to industry-wide discussions about data integrity reporting requirements and insider trading policies during periods of material non-public information.
