A former Mylan executive has pleaded guilty to an insider trading scheme that netted him $4.27 million. After leaving the company in 2017, Dayakar Mallu received information on earnings reports, FDA drug approvals and an impending merger with Upjohn, then a division of Pfizer.
Mallu, Mylan’s former chief of global IT operations, will be sentenced on Jan. 24. He faces 57 to 71 months in jail and must pay $4.8 million, according to his plea agreement.
Mallu served 11 years at Mylan, rising to vice president of global IT operations in 2014. He left the company in March of 2017, but continued his association with a company insider, who tipped Mallu off to four key events affecting the value of the publicly traded company, authorities said in a complaint.
The insider, who was unnamed in court documents, had an outside business with Mallu and the former executive shared the profits with his tipster, authorities said. The cash transactions were made in Indian currency.
“Mallu’s efforts to conceal his scheme through secure messaging apps and foreign cash payments were unavailing as this case highlights the agency’s ability to use sophisticated data analysis to detect suspicious trading patterns and identify the traders behind them,” said Scott Thompson of the Securities and Exchange Commission’s Philadelphia office.
The first of the tips, according to the complaint, came on September 29, 2017, and was about the forthcoming approval of Mylan’s generic version of Teva’s Copaxone, a multiple sclerosis drug. Mallu bought $800,000 of Mylan stock and four days later, when the approval went public, the value of his purchase increased by $700,000.
In January of 2019, when Mylan scored FDA approval for its Advair Diskus generic, Mallu gained $84,000 from a $38,000 investment in the company he made the day before.
Mallu also was tipped off about an earnings decline in 2019, the feds said. And in response to a tip that Mylan was set to merge with Pfizer’s Upjohn, Mallu bought call option contracts for $8.4 million, authorities said. When the merger deal went public in November of 2020, Mallu’s options value increased by $2.2 million.
Mallu also admitted that he sent false information to his tax preparer relating to his outside Opel Systems, a Michigan-based company he owned and controlled during his time at Mylan. He told the tax preparer that he paid $1.3 million to a contractor, when the money actually went into his private brokerage account.
With mergers and acquisitions on the rise in the pharmaceutical industry, a series of insider trading cases have emerged. A month ago, for example, the SEC said it was charging Medivation’s former head of business development, Matthew Panuwat, with insider trading ahead of his company’s acquisition by Pfizer.
Two years ago, the SEC of India fined the former co-founder of Aurobindo and his wife for insider trading before the company made a licensing deal a decade earlier.