The Long, Slow Processes of Discovery

Which takes more time: Finding out whether the clinical trial of a bioengineered drug will win Food and Drug Administration approval? Or recouping illicit insider-trading gains from biotech executives?

Shareholders in Transkaryotic Therapies must be asking themselves that question after learning that Richard F. Selden, their former C.E.O., agreed to pay more than $1 million to settle a Securities and Exchange Commission lawsuit.

The S.E.C. accused Selden of having made misleading statements to investors while the company's flagship drug, Replagal, was awaiting federal government approval.

The final judgment requires Selden to pay a $125,000 civil penalty and disgorge a little over $1 million from his sales of the Cambridge, Massachusetts, company's stock between 2000 and 2002.

(A British company, Shire Pharmaceuticals, acquired Transkaryotic in 2005 for $1.6 billion.)

The S.E.C. said Selden, of Lincoln, Massachusetts, had made positive statements about Replagal, and described its clinical trials as a success and made encouraging statements about the drug's chances of being approved by the F.D.A.

In its complaint, the S.E.C. said he knew, but failed to disclose that Replagal's clinical trial failed to meet its primary objective, and that the F.D.A. had warned the biotechnology company on several occasions about data in the trials, and recommended additional clinical trials.

Despite this, Selden sold 90,000 shares of Transkaryotic between May 2001 and February 2002, before the company disclosed some of the negative information about the drug in October 2002. That caused the stock price to fall 62 percent in a day.

Later shareholder suits charged that Transkaryotic had known as early as December 2000 that the drug's data wouldn't pass the F.D.A.'s muster, but did led investors to believe the contrary.

Selden, a former Harvard Medical School instructor until he left to found Transkaryotic in 1988, resigned from the company in February 2003, one month after the F.D.A. declined to approve Replagal. He is 49 years old.

Selden, who is barred from further violations of securities laws, was liable for $714,000 in trading gains plus $326,000 in prejudgment interest. The court has yet to decide whether to bar Selden from serving an officer or director of a public company.

by Elizabeth Olson