Ex-chief information officer of Mylan indicted for insider trading scheme

The former chief information officer (CIO) of the pharmaceutical business Mylan was charged with insider trading for, among other things, tipping off a former colleague about the company's upcoming merger with a Pfizer division.

Ramkumar Rayapureddy, who holds the same position at Mylan successor Viatris, tipped off his former colleague and friend Dayakar Mallu about the company's financial results, an unannounced Food and Drug Administration (FDA) approval of a Mylan drug, and an upcoming merger with Pfizer, according to a complaint filed by the Securities and Exchange Commission (SEC) on November 10 in U.S. District Court for the Western District of Pennsylvania. Rayapureddy faces criminal allegations from the Department of Justice as well (DOJ).

According to the allegation, Rayapureddy informed Mallu of the significant nonpublic information between September 2017 and July 2019. The SEC stated that Rayapureddy began working at Mylan in 2014 and was promoted to CIO in January 2016.

On September 29, 2017, Rayapureddy called Mallu to inform him that the FDA will shortly announce the approval of a Mylan medication.

“That same day, Mallu purchased 1,100 Mylan call option contracts in his brokerage account for $799,945,” the SEC alleged. On Oct. 4, 2017, the day after the drug approval was announced, Mylan’s share price soared from $5.27 per share to $37.80 per share, and Mallu’s contracts increased by $691,555, per the complaint.

The SEC said that Rayapureddy continued to provide confidential information with Mallu. Mallu, who departed Mylan in March 2017, utilised the information to ultimately profit roughly $8 million through Mylan stock trading. He shared a portion of his profits with Rayapureddy in India through cash transfers, according to the SEC.

“As the officer of a public company, Rayapureddy had a duty to safeguard material nonpublic information concerning significant Mylan events, but, as our complaint alleges, he violated this duty by tipping his friend in exchange for cash kickbacks,” said Nicholas Grippo, regional director of the SEC’s Philadelphia office, in a press release.

Rayapureddy is charged with Securities Exchange Act violation. The SEC seeks an injunction, disgorgement, a penalty, and a prohibition against Rayapureddy serving as an officer or director again.

Separately, the DOJ reported that Rayapureddy was charged with one count of conspiracy to conduct securities fraud and three counts of securities fraud. If he is found guilty, he faces up to 65 years in prison.

“We take the government’s allegations made … against Ramkumar Rayapureddy very seriously and will continue to review the matter in the same fashion,” a Viatris spokesperson said in an emailed statement. “The company is committed to the highest standards of integrity and compliance with the law. Ramkumar Rayapureddy is on a leave of absence from the company. We have and will continue to fully cooperate with the authorities, and we expect to have no further comment on this matter.”

Mallu pled guilty in September 2021 to conspiracy to commit securities fraud and assisting in the preparation of a fraudulent tax return. The defendant has been awaiting sentencing.

By fLEXI tEAM