Immunomedics Shares Slide 19% on Word of Federal Probe - TheStreet

Immunomedics

(IMMU) - Get Report

investors are getting worried.

Immunomedics shares fell $4.44, or 19%, to $18.50 Monday on news that the

Justice Department

is looking into matters involving the biotech company's research at a New Jersey facility. Last week,

TheStreet.com

reported that the

Food and Drug Administration

suspended clinical trials of Immunomedics cancer drugs at the Garden State Cancer Center amid an inquiry into record-keeping there.

The U.S. attorney's office in New Jersey last week subpoenaed a former clinical trial investigator at Garden State, Malek Juweid, demanding "all documents and communications related to Immunomedics" and the center, according to a copy of the subpoena disclosed by Juweid's attorney, Walter Lucas.

Immunomedics said it knows nothing of any probe. "We know of no allegations that are of merit, and in fact have not been contacted by any governmental agency regarding any such allegations," the company said Monday in a press release. "Our business and product development activities continue as before." Neither the Garden State Cancer Center nor the U.S. attorney would immediately return calls seeking comment.

Worries

Juweid, who was in charge of some clinical trials of Immunomedics drugs, resigned from the Garden State Cancer Center last month after the FDA suspended all dozen or so clinical trials there. Immunomedics attributed the suspension of the trials to faulty "monitoring" of clinical trials, which the company said wouldn't slow the progress of drug development. Neither the FDA nor Immunomedics would disclose additional details about the probe.

Even as Immunomedics stock fell, some bulls stood behind the stock based on prospects for LymphoCide, a cancer drug that the company says is slated to enter the final stage of clinical trials in coming weeks. The drug has shown promise in treating lymphoma and other cancers.

"Anytime you have the Department of Justice involved, investors are going to be worried," says Stefan Loren, an analyst with

Legg Mason

who maintains a strong buy rating on the stock. "The bottom line is that when we see the product go into phase three, we can talk about the real reason people own the stock."

Shadow Boxing

Lucas, Juweid's attorney, said Juweid wanted to take six boxes of documents with him to a new post at the University of Iowa, but that Garden State had demanded the documents back under the terms of a nondisclosure agreement.

"We were preparing to surrender them when the U.S. attorney called and said, 'We want them,'" said Lucas. He said his client is not the target of the investigation and that Juweid is cooperating fully with federal investigators.

The Justice Department subpoena demanded the documents as part of an investigation concerning "federal health care offenses" cited in various statutes, including those related to health care benefits programs. Garden State has received a number of National Cancer Instititue grants over the years for cancer research.