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Ex-Merck analyst faces insider trading charges on merger tips

Reuters - UK Focus

(Adds comment from Merck (Other OTC: MKGAF - news) spokeswoman in paragraph eight, updates court appearance status in paragraph six)

By Emily Flitter

NEW YORK, Oct 14 (Reuters) - Federal prosecutors in New York charged a former Merck & Co Inc employee with conspiracy to commit fraud for tipping a contact about potential mergers, including Merck's takeover of Idenix Pharmaceuticals ahead of a public announcement in June, according to a court filing on Tuesday.

In charging Zachary Zwerko, the filing referred only to "the pharmaceutical company where he was employed at the time." But his profile on the business networking site LinkedIn describes him as a former senior analyst for Merck and his attorney confirmed that Zwerko worked at Merck during the relevant period. The lawyer declined to comment on the case.

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The complaint said Zwerko, who was a senior finance analyst in his company's financial evaluation and analysis group, passed information to a trader at an unnamed bank with whom he had attended Rutgers Business School. The trader, who is not charged in the complaint, allegedly traded on Zwerko's tips about Idenix and two other stocks: Ardea Biosciences and ViroPharma Inc.

Zwerko had access to a computer directory of information about potential acquisitions and learned Ardea and ViroPharma were both potential targets, according to the complaint. He is alleged to have passed on tips to the trader by phone.

AstraZeneca (NYSE: AZN - news) announced a bid for Ardea in April 2012. Shire (Xetra: S7E.DE - news) announced a takeover of ViroPharma in November 2013.

Zwerko was charged with one count of conspiracy to commit securities fraud, according to the filing. He was arrested in Cambridge, Massachusetts on Friday and released on a $1 million bond after an initial appearance in federal court in Boston on Tuesday. He is required to appear in court in New York this week.

The U.S. Securities and Exchange Commission on Tuesday filed a corresponding civil complaint, which also did not name Zwerko's employer. According to the SEC complaint, Zwerko's company tried to protect confidential information by code-naming merger projects. Its takeover of Idenix was code-named "Project Invincible."

A spokeswoman for Merck confirmed Zwerko worked for Merck and said Merck was cooperating with the SEC on the case.

According to LinkedIn, Zwerko left Merck in July. (Reporting by Emily Flitter; Editing by Chizu Nomiyama and Tom Brown)