Johnson & Johnson Shares Fall After Leak of Study on Rival
This one again. It's shocking to think that someone would break their word just to make a few million dollars. But since that is the wicked world we live in, perhaps they could cut out this "embargo" crap. When you announce it to 50 reporters, it's out there, and pretending otherwise just enables the sharks to feed on the fish.
Clark - great potential and party insiders would love it, but starting from a tough spot.
- Doc
By RON WINSLOW and LAURA JOHANNES
Staff Reporters of THE WALL STREET JOURNAL
Details of a highly anticipated study of a medical device being developed by Boston Scientific Corp. leaked out in advance of an embargo Monday, apparently enabling some investors to unload shares in rival Johnson & Johnson and another company before the data were publicly released.
The trading is sure to fuel a growing controversy over information leaks involving medical meetings and scientific journals -- especially when the findings have the potential to move stock prices.
In the most recent example, the study's findings were disclosed at a press conference at 11 a.m. Monday, but were embargoed until their official presentation at 2 p.m. to an audience of several thousand doctors at a cardiology meeting in Washington. The results suggested that the Boston Scientific device, known as a drug-eluting stent, likely would be a strong competitor to a similar J&J product that already is on the market.
Between 11:30 a.m., when the presentation of Boston Scientific's data at the press conference concluded, and 2 p.m., the official release time of the study, J&J shares fell 2.5% on the New York Stock Exchange. That included a 1.4% drop during the first 15 minutes after the end of the media session. There was an even sharper drop in the same period of shares of SurModics Inc., a smaller company that supplies an important component of J&J's stent.
Trading in Boston Scientific had been suspended before the news conference at the company's request and thus didn't move during the three-hour interval between the press conference and the afternoon presentation.
The study was presented at a meeting called Transcatheter Cardiovascular Therapeutics, or TCT, which is sponsored by the Cardiovascular Research Foundation, New York. Reflecting the policy at many scientific meetings, TCT organizers scheduled morning press conferences in advance of the actual scientific presentations in a longstanding practice that enables the media to get a summary of news-making studies and a head start in preparing their reports. But in the belief that the "integrity" of scientific data is protected only when they are released in a scientific forum, the leaders forbade release of information before its actual presentation.
Between 40 and 50 reporters, including two reporters from The Wall Street Journal, and about 20 representatives of Boston Scientific were present at the press conference for the Taxus 4 results. All signed nondisclosure agreements pledging to abide by the 2 p.m. embargo, according to a spokesman for the Cardiovascular Research Foundation.
Nancy Patterson, a venture-capital analyst with MedFocus Fund LLC was initially cleared to attend as a journalist but was asked to leave, before the presentation began, when one of the researchers recognized her. Ms. Patterson could not be reached for comment, but a person familiar with the matter said she writes for several cardiovascular specialty journals. For example, Ms. Patterson recently co-authored an article on repair of aortic aneurysms for the BBI Newsletter, a publication for health-care executives.
Dozens of other people, including some Wall Street analysts, crowded the hall outside the press conference room hoping for news from the briefing. When it became apparent that a small window made it possible for those outside the room to see slide presentations on a screen, paper was taped to the window to block the view.
When the Boston Scientific portion of the media session ended, its representatives left; most of the journalists remained to hear briefings from researchers on two other studies.
Exactly how the results leaked couldn't be determined, but it is clear that key details had begun to find their way to the investment community. A report by Merrill Lynch's Dan Lemaitre, released at 12:37 p.m. on First Call Thomson Financial, reports that, "the details of the study results will not be available until later today, but our checks at TCT indicate that the data compare favorably" to J&J's. Later in the report, Mr. Lemaitre adds that the Taxus 4 data on the critical measure of the need for repeat procedures for patients getting the device were "superior" to J&J's.
The "restenosis rate" for the device, a measure of its ability to prevent the reclogging of arteries treated with angioplasty balloons and stents, was 7.9%. A roughly comparable number in a trial of J&J's device was 8.9%.
In an interview, Mr. Lemaitre said critical data from the study were out "in about a nanosecond" after the press conference. The embargo, he said, "wasn't a very fine filter" for the information.
Upon leaving the press conference, Boston Scientific company representatives were surprised when analysts approached them and asked if they could confirm the 7.9% restenosis rate -- a figure that was supposed to have been secret. They declined to comment, according to company spokesman Paul Donovan. The company was "absolutely, categorically" not responsible for any leaks, he added.
J&J didn't have any comment on the stock movement. The company said it didn't consider seeking to halt trading in its shares, and it is too big for any one event to be truly material. The stock was flat Tuesday and fell back again Wednesday to close at $50.22 in New York Stock Exchange 4 p.m. trading.
A spokesman for the Securities and Exchange Commission declined comment. The New York Stock Exchange and the Chicago Board of Options Exchange also declined comment. As a matter of policy, neither of the exchanges discloses whether they are conducting an inquiry into unusual activity.
Mr. Donovan said Boston Scientific didn't disclose the data widely at the time of the press conference because the time of the public release was set by the nonprofit Cardiovascular Research Foundation, the meeting sponsor. "We had no choice," he said.
To adhere to the policy, he said the company took "every reasonable measure" to keep the data under wraps until the set release time. Even scientific investigators from the 73 sites that participated in the trial did not get the information until a 12:30 p.m. meeting, after the press conference; everyone at that meeting was required to sign confidentiality agreements, the company said.
---- Peter A. McKay contributed to this article.
Write to Ron Winslow at ron.winslow@wsj.com and Laura Johannes at laura.johannes@wsj.com
Updated September 18, 2003 12:16 a.m.
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