"ADVR CAUGHT BETWEEN A ROCK AND A HARDPLACE"
Here's a perfect example! It's long but very interesting.
Dow Jones Newswires -- May 9, 1997
Drug Trials' Data Gaps
Often Mean Investors Trade
In Dark
By JESSE EISINGER
Dow Jones News Services
NEW YORK -- Something was missing from
Centocor Inc.'s (CNTO) press release last month
on the completion of its Crohn's disease drug trials:
the data.
The Malvern, Pa., biotechnology company said in
the press release that its drug, called CenTNF,
helped treat the painful inflammatory bowel
disease, but that was it. ''Full results of this study
will be released at an appropriate medical forum
in 1997,'' the statement said.
In the interim, investors have had to trade in the
dark, relying on the company's description of the
data as fair and accurate. Data wonks will be able
to see the first in-depth information on the trial
next week when Centocor's investigators present at
the Digestive Disease Week meeting in
Washington, D.C.
Centocor's tactic is common among biotech
companies, which often release the conclusions of
their studies first and full data weeks or months
later. Companies argue that they have to balance
the need for prompt disclosure for investors with
the natural slow course of scientific analysis.
For investors, the data gap creates another level of
risk in a sector rife with uncertainty, but they seem
resigned to the situation.
''You can't do anything about the basic problem,''
said Lisa Tuckerman, a portfolio manager for
Spears Benzak Salomon & Farrell. ''If the company
says it has statistical significance on its primary
endpoint, you got to presume'' the company is
telling the truth, she said. If not, ''they'd have a
liability issue.'' Reaching statistical significance,
which is the hurdle for efficacy and safety for
clinical studies, means that there is at least a 95%
certainty that the effect seen is due to the drug and
not to chance.
Even when biotechs give out more information
than Centocor did, there still is a risk that other
parties will have a different interpretation of the
numbers. The science of data analysis, after all, is
part art, experts say.
''The last thing you want to do is say: 'We did it.
High-five. Details to follow,''' said Boris Feldman,
a lawyer who advises biotech companies on
disclosure for Palo Alto, Calif., law firm Wilson
Sonsini Goodrich & Rosati. ''There can be aspects
to the trial that undermine the achievement.''
Take the well-known case of Cephalon Inc.
(CEPH) of West Chester, Pa. The biotech company
said in the fall of 1995 that the second trial of its
Lou Gehrig's disease drug Myotrophin confirmed a
positive first study, which had been made public
the previous summer. The press release covered
most of the major points analysts and investors
look for. After languishing in the single digits for
the first five months of 1995, the stock soared to a
high of 41 1/2 in the euphoria over the second-trial
results.
Several analysts, however, eventually came to think
that the second trial failed to replicate the first.
Last year, a Food and Drug Administration
advisory panel concluded that the second trial did
not confirm the first, though it recommended the
drug be approved for compassionate use. Thursday,
the same panel recommended against approval of
the drug for commercial use. Cephalon's
development partner on Myotrophin is Chiron
Corp. (CHIR), of Emeryville, Calif. Friday,
Cephalon's stock fell 37% to 12 5/8.
Biotech companies say they have little choice but
to initially release only the results, and not the
complete data, from clinical trials. For one, the full
data take a while - sometimes months - to analyze.
The Securities and Exchange Commission, however,
requires prompt disclosure of any material event.
The FDA, on the other hand, casts a wary eye on
any statements from companies about their clinical
results. Not surprisingly, data interpretation and
dissemination has been a central issue in numerous
shareholder lawsuits against biotech companies.
''It's a serious, serious problem. Many people use
the phrase, but this is a true Catch-22,'' said
Howard Asher, who runs a San Diego clinical
research company called Advanced Bioresearch
Consultants.
''The FDA and the SEC rules are in direct conflict
with each other,'' said Stephen Push, a spokesman
for Cambridge, Mass., biotech Genzyme Corp.
(GENZ). ''We've taken the position - and the FDA
doesn't agree with us and we are willing to risk a
warning letter - that we have a duty to keep
investors informed.''
Established pharmaceutical companies, which are
less dependent on a single drug for their financial
future, have more leeway than small biotech
companies. They generally can wait to release any
data on their clinical trials until a full presentation
at a scientific meeting. Thus, they avoid
antagonizing the FDA.
''If the FDA had its way, it would probably not let
disclosure until all the studies were completely
done,'' Asher said.
Another major reason for the data delay is that the
scientists on the trials participate partly in
exchange for being able to publish the results and
present them at major medical conferences,
enhancing their own prestige. If the data are put in
a press release and then widely disseminated by
the mainstream media, major scientific journals
will be loath to publish the study, companies say.
Given the complexities, some biotech companies,
like Centocor, resort to thumbs-up, thumbs-down
statements without the details. ''The nuances of the
trial - the dose-response, the duration of effect -
that wasn't necessary for investors to know whether
the technology worked or not,'' said Paul Wulfing,
Centocor's treasurer. ''It's a tightrope. But it's one
that, at this point, we are willing to walk.''
Sometimes companies lose their balance. Genzyme
took a tack similar to Centocor's with its surgical
anti-scarring products, Seprafilm and Sepracoat. In
January 1995, company Chairman and Chief
Executive Henri Termeer said the results of its first
trial of the Saran Wrap-like Seprafilm ''exceeded
our expectations. They are highly significant both
statistically and clinically.'' Genzyme's stock soared
as the company repeatedly talked about the
''market opportunity'' of the products as a
approaching a billion dollars annually.
When Genzyme later that year announced its
Sepracoat trial results - but not the data - Termeer
was quoted in the press release as saying the two
products ''promise to provide tremendous benefits
to surgical patients.''
In late 1995, when the company released the data
on Seprafilm, investors were disappointed with the
degree of anti-scarring in the trials. The stock
began a decline from its December 1995 high of
slightly more than a split-adjusted 35, from which
it has yet to recover. The stock has been in the
mid-20s all this year. And though Seprafilm was
cleared for sale in the U.S. in August, it has yet to
contribute meaningfully to the biotech's revenue or
earnings.
Sepracoat's fate was worse. Though Genzyme said
its trials reached statistical significance, the FDA
disagreed. On Monday, a Food and Drug
Administration panel rejected Sepracoat, saying the
company hadn't presented enough evidence that the
product worked. ''We have no regrets. We still
maintain that we g
Biotech companies say they have little choice but
to initially release only the results, and not the
complete data, from clinical trials. For one, the full
data take a while - sometimes months - to analyze.
The Securities and Exchange Commission, however,
requires prompt disclosure of any material event.
The FDA, on the other hand, casts a wary eye on
any statements from companies about their clinical
results. Not surprisingly, data interpretation and
dissemination has been a central issue in numerous
shareholder lawsuits against biotech companies.
''It's a serious, serious problem. Many people use
the phrase, but this is a true Catch-22,'' said
Howard Asher, who runs a San Diego clinical
research company called Advanced Bioresearch
Consultants.
''The FDA and the SEC rules are in direct conflict
with each other,'' said Stephen Push, a spokesman
for Cambridge, Mass., biotech Genzyme Corp.
(GENZ). ''We've taken the position - and the FDA
doesn't agree with us and we are willing to risk a
warning letter - that we have a duty to keep
investors informed.''
Established pharmaceutical companies, which are
less dependent on a single drug for their financial
future, have more leeway than small biotech
companies. They generally can wait to release any
data on their clinical trials until a full presentation
at a scientific meeting. Thus, they avoid
antagonizing the FDA.
''If the FDA had its way, it would probably not let
disclosure until all the studies were completely
done,'' Asher said.
Another major reason for the data delay is that the
scientists on the trials participate partly in
exchange for being able to publish the results and
present them at major medical conferences,
enhancing their own prestige. If the data are put in
a press release and then widely disseminated by
the mainstream media, major scientific journals
will be loath to publish the study, companies say.
Given the complexities, some biotech companies,
like Centocor, resort to thumbs-up, thumbs-down
statements without the details. ''The nuances of the
trial - the dose-response, the duration of effect -
that wasn't necessary for investors to know whether
the technology worked or not,'' said Paul Wulfing,
Centocor's treasurer. ''It's a tightrope. But it's one
that, at this point, we are willing to walk.''
Sometimes companies lose their balance. Genzyme
took a tack similar to Centocor's with its surgical
anti-scarring products, Seprafilm and Sepracoat. In
January 1995, company Chairman and Chief
Executive Henri Termeer said the results of its first
trial of the Saran Wrap-like Seprafilm ''exceeded
our expectations. They are highly significant both
statistically and clinically.'' Genzyme's stock soared
as the company repeatedly talked about the
''market opportunity'' of the products as a
approaching a billion dollars annually.
When Genzyme later that year announced its
Sepracoat trial results - but not the data - Termeer
was quoted in the press release as saying the two
products ''promise to provide tremendous benefits
to surgical patients.''
In late 1995, when the company released the data
on Seprafilm, investors were disappointed with the
degree of anti-scarring in the trials. The stock
began a decline from its December 1995 high of
slightly more than a split-adjusted 35, from which
it has yet to recover. The stock has been in the
mid-20s all this year.
Although Seprafilm was cleared for sale in the
U.S. in August, it has yet to contribute
meaningfully to Genzyme's revenue or earnings.
Sepracoat's fate was worse. Though the biotech
said its trials reached statistical significance, the
FDA disagreed. On Monday, a Food and Drug
Administration panel rejected Sepracoat, saying the
company hadn't presented enough evidence that the
product worked. ''We have no regrets. We still
maintain that we got statistically significant
results. Unfortunately, the FDA reviewer didn't
agree,'' said Genzyme spokesman Push.
Spears Benzak manager Tuckerman, a Genzyme
bull, doesn't blame the company. Instead, she
thinks Wall Street analysts were overexuberant
about the products' prospects. ''Maybe the company
should have been more aggressive in toning down
analysts.'' She added, ''It comes back to being
conservative at the end of the day.''
The most problem-causing releases are the ones in
which data are characterized as encouraging or
promising without numbers or even a statement
about statistical significance, said disclosure
lawyers. Sometimes, these are releases about
interim looks at trials. By the end of the trials, the
results can change. ''That type (of release) is
troubling because it is vague,'' said Jeff Marcus, a
New York lawyer for San Francisco firm Morrison
& Foerster.
Most biotech companies do well within the
strictures of the process, observers said. ''Most of
them do it right. They are very sophisticated about
what it means,'' said Wilson Sonsini lawyer
Feldman.
Disclosure lawyers reading over Centocor's press
release said the company disclosed enough
information for investors.
''The issue is whether there was adequate
information to make an investment decision,'' said
Marcus. He said an indication that the
announcement was adequate was that analysts felt
comfortable making positive comments and some
firms, like Cowen & Co. and Merrill Lynch & Co.,
upgraded the stock on the news.
Centocor said in its April 4 release that it
reached a statistically significant result on its main
goal, or primary endpoint of its trial. CenTNF
closed the number of open fistulae - abnormal
passages that pass from one organ to another or
out to the skin - by ''at least 50%.''
Centocor did not give indication of whether that
reduction was 51% or 99% or somewhere in
between, an illustration of the comparison with the
placebo group, or any sense of the duration of
effect. However, the company did say that the data
were consistent with its earlier clinical trials that
have been made public.
Centocor Treasurer Wulfing said that Centocor
is particularly sensitive to the disclosure issue
because a previous controversial drug the company
had in development for the infection syndrome
called sepsis failed to get approved.
''Looking back, we were a young company, a bit
naive. We are more conservative than we were in
the past,'' said Wulfing.
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