Maybe RCMac would like to comment?
A quick comment -- I'm pretty tied up today.
I agree that plainly the SEC could go after these guys if it allocated the resources to do so, and that they probably won't in light of other demands (although they're in the process of increasing staff substantially). Since this is a pretty egregious case -- impersonating a doctor is surely a crime as well as enough of a fraud to invoke the securities laws -- it's at least conceivable SEC might get interested. The e-mail address is enforcement@sec.gov. Now, if a Congressional committee could get interested and hold a hearing . . . ?
At first blush, I'd think private actions under 10b-5 would presumably be available, but not likely to do much. Remember that for a private action, the plaintiff must be a "purchaser" or "seller" damaged by the bad conduct of defendant. This probably limits the potential recovery and complicates the fact pattern enough to make a class action unwieldy (in contrast, say, to purchasers while a false/misleading PR of 10-K is outstanding).
SEC has no such obstacles to its enforcement actions. (Some first amendment issues would crop up, however.)
My favorite bit of the article is this:
Mr. Risk's report on the Neurocrine sleep drug was inaccurate, says Mr. Scott, the clinical-trial-center executive. People familiar with the situation say the patient who was hard to rouse from sleep had tested positive for opiates the same day, and doctors blamed those, not the sleep drug. He was kicked out of the trial for violating its protocol. Neurocrine says the trial continues, and the company hopes to apply for marketing approval from the FDA next year. Its stock, meanwhile, has bounced from a high of about $54 in December to a low of $23.25 in June and the current level of $37.14.
Mr. Risk says he didn't know the patient had tested positive for opiates or that doctors weren't blaming the Neurocrine drug. He didn't check with Neurocrine before putting out the report, the 25-year-old analyst says, adding that he doesn't believe it's essential to call companies before attacking or lauding their products. "I'm young and inexperienced and not afraid to be wrong," he says.
'Risky'
Mr. Risk, who calls himself "Risky," basks in the results of his work. "The portfolio managers said we scared the Street," he says. "Creativity knows no bounds with us. We're tracking down the truth."
Steven Kirsch, head of Sterling's research division, says there's no legal obligation to call biotech companies for comment
In other words the little b*****d doesn't care whether he gets the story right, nor does his boss.
--RCM |
