how was the data so misinterpreted?
Obviously I am just speculating here, but I think the following two issues played a part:
1. The article showed no drug benefit relative to placebo. Semi-informed biotech investors are so used to this being the key measure that they assumed that the trial had really failed. I assume this was the basis for the early reports by TSC that the trial was really a failure.
2. The second issue was the size of the plaque reduction. The company CEO (who was apparently blinded to the study results) had suggested that this was likely a 10% effect, presumably based on the low p value and an assumed standard deviation that turned out to be high. When it turned out that it was only a 4% reduction, there was a natural assumption that the trial was disappointing. A 4% reduction does not sound impressive to someone who is not an expert in this area.
So my guess is that some big hedge funds jumped in based on this preliminary analysis. The first ones in still must have done well, particularly if they were not greedy and covered in the dip. The people that really got screwed were those that shorted on day two, perhaps swayed by the price decline and the TSC reports.
Notice that for long term shareholders that didn't panic, this whole affair has ended up pretty much a non-event.
The NYT article was time stamped 4:02, so obviously the writer was able to read, digest, and gush. In the meantime all the other tippees (g) were selling like crazy.
I suspect that there was prior disclosure to reporters, subject to embargo. My evidence for this is that ABC News first aired teasers for their story several days ago. So they had the benefit of discussions with the principal investigators.
Incidentally, reading the accompanying editorial in JAMA, it turns out that the idyllic Italian town with no heart disease is something of a myth. Turns out there is indeed heart disease, just not the levels that would be expected from the very low HDL levels.
I spoke to a neighbor who is a cardiologist specializing in lipid disorders. His view jibed with mine - this was an interesting experiment, but they still need to demonstrate clinical benefit. His other comment was that low HDL levels are a very significant issue that is only slowly being fully recognized by non-specialist doctors. (He is a Niaspan proponent by the way).
From a valuation point of view, the key now is whether this data is enough to persuade a pharma that a partnership with ESPR is a smart idea. The HDL play is one of the few obvious mid-term blockbuster opportunities left, and so maybe some hungry pharma will jump in early. (The most advanced drug I know of in this area is Pfizer's CP-529,414, a CETP inhibitor that I think is in Phase II).
Peter |
