This is an interesting article. Certainly one of the challenges of biotech investing is "de-spinning" a biotech company's PR.
FEATURE-Biotech press releases a Wild West of spin
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By Ransdell Pierson
NEW YORK, April 24 (Reuters) - It's the Wild West when it
comes to claims by biotech firms about drug trial results, and
U.S. regulators are doing little to rein in confusing or
exaggerated information in press releases that can dramatically
move share prices.
Clinical trials make or break a drug's chances of being
approved by the U.S. Federal Drug Administration, so investors
often bid up or dump shares based on news releases from the
nation's almost 350 publicly traded U.S. biotechnology firms.
"Sometimes they go and do more than presenting the facts"
in their press releases, said Leah Palmer, who heads the FDA's
Division of Drug Marketing Advertising and Communication.
"They make conclusions about how wonderful this is and how
excited they are about that. And they really exaggerate and
spin the results. We have taken some actions. But our resources
are limited. We need more bodies," said Palmer, who declined to
discuss specific biotech firms.
There is little real regulatory oversight of biotech press
releases about experimental drugs, which often contain avid
claims about clinical successes, according to analysts and
government officials. By contrast, companies must provide the
FDA with copies of all press releases about drugs that have
already been approved.
The FDA has written almost 1,100 warning letters in the
past year to food and pharmaceutical firms, though only a
handful deal with press releases involving clinical trial
results of non-approved drugs.
For its part, the Securities and Exchange Commission, in
charge of protecting the public against malpractice in the
capital markets, basically defers to the FDA to keep watch over
the legitimacy of claims found in biotech press releases.
ALEXION'S RISE AND PLUNGE
One company that sparked controversy this year was Alexion
Pharmaceuticals Inc. <ALXN.O On Jan. 23, the company issued a
release about the strong efficacy of its drug, pexelizumab, in
reducing death and heart attacks among patients undergoing
heart surgery. Shares of Alexion closed almost 25 percent
higher to $71.37 after the news was released.
Alexion said the positive preliminary results of clinical
trials were "unanticipated." Chief Executive Leonard Bell said
the data "substantially surpassed" pre-trial expectations.
"The market is always right," Bell told newsletter BioWorld
Today, indicating the suddenly higher share price of his
Cheshire, Conn-based biotech firm was on the money.
But the following week, Alexion's share price fell almost
in half after the company issued another press release saying
its drug failed its primary clinical objective, or endpoint, of
reducing small heart attacks and other complications.
As it turned out, the positive data highlighted in
Alexion's first press release referred to secondary trial data
involving only a subgroup of patients tested, not the primary
goal among all 914 patients tested. No mention of the failed
primary objective appeared in the first release.
Nevertheless, Bell told Reuters he had been forthright by
describing the failed objective in a telephone conference call
with industry analysts on the day of the first press release.
That call was also carried on the company's Web site.
"The most efficient means of getting out information is
probably not via a press release," said the former Yale
assistant professor of medicine, adding it was preferable to
releasing important information on conference calls.
TAKING LIBERTY WITH COMPLEX DATA
Biotech press releases, with their profusion of jargon and
statistics, can be devilishly hard to understand, thus enabling
companies to highlight relatively minor successes in a clinical
trial and downplay major disappointments.
"I wouldn't say many companies are trying to fool people,
but they want to paint the best picture they can without being
accused of lying. So I never judge anything by a press
release," said Peter Wen, co-manager of the Warburg Pincus
Global Health Sciences Fund. Instead, Wen said he relies on
interviews with physicians and top management of biotechs.
A case in point is Repligen Corp. <RGEN.O>, which on April
4 reported good and bad news in a press release on secretin,
the Needham, Mass.-based firm's experimental treatment for
autism -- a condition in which children have difficulty
developing normal social relationships.
Repligen's reported "Positive Initial Results" and
"statistically significant improvement" in its headline. But
the positive results were only secondary, while the primary
endpoint failed to prove statistical significance, a fact not
mentioned until the fifth paragraph of the release.
"In its headline, Repligen said the drug works. But it
actually missed the primary endpoint, which means the trial
didn't work. That's a little misleading" and could
unjustifiably raise the hopes of patient families, said Carl
Gordon, a drug analyst for OrbiMed Advisors in New York.
"The headline should have said the drug showed significant
benefits (only) against a secondary endpoint. By not doing
that, you could confuse non-expert investors who read the press
release and think the drug works and go out and buy the
company's stock," Gordon said.
Repligen shares plunged 30 percent the day of the release,
and remain in the doldrums. But Repligen Chief Executive Walter
Herlihy remains hopeful secretin will eventually prove itself.
He said Repligen may now have to go back to the drawing board
and conduct a new study -- which could take a year or longer.
"We had an obligation to say we didn't hit the primary
endpoint and we did so about as clearly as one could say. I
don't think there was any obfuscation," Herlihy added.
DOWNPLAYING BAD NEWS
Another headline that caused confusion was released Sept.
19, when Nabi Inc. (NASDAQ:NABI) cited the "successful reduction" in
bloodstream infections among patients taking its StaphVAX
vaccine against staphylococcus bacteria.
The first paragraph of the release cited "a dramatic
reduction" of infections during the first 10 months of the
study, but later said the trial had failed its primary endpoint
of showing significant benefits after a full year.
"We are excited by the data from this trial," Nabi chief
executive David Gury said in the second paragraph, adding that
the results gave him faith such a vaccine against staph
infections was feasible.
One national wire service and at least seven major U.S.
newspapers used glowing terms to report that the vaccine had
been effective, all failing to mention the trial had failed its
designated objective.
Gury said he believed Nabi's headline and claim of dramatic
reduction in infections was appropriate even though the trial
failed its primary endpoint. "The trial was not a home run
because we didn't get to where we wanted to be, but we clearly
have shown the vaccine provides protection," he told Reuters.
Michael Murphy, editor of the California Technology Stock
Letter, said many industries have become prone to "spin"
positive news and thereby drown out the bad.
"The biotech guys learned from the Internet guys and are
among the most egregious," Murphy said. "They're trying to put
the best spin on clinical progress and the objective is
obviously to minimize damage to their stock price."
Copyright 2001, Reuters News Service |
