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August 26, 2002
Muddying the Water For Fun and Profit
I've been meaning to comment on some recent reports in the Wall Street Journal about the lengths that stock analysts have gone to get information on clinical trials. The main example was one David Risk of Sterling Financial (primarily a short-selling outfit, and quite sceptical of official company information.) Back in February, he signed on as a patient in a trial of a sleep-disorder drug from Neurocrine Bioscience, saying that he fit the profile that they were looking for. After his acceptance, he spent his time quizzing everyone he could buttonhole, then bailed and issued a "sell" on the stock. This was based on one verbal report of a bad reaction in one patient.
Other examples in the article had analysts calling the physician in charge of a trial, pretending to be fellow MDs, and asking for details on enrolling patients (while really trolling for inside data.) One Boston outfit, Leerink Swann & Co., pays physicians involved in clinical trials to have "discussions" with analysts (who pay Leerink Swann, of course.) These discussions supposedly don't violate confidentiality agreements, but I'd like to know what useful information could change hands in a conversation that didn't.
This sort of thing strikes me as being over the line. And the thing is, I like selling stocks short. I'm a bear by temperament; my facial expression in the stock market is a permanently raised eyebrow. Investors should view company press releases with suspicion, because most of the time it's fully deserved. Biotech drips with hype and falsely raised expectations. But that doesn't justify this behavior, which is indefensible on several grounds. Legally, the Sterling analyst entered the trial under false pretences, and he had to violate his non-disclosure agreements to write the report he did. If someone wants to make a case out of that, they probably could. I could add that he wasted the time of the administrators of the trial, and that these things are hard enough to run without jokers joining in.
On the scientific side, it's really idiotic to grab onto individual data points the way he did. As it turned out, the patient with the bad reaction to the Neurocrine test drug also tested positive for opiates, and was kicked out of the trial for violating its protocol. His case probably had no bearing on whether the drug was working or not, or how safe it was. It's a recurring pattern, though: the same analyst put out a strongly negative report on a Regeneron clinical candidate for obesity because one patient came down with Guillain-Barre syndrome during the trials. Did this have anything to do with the drug? Causality's a tough question, but the patient had had a recent flu vaccination and an upper-respiratory infection (both of which are risk factors for G-B.) No other patients have had the syndrome. There seems to be no reason to assume a connection between the two.
I can't stress this enough: finding out if a drug is safe is very difficult. Finding out if a drug is effective is very difficult. And that's if you're the one running the clinical trials.The only data that mean anything are those from rigorously controlled studies, done on as many patients as possible. And once the numbers come in, you have to sit down for an extended session of head-banging statistics to be sure that you know what they mean. Sure, you can go around picking out tiny bits of positive news (like some companies do) or tiny bits of negative data (as these examples have done.) But both of these are dangerous, stupid, and irresponsible. The people in the WSJ's article go on about how they're just trying to "uncover the truth." The truth is, they're just as bad as any deceptive PR department.
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