By Roger Mills, M.D.
Recently, a pharmaceutical executive raised an interesting question in the media. To paraphrase, he asked, “What should a corporate entity do when it has new information that is material to its financial situation and that new information is ‘under embargo’ until it is either published in a journal or presented at a scientific meeting?”
This question seems as if pharma researchers, particularly clinical researchers, could be caught on the horns of a dilemma, and being caught on the horns of anything is not a good place to be. Fortunately, with an understanding of the rules and some careful planning, researchers can largely pre-emptively mitigate these issues.
Understanding what “material to its financial situation” means is a reasonable place to start. The idea of disclosing “material information” represents the federal government’s attempt to require that companies disclose important information without flooding the public with trivial or irrelevant information. The purpose here is to protect investors. A Business Roundtable white paper states:
The standard for materiality articulated by the Supreme Court — “an omitted fact is material if there is a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote” — benefits investors in at least three ways. First, by filtering out irrelevant information, it helps to ensure that investors are not buried in an “avalanche of trivial information.” Second, it requires public companies to consider the information they are required to disclose based on their particular facts and circumstances. Finally, as changes occur in either the broader economy or within a public company, the information that is important to a reasonable investor changes, and the materiality standard requires public companies to adjust their disclosures.
Expanding on this final issue, the authors continued, “Since materiality is dependent upon whether information is important to a reasonable investor, it changes over time and provides a framework for addressing new issues and shedding issues whose importance has waned. As stated by the SEC, ‘[t]he federal securities laws are dynamic and respond to changing circumstances.’”
Federal regulations do not specifically require disclosure of information such as clinical trial outcomes. However, in addition, a public company is subject to the rules of the securities exchange on which it is listed.
I’m used to writing, “I am not a statistician, but …” in my peer-reviews. Here, I should clearly state, “I am not a lawyer, but” the protective intent of these laws and rules is serious: the prevention of circulating misleading information and the prevention of insider trading.
Turning to journal and meeting embargo practices, these policies have important benefits for researchers. Vivian Siegel of MIT listed them clearly:
- Multiple journalists get an equal chance to publish a well-researched and balanced article.
- The public gains access to the scientific article very close to the time they read the news story.
- Other scientific experts gain access to the scientific article as soon as the findings become news.
- A press embargo can protect a scientist’s claim for priority in the face of competition from other scientists and journals.
- The embargo system allows time for prepublication peer review.
So, let’s put these ideas together. Results of Phase 1 and early Phase 2 trials are not likely to be financially “material.” These small trials represent modest investments, and drugs in early clinical development will either be dropped or move on to additional, larger 2b or Phase 3 trials. There’s a long road ahead, even for a promising compound. Nonetheless, time spent planning for the release of results and formalizing the publication/presentation plan, even for a small trial, will prevent later misunderstanding.
For large, expensive, Phase 3 trials, the clinical research team must have fully developed contingency plans that include any partners in the work, such as a steering committee members or an academic research organization (ARO). Publication plans should be in place well before the anticipated end of the trial. An accurate description of “top-line results” will probably satisfy the disclosure requirements of the SEC or the major exchanges. The critical word here is “accurate.” You cannot be misleading. A clear understanding with the target journal editor or meeting organizer (or both) should address the release of “top-line” or preliminary data to meet the applicable stock exchange rules. Pre-publication access to the data must be strictly controlled and limited to a minimum number of individuals.
The message to the clinical research community is clear. Plan ahead. In almost all cases, the project is not complete until you have communicated the results in the peer-reviewed scientific literature. You are doing important work, and you must plan to present your data in a way that will enhance its credibility.
About The Author:
Roger Mills, M.D., is an academic cardiologist who recently retired from Janssen Research & Development, LLC. He has worked as a site investigator or study-responsible physician in all phases of clinical research from first-in-human trials to post-approval registries. He is now formally retired but remains active as a peer reviewer, consultant, and writer. His book Nesiritide: The Rise and Fall of Scios was recently named the Foreword INDIES 2016 Bronze Winner for science.