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When to Tell the World About the Good News : Why drug companies have a special responsibility

June 25, 1995

Probably nothing is more heartbreaking for people who suffer from debilitating diseases than to hear of a promising new drug or treatment long before its efficacy has been conclusively proven. This phenomenon has been magnified enormously in recent years by the revolution in biotechnology, particularly where it intersects with Wall Street.

Consider, for example, the case of Cephalon Inc. of West Chester, Pa., and its highly touted new drug for amyotrophic lateral sclerosis, or ALS, a devastating neuromuscular disorder commonly known as Lou Gehrig's disease. Cephalon staged a news conference and stock-analysts briefing in New York on June 12 to trumpet news that the drug, Myotrophin, had slowed ALS's inexorable deadly progression in clinical trials in North America. Though not a cure, the results doubled the price of Cephalon stock that day--and stirred excitement among patients and families.

APPROVAL FAR AWAY: Yet the company will not apply for approval from the Food and Drug Administration before the end of the year while it conducts further tests, and many drugs founder in final studies. Some top ALS researchers had urged Cephalon to avoid the publicity until its research had been published in a peer-reviewed scientific journal. Cephalon says it brought in outsiders to do a confidential internal peer review. But the only disclosure Cephalon has yet made to other medical experts was a slide show at a closed meeting in France two days before the dog-and-pony show in New York.

Cephalon officials say they were obliged under securities laws to release any "material" information about the company to shareholders as soon as possible. The issue has much to do with the peculiar economics of the biotechnology industry.

Still, Cephalon is highly regarded even by industry critics like Dr. Lewis P. Rowland, a top ALS expert at the Columbia-Presbyterian Medical Center in New York. He faults the company for seeking lay publicity but says he is nonetheless rooting for Myotrophin because "there is nothing else out there."

Only eight years old, Cephalon is cash-starved. It lost $36 million last year and had to abandon a $20-million stock offering last January because its stock had fallen so low. The company needed good news and perhaps can be forgiven for shouting it out. (A troubling aspect is the unusually high volume--roughly 35 times normal--of Cephalon stock traded the week before the announcement. The company says this reflected routine investor speculation before major news. Even so, we think the Securities and Exchange Commission might want to raise questions.

PATIENTS FORGOTTEN: Earlier this year researchers criticized Rhone-Poulenc Rorer Inc. for premature release on another ALS drug, Rilutek. And ICN Pharmaceuticals Inc. of Costa Mesa has been embroiled in controversy over the circumstances under which its chairman, Milan Panic, sold $1.24 million worth of ICN stock while delaying release of news that federal regulators had rejected a major hepatitis drug made by ICN.

The issue has been drawn mostly in terms of the tension between demands of basic researchers for strict scientific peer review and the need of innovative companies to stimulate investment and satisfy SEC disclosure rules. Often forgotten in all this are the needs of patients, their families and doctors. The Tucson-based Muscular Dystrophy Assn., which promotes research and treatment for 40 neuromuscular diseases including ALS, is planning a conference on how better to release data to the public.

The FDA lacks jurisdiction over drugs until approved for marketing. It is thus incumbent on the drug companies and representatives of the afflicted to come up with a solution that both encourages investment in promising new drugs and also protects the ill, who thrive only on hope, from the cruelties of the stock market.

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