The New England Journal's executive editor, Dr. Marcia Angell, said that the publication is mailed out a week ahead of the embargo date, and most subscribers receive it on a Thursday. Journalists who have agreed to abide by the embargo are mailed their copies first-class and get it even sooner.
"There's no special deal for analysts," Angell said. "We want to get it to our subscribers so they have full information in front of them at about the time their patients hear about it through Dan Rather or Tom Brokaw. . . . We don't have control over analysts.
"We are not responsible for the stock market. We are not an arm of the SEC. That's not really what our focus is, and there is not much we can do about it," Angell said.
That proved true with another publication in mid-August. The Journal of the American Medical Assn., with a worldwide circulation of 700,000, published a major study of the impact of estrogen replacement therapy on post-menopausal women with coronary heart disease. The researchers found that, contrary to expectations, taking the hormone replacement treatment did not reduce the risk of heart attacks and other heart complications, but did result in a higher incidence of dangerous blood clots and gall bladder disease.
The study was sponsored by Wyeth-Ayerst, a division of American Home Products Corp. of Madison, N.J., and a leading manufacturer of hormone replacement pills. The results were clearly a disappointment to the large pharmaceutical company.
Jeff Molter, director of science news at the AMA, said the details of the study were being circulated before the journal's release time in an e-mailed stock-tip newsletter called Pharmafool. Molter said he was unable to find the authors of Pharmafool and the journal decided not to lift its embargo. As a result, the general public--and most investors--had to wait several hours for access to the information.
Molter said that he and others at the AMA are concerned about word leaking out to speculators, but cannot always stop that from happening. "The purpose of the embargo is to educate and inform journalists about the medical information," he said.
The aim of the SEC is to "keep people from getting an unfair informational advantage that is not through skill or diligence of their own," said Thomas C. Newkirk, associate director of the SEC's enforcement division.
The commission has a variety of ways of uncovering insider trading, including the agency's own market surveillance and referrals of suspect trading from securities dealers and stock exchanges.
Beginning in 1996, the SEC has brought a series of insider-trading cases against medical researchers and others associated with biotechnology firms.
In June, for example, the SEC settled one of those cases--a civil complaint against Changnian Liu, who once worked as a scientist at ImmunoGen Inc., a Norwood, Mass.-based biotech firm.
The commission alleged that Liu purchased 30,000 shares of the company stock in the days leading up to the 1996 publication of a study in another esteemed journal, the Proceedings of the National Academy of Sciences. The study showed that one of the company's drugs had completely eradicated human colon cancer tumors grown in mice. When the embargo was lifted and the news was released, share prices rose by more than 60%. Without admitting fault, Liu agreed to pay back $41,700 in what the SEC described as illegal trading profit, plus $48,333 in penalties and interest.
"The lesson to be learned from all these cases is that if you trade on inside information, on the results of medical tests, the SEC is likely to find out and prosecute you," said Peter H. Bresnan, assistant chief litigation counsel at the commission. "And the penalties will be severe."
Geron Stock Rises on Research News
Geron, from the Greek word for "old man," was founded in 1992 to exploit the growing research into what causes cells to die--and new theories about how to reverse or retard that process.
The company, which went public in 1996, has raised $138 million from public and private sources. And like many biotechnology companies, it has yet to make a profit.
A chart of its share price has a mountainous look--each jagged peak corresponding to the release of another publication in Science, the weekly journal of the American Assn. for the Advancement of Science in Washington, D.C.
Such price variability is common among the many publicly traded biotech companies, which are bought and sold on the basis of promising research results, not on sales. Most have no approved products on the market.
On Aug. 14, 1997, Geron announced that Nobel laureate Thomas Cech of the University of Colorado had cloned the gene for human telomerase--what it described as an "immortalizing enzyme." The price per share, which stood at $6.50 before the announcement, more than doubled the next day.