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The ASCO disclosure dance


Nothing 'fair' in this disclosure

There is arguably no bigger medical conference for biotech than the American Society of Clinical Oncology (ASCO) conference held in early June of each year. More market-moving news is released at this cancer conference than perhaps any other throughout the year - though the two big cardiology conferences do come close.

Scientists come to ASCO and present abstracts of their research. These abstracts amount to a few hundred words describing the results of clinical trials and lab experiments. The most important of these abstracts will be chosen to be the subject of an oral presentation where the author provides expanded information about the research to his or her peers. Others will be chosen to be presented in "poster" form, which amounts to a large poster displaying additional information.

The information presented at these scientific conferences is material in the SEC meaning of the word. Critical, market-moving information on clinical trials is contained in the abstracts, oral presentations, and posters. This makes ASCO a hugely important event for investors, even though it is created for scientists.

The problem is ASCO could care less - especially this year - about investors and the fact that this information is material. They have no interest in making sure all investors have access to this material information at the same time. In fact, the way abstracts are disclosed this year enables ASCO members to profit from the non-uniform release of this information. This will cause incredible volatility in certain stocks, which is why this subject is fair game for the 'Ville.

For this year's ASCO, the book containing the abstracts will be sent to ASCO members in mid-May. ASCO has chosen to send the book only to members and not all conference attendees (anyone can go to ASCO if you're willing to pay the fee). Conference attendees can retrieve their book on June 3rd. Everyone else has to wait for the conference to be over on June 8th to see the abstracts. ASCO does not allow companies to release any information until after their oral or poster presentation is over.

Keep in mind this is material, market-moving information.

To be fair, ASCO has a non-disclosure policy that comes along with the abstract book. This policy prohibits sharing of the information with anyone and specifically prohibits those who get early copies of the book from using the information to trade stocks until the abstracts are released to everyone after the conference is over.

That's fantasy. Let me explain the reality.

There are firms whose sole reason for existence is to pay honorariums to doctors so the doctors' expertise can be tapped for investing purposes. As part of many of these arrangements, the doctors share their early access to scientific information. The firms paying the honorariums pass this information to their hedge fund and mutual fund clients, giving them advance notice of material information. This is exactly what will happen when the ASCO abstract books are sent out in mid-May. Doctors will pass this information along to the firms paying these honorariums. This information will work its way into the market and certain biotech stocks will start dancing as a result.

ASCO tried to address this at the 2003 meeting by making the book available only at the conference. This was broadly unpopular for two reasons:

The first reason is this book is huge. The 2003 abstract book has 905 pages of abstracts - over 3600 in all. The meeting floor plan is also vast. You need to have access to the abstract information ahead of time to develop a plan of action for viewing the oral and poster presentations. This is a legitimate reason why you'd want to release the abstract information early.

The second reason is ASCO members lost out on their honorariums. I overheard two doctors grousing about it, both noting they lost over $10,000 each because they couldn't provide their benefactors with an early peek at the ASCO abstracts.

ASCO heard these complaints and put the matter to a vote of its members. The members, not surprisingly, voted to release the abstract books in mid-May but only to ASCO members. Non-member attendees don't get the book until ASCO opens for business on June 3rd.

When I spoke with a member of ASCO media relations staff about this, they said the reason for the change was to give ASCO attendees a chance to determine their schedule ahead of time. When pressed as to why not all attendees got the book instead of only ASCO members, the only response was to say that's what ASCO members wanted.

If the going rate for getting an early peek at the ASCO abstract book is over $10,000, no wonder the ASCO membership voted the way they did.

ASCO also likes to say the reason for the selective disclosure is the information is intelligible only to other scientists. Releasing the information to everyone is dangerous unless a trained scientist is there to interpret it for the masses. This is bullpucky. Give those of us who study biotech for investing purposes a little credit, not to mention the fact that some very accomplished scientists and doctors work in the investing industry.

Where the SEC is in all of this is a mystery to me. Because ASCO publishes this information instead of the companies, this selective disclosure of material information seems to fall through some loophole in Reg. FD. Interestingly, most of these abstracts contain at least one author employed directly by the company - often a member of the executive team. Why this, at least, doesn't fall under the auspices of a Reg. FD selective disclosure of material information is a mystery to me.

The companies are in a serious Catch-22. If they release this material information before ASCO rules allow it, they risk being banned from the conference. This would severely hamper future marketing and development efforts. Many companies I speak with are genuinely distressed about this issue, but they are simply stuck. The SEC should provide them with cover by mandating the companies release the material information under Reg. FD. While the SEC has no jurisdiction over ASCO, mandating that companies release the information uniformly would cause ASCO to change their policies or risk having all research conducted on drugs in development by publicly traded companies pulled from their conference.

I will note nearly all the other major conferences have addressed this problem by releasing the text of the abstracts on their web sites at the same time for everyone. This is a simple solution to the problem and only those members who accept honorariums for breaking disclosure rules suffer.

If you're still with me at this point, you need to be aware of five market-moving dates related to ASCO.

1. Itinerary planner available - ASCO made the itinerary planner available on their web site ( yesterday. The only information there will be author names and abstract titles - the abstract text will not be available. The titles are rarely descriptive enough to reveal whether a particular set of research is positive or negative. If a company unexpectedly submits an abstract for an important clinical trial, however, it may move their shares.

2. Selective abstract disclosure - In mid-May, ASCO abstracts are released to ASCO members. These will immediately filter into the hands of market participants and stocks will start moving within a day or two of the mailing.

3. Thursday, June 3 - This is the first time all ASCO attendees can pick up their abstracts. Stocks will immediately start moving during the trading day, picking up steam into Friday.

4. Friday, June 4 - You will see the first press releases from companies on ASCO-related material. Poster and oral presentations begin today and the ASCO news embargo on the specific abstract will be lifted after the presentation is completed.

5. Tuesday, June 8 - The most newsworthy abstracts will likely be disclosed via press release since all oral and poster presentations are over by noon (New Orleans time) on Tuesday. There will be a bolus of additional press releases, however, as any abstract not picked for a poster or oral presentation is now out from under the embargo. Some time on the 8th or 9th, ASCO will allow everyone access to full-text abstracts on their web site.

Few analysts or media outlets will break ASCO's embargo and publicize abstract contents early. To do so risks being banned from attending ASCO, which can be a serious problem for anyone who covers the biotech space. We are not aware of anyone who has been banned for this reason, but ASCO can always start enforcing the policy at any time. For this reason, only those who are able to pay the honorariums get the advantage of early access.

Hopefully the SEC will realize the market abuses surrounding medical conferences (and medical journals) and make a stand against this kind of selective disclosure. Until then, realize ASCO's 2004 disclosure policy will create serious volatility at the key times I outlined above. Be vigilant around those dates.

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