Updated from 1:17 p.m. EST
Just who is responsible for leaking research abstracts from the upcoming annual meeting of the American Society of Clinical Oncology?
(DNA) plummeted more than 12% Thursday after Wall Street traders got hold of one of these abstracts, which raised safety issues with its experimental cancer drug, Avastin.
ASCO officials told
Bloomberg News Thursday that the cancer research medical group is launching an investigation into the leaks. The research abstracts were not supposed to be released until Monday, April 15.
"I'm getting calls
saying they have seen the abstracts but they won't provide a copy or tell me where they came from," Michelle Kirkwood, a spokeswoman for ASCO, told
Bloomberg. "We are going the other route now, checking our servers and making sure our security hasn't been breached."
Well, ASCO shouldn't really need to look very hard to find the culprit. The leaker is ASCO itself.
Research abstracts for ASCO's May meeting -- filled with potentially market-moving information -- are easily obtained through a gaping hole in the medical group's Web site that has been open since Wednesday afternoon. The information is easily found with just one mouse click off ASCO's home page, as long as seekers have an ASCO membership password.
And who has these valuable passwords? The thousands of registered ASCO members have them, and of course, so does just about every savvy institutional investor on Wall Street.
has obtained a password and has been able to search and download research abstracts at will, even on Friday after ASCO officials were alerted to the problem.
"ASCO is looking for scapegoats to blame for the leaks? That's funny," said one hedge fund manager, who's been downloading abstracts since Wednesday. "No one hacked into their Web site, all the information is right there, out in the open."
Unfortunately, the abstracts are not available to the general investing public, who don't have ASCO membership passwords. And that must have been a very uncomfortable place for holders of Genentech on Thursday, as they watched the stock get hammered for no apparent reason.
ASCO did not return calls from
the leaks Thursday.
This whole incident raises serious doubts about ASCO's efforts to clamp down on the selective disclosure of nonpublic research data prior to its annual meeting, which from both a medical and financial standpoint is one of the most important scientific confabs of the year.
reported extensively last year, ASCO members and Wall Street insiders get early access to preliminary, but still market-moving, information contained in research abstracts. And they use that advantage to trade before the general investing public has any inkling of what's happening.
As a nonprofit organization, ASCO is not subject to Regulation FD, which the
Securities and Exchange Commission
designed to quash selective disclosure of market-moving information. But earlier this year, ASCO officials
for the first time that its previous policies ran counter to the spirit of the law, and they were trying to do something to stop it.
But even as ASCO pledged to wrap its 2002 research abstracts in a confidentiality agreement and prohibit its members from disseminating the research before the meeting, it persists in releasing the abstracts selectively. ASCO members -- and yes, Wall Street fund managers and investment banking analysts -- get first crack at the abstracts one month before the meeting starts. The general investing public is not offered the abstracts until after the meeting ends.
"My attitude is that if investors can operate under Regulation FD, then ASCO should operate under the same rules," says Robertson Stephens biotech analyst Mike King. "What purpose does ASCO think it's serving by making abstracts available to some people, but not everyone?"
To avoid any problems with selective disclosure, other medical research groups such as the American Society of Hematology, the American College of Cardiology and the American Association for Cancer Research make research abstracts for their meetings open to everyone via public Web sites.
But at the same time, ASCO prohibits the media from publishing research abstract data before the meeting, and it even extends this embargo to any information gleaned from analyst reports. Last year,
was barred from attending ASCO's meeting after writing about ASCO research data contained in Wall Street analysts' reports. This policy is still in place this year, and
has been warned by ASCO that it may be barred from the upcoming meeting if it once again reports in advance on what Wall Street analysts are saying about "embargoed" ASCO research.
With the biotech sector down as much as 20% this year, investors are looking for any edge they can to eke out profits. That makes this year's ASCO meeting even more important than usual, as investors try to scope out new drug prospects from companies such as
And as the trading in Genentech on Thursday demonstrates, Wall Street traders, assisted by ASCO, are salivating to play their advantage, while retail investors appear to be on the outs.