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Early Data Peek Puts Esperion Shares in a Jam

This is a bonus column from Adam Feuerstein, whose commentary usually runs only on RealMoney. We're offering it today to readers. To read Adam's commentary every day, click here for information on a free trial to RealMoney.

Esperion Therapeutics (ESPR) fell almost 30% Monday, because some investors -- subscribers to a major medical journal -- had the first look at highly anticipated clinical data on the company's arterial plaque-reducing drug, ETC-216.

Evidently, these investors -- who had early access to a study published in this week's issue of the Journal of the American Medical Association -- weren't happy with the results. The heavy selling of Esperion shares on Monday erased about $200 million from the company's market value. The stock fell another 1% on Tuesday.

Why did these investors get a trading advantage over everyone else? Because rules enforced by JAMA prohibit companies like Esperion from speaking publicly about journal articles until the official publication date. The same restrictions are applied to the media.

But no such rules apply to JAMA subscribers, who typically get their issues by mail before the embargo is lifted. Lucky them, I guess. If they invest, JAMA rules provide them with an easy way to trade before information is widely disseminated in the market -- yet another example of how medical research organizations and scientific journals facilitate the selective disclosure of material, market-moving medical research.

I called JAMA to discuss the issue, and quite frankly, I was surprised by the response, or lack thereof. JAMA's editor-in-chief, Dr. Catherine DeAngelis, refused to talk to me, but a spokeswoman said the financial markets are not JAMA's concern. JAMA is focused on publishing medical research, she said, so it doesn't worry about whether that research is being used by some people to trade stocks.

I guess no one at JAMA has ever heard of Regulation Fair Disclosure.

Esperion isn't entirely blameless. The company was fully aware that its clinical data were getting out into the market on Monday, but it remained silent. Like JAMA's editor-in-chief, Esperion management wouldn't discuss the issue. An Esperion spokesman would only say the company was bound by the journal's rules and wouldn't be able to discuss the ETC-216 data until a Tuesday afternoon conference call after the embargo lifts.

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