The American Society of Clinical Oncology is taking steps to clamp down on the selective disclosure of nonpublic research data prior to its big cancer meeting in May. This is a significant step for the medical group, which runs one of the most important and closely watched scientific meetings of the year. Shares in biotech and pharmaceutical companies rise and fall based on drug research results presented at the ASCO annual meeting, slated this year to run May 18-21 in Orlando, Fla. As TheStreet.com 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 as this year's meeting approaches, ASCO officials are acknowledging for the first time that its previous policies ran counter to the spirit of the law, and they're trying to do something to stop it. Whether ASCO will be successful is still an unanswered question.
New Confidentiality Policy
ASCO will not comment on its new policies, but TheStreet.com has obtained a letter written in February to all companies that have submitted research for the annual meeting. In the letter, ASCO acknowledges that information contained in its research abstract book has been distributed and publicly discussed prior to the meeting. To stop this, the group is instituting a new confidentiality policy that will govern the use of abstract information. ASCO is also prohibiting the dissemination of any abstract reprints before the meeting. "Recently, the Securities and Exchange Commission has stepped up its efforts to ensure that nonpublic research data is not selectively released," the letter begins. After detailing the above-mentioned changes, the letter ends by stating that, "although ASCO is not subject to the new SEC regulations regarding fair disclosure, this change does help to align our Society's policies with the spirit of those SEC regulations." Laura Livingston, ASCO's deputy director of communications, confirmed the letter but would not comment on its contents, including providing specifics on the new confidentiality policy. "We will make these changes public after we've communicated them to our members," she says. ASCO expects that to happen by mid-April, when research abstracts will be released to people who have preregistered for the annual meeting.
Will It Work?
Without knowing how strict ASCO's confidentiality clause will be, it's hard to judge the effectiveness of the new policies. For instance, it's not known whether Wall Street analysts will be prohibited from writing research reports that recommend stocks of presenting drug companies based on information they get from the research abstracts. In past years, ASCO has allowed this practice to go on unfettered, allowing the institutional clients of investment banks to get a leg up on ASCO stock tips. 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, TheStreet.com was barred from attending ASCO's meeting after writing about ASCO research data contained in Wall Street analysts' reports. This restrictive policy is still in place this year, and TheStreet.com 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. And no confidentiality policy, no matter how strict, will stop aggressive fund managers from gaining access to the ASCO information. This year's meeting is still two months away, but buzz is already building. It's been a tough year in the drug and biotech sectors, so many fund managers see ASCO as an even more important catalyst for the second half of the year. Companies like Genentech ( DNA), ImClone Systems ( IMCL), AstraZeneca ( AZN) and Cell Therapeutics ( CTIC) are all expected to release important new cancer drug research at this year's meeting. In years past, ASCO has published its research abstracts online, available only to its members. But passwords to the private site are very easy to come by for savvy buy-side fund managers. They're not so easy to get for the average investor. To get around this problem and level the playing field, 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. ASCO's Livingston would not comment on whether her group is considering this approach this year.