The American Society of Clinical Oncology is taking new and somewhat draconian steps to eliminate the leaking of market-moving research abstracts prior to its all-important annual meeting in late May. The
leaking of ASCO research abstracts in advance of the well-attended cancer research meeting -- and the dissemination among Wall Street's institutional investors -- has skyrocketed over the last several years. This so-called "ASCO effect" has led to wild fluctuations in the stocks of biotech and drug companies as investors learn how experimental cancer drugs are faring in clinical studies. Bowing to the spirit of Regulation Fair Disclosure, ASCO on Friday announced a new, get-tough policy: Research abstracts will not be available until the first day of its annual meeting on Saturday, May 31, reversing a long-held policy giving organization members an early peek at abstracts. It's the second information-policy change for ASCO in as many years, following TheStreet.com's drawing attention to the effect of ASCO's disclosure of abstracts on the market during the 2000 meeting. Last year, ASCO tried to clamp down on the leaks, with no success, mainly because the nonprofit medical research group insisted on giving its dues-paying members -- but not the general public -- access to the research abstracts one month in advance of the meeting's kickoff. Not surprisingly, some of ASCO's members work on Wall Street, or are happy to share information with curious fund managers and sell-side analysts. That, of course, left retail investors in the dark, leading to criticism of ASCO's practices, mainly that the group was aiding and abetting the selective disclosure of nonpublic, market-moving information. ASCO, as a nonprofit, claims exemption from the Securities and Exchange Commission's Regulation FD. Attendees traveling to Chicago, the site of this year's gathering, will be handed the telephone book-sized "Meeting Proceedings" book -- chock full of research abstracts -- when they arrive at the convention hall. ASCO members not attending the meeting will be able to download abstracts off the Internet on the same day, after entering their passwords and agreeing to what ASCO calls a "double-click confidentiality policy."
"The SEC has been looking closely at scientific information that is not yet publicly available, but could potentially influence financial markets," ASCO said in its statement announcing the new policy. "In that light, advance mailings of abstract books for scientific meetings, such as ASCO's, which include preliminary results from clinical trials of investigational and approved treatments, have been the subject of growing concern and debate." ASCO officials could not be reached for comment. It remains to be seen whether ASCO's new policy really stops Wall Street from getting advance access to research abstracts, but some fund managers acknowledge the ASCO game just got a whole lot tougher. "This makes our job more difficult and makes the meeting more significant," says one hedge fund manager, who has long used early access to ASCO's research abstracts to gain a trading edge going into the meeting. Last year, for instance, savvy biotech investors were playing shares of Genentech ( DNA), ImClone Systems ( IMCL), Cell Therapeutics ( CTIC) and Millennium Pharmaceuticals ( MLNM) well in advance of the ASCO meeting, based on data found in the research abstracts. That meant by the time the meeting started, a good bit of trading profits to be had already were. But this year, if abstracts remain under lock and key, fund managers will have two days -- Saturday, May 31, and Sunday, June 1 -- to furiously download abstracts, attend presentations at which final data will be discussed, and formulate investment strategies in time for when trading begins on Monday, June 2. "Stocks are going to be extremely volatile that week," adds the aforementioned fund manager. Many other medical research organizations that deal with these same issues have resolved potential selective disclosure problems by releasing research abstracts to the general public and members at the same time, usually in advance of their scientific meetings. Some biotech industry professionals acknowledge that ASCO's new rules are tough, but still do the job by leveling the playing field when it comes to the release of important information.
"We commend ASCO for understanding industry concerns and working quickly to find a fair solution that can be acceptable to physicians, investors and publicly traded companies," says Neil Cohen, a Genentech spokesman. Says SG Cowen analyst Eric Schmidt: "This isn't a bad thing as long as there is equal and fair dissemination of the research abstracts. The past couple of years have been a real disaster for ASCO." Scott Gottlieb, a doctor and fellow at the American Enterprise Institute, disagrees. Gottlieb believes ASCO should have decided to make a general public release of its abstracts in advance of the annual meeting. Instead, ASCO's actions bolster his view that the group is more interested in preserving the importance of its meeting rather than actually helping doctors treat patients with cancer. "It seems ASCO is still in the business of restricting information, but now nobody can have it," says Gottlieb. "It still presumes average people are too stupid to interpret bottom-line results without the help of the conference. This will probably hurt the quality of the conference for its members, so I'm surprised
ASCO did it." ASCO's new policy does not make any mention of its embargo policy, which prohibits the media from publishing research-abstract data before the meeting, and even extends the prohibition to any information gleaned from analyst reports. ASCO has barred TheStreet from attending its meeting under a media credential for the last two years because TheStreet reported on ASCO research data contained in Wall Street analysts' notes, although the information was "embargoed" by the group.