My colleague, Pieter Droppert, who writes the Biotech Strategy Blog, posted an interesting analysis this morning on the Matrixx Zicam case currently being reviewed by the United States Supreme Court (SCOTUS). At the heart of the issue is whether or not adverse events should be disclosed to investors, even if not statistically significant. The way the questioning appears to be going from the Justices so far, it looks like they believe they should be.
The reason I bring this topic up is because it has important implications for Pharma and Biotech companies.
Recently, several obesity drugs were reviewed by the FDA Advisory Committees. It’s not an area I usually follow, except that one of them, Arena Pharmaceuticals ($ARNA), caused a stir when many analysts and investors were surprised by the FDA briefing documents. In it, was a hidden gem – the drug in question appeared to have an increased risk of developing cancer in rats – but the company hadn’t publicly revealed this fact. Why? Because the CEO, Jack Lief, and the Board didn’t think it was material.
Inevitably, a lot of investors were rather dismayed not to have known that information before deciding whether or not to invest in the company. Most of the industry watchers on Twitter, including myself, were certainly a little flabbergasted to hear it for the first time from the FDA.
Of course, the drug did not get recommended for approval, partly because of the marginal efficacy data, but also there was genuine concern over heart valve problems, and it is hard to imagine that the undeclared rat cancer didn’t factor in either. In the end, a complete response letter (CRL) was issued.
I love Adam Feuerstein of The Street’s tweet around that time:
Now, if we fast forward to the SCOTUS discussion on this very issue, it is not hard to see that this kind of information ought to be revealed to allow investors to make a rational decision on whether to invest or not.
The final SCOTUS decision is expected by the summer, so it will be interesting to see what happens if they decide that adverse events, whether significant or not, should be declared. personally, I think they should and people can then do their own due diligence and research on whether they think it increased their risk tolerance or not.
This decision may well have a far reaching impact on the Pharma and Biotech industry and force company Boards to be far more rigorous and diligent in providing relevant information to potential investors.