August 15, 2017

Roche Holding AG shares jumped 6.5% on a single day in early March when the drugmaker said its new breast-cancer treatment, Perjeta, helped prolong average patient survival in a clinical study. 
 
But the stock gave up nearly all those gains three months later, when the Swiss company disclosed full details of the trial at a medical conference. The study, dubbed Aphinity, showed what some doctors said was only a marginal benefit for Perjeta, and investors, initially hopeful of a big sales boost for the drug, lowered their expectations.

The episode throws light on the peculiar drip-feed way drug companies often disclose the results of clinical trials. 
 
To comply with securities requirements of timely disclosure of material information, companies often issue brief "top line" news releases stating whether a study has met a goal, such as prolonging life in cancer patients or preventing heart attacks. Weeks or months later, however, companies often reveal the full details – such as the magnitude of a new drug's benefit – in medical-journal articles or at medical conferences. 
 
If positive top-line results aren't borne out in the subsequent details, investors sometimes lash out. In the Roche case, the disconnect triggered a shareholder lawsuit, filed in New Jersey federal court in June, claiming Roche misled investors and violated securities laws when it didn't immediately disclose that Perjeta's benefit was only modest. The suit seeks class-action status on behalf of investors who bought Roche shares during the three months between the top-line and full reports.

The window between top-line report and full disclosure is a risky time for drug-company insiders to trade shares. "To the extent that the executives are in possession of more material information regarding the clinical study that has not been disclosed yet to the investing public, then trading during that interim period is perilous," said Daniel Sommers, a securities-litigation attorney with Cohen Milstein Sellers & Toll in Washington. He said the two-step disclosure process runs counter to the logic of disclosure principles in federal securities law.

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