Securities Enforcement/Life Sciences
AUGUST 2004
Is the SEC Exploring Pharmaceutical
Companies’ Disclosure of Clinical Trial Results?
Over the past six months, regulators and plaintiffs’ lawyers
without necessarily having hard evidence of misconduct.
have increased their scrutiny of publicly owned
“Wildcatting” is occurring despite the fact that the SEC has
pharmaceutical companies’ disclosure of clinical trial results.
never been required to make a threshold showing of
The Securities and Exchange Commission appears to be
reasonable suspicion, probable cause or other level of proof
joining the fray. Of note:
to justify the commencement of an investigation.
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This month, a publicly traded pharmaceutical company
acknowledged that the SEC is investigating whether the
company (and its chairman) had a duty to disclose
important but unexpectedly negative preliminary clinical
trial data as soon as the information became available,
rather than two weeks later. The company has stated that
the delay was necessary in order to confirm and clean up
data before public disclosure. This investigation follows a
formal probe by the SEC into alleged insider trading in
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Because the SEC is interested in improving corporate
transparency for investors, it may take a keen interest in
ensuring that pharmaceutical companies’ disclose clinical
trial results in a timely fashion. In essence, the SEC may
view a disclosure delay as an omission of material
information from the company’s financial statements and
potentially violative of the antifraud provisions of the federal
securities laws.
the same company’s securities while the clinical trial data
In determining whether to disclose clinical trial results,
remained undisclosed.
companies should consider, among other factors, whether:
In June, New York State Attorney General Eliot Spitzer
sued GlaxoSmithKline PLC, alleging that the company
suppressed efficacy and safety results for Paxil, one of its
blockbuster drugs.
(1) the results of clinical trials have been disclosed in medical
meetings, journals and letters to doctors; (2) the drug trial
information is likely to be considered “material” to an
investor; and (3) the drug’s success could be crucial to the
company’s financial liquidity and/or its scientific credibility.
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Another publicly traded company has been privately sued
If the answer to any of these questions is yes, prompt
in Massachusetts federal court over its alleged issuance of
disclosure may be necessary.
false and misleading press releases regarding the clinical
trials of one of its compounds.
In addition, companies may need to develop explicit policies
requiring notification of the company’s general counsel by
The attention of the SEC to this issue is not surprising, given
the relevant R&D team when results on a key trial are
Attorney General Spitzer’s interest, the involvement of the
imminent. This will enable the legal department to react to
plaintiffs’ bar, the interest of the financial media, and the
prevent innocent (but embarrassing and perhaps even legally
demand for greater disclosure of clinical trial results (see,
actionable) written or oral statements by company officials.
e.g., Leila Abboud, “Lilly Plans Broad Access to Results on
Its Drug Trials,” The Wall Street Journal, August 3, 2004).
DEREK M. MEISNER
The SEC has developed a new program termed “wildcatting,”
dmeisner@kl.com
617.261.3114
EILEEN SMITH EWING
where it investigates entire industries to find possible abuses
Kirkpatrick & Lockhart LLP
eewing@kl.com
617.951.9227
Kirkpatrick & Lockhart LLP is comprised of more than 800 lawyers practicing in offices located in Boston, Dallas,
Harrisburg, Los Angeles, Miami, Newark, New York, Pittsburgh, San Francisco and Washington. K&L currently represents or
recently has performed projects for over half of the Fortune 100; 21 of the 25 largest mutual fund complexes or their
investment managers; and 18 of the 20 largest U.S. bank holding companies. Our practice is national and international in
scope, cutting edge, complex, and dynamic.
K&L’s Securities Enforcement Practice is among the largest and most active in the country. We have many years of
experience representing public companies and their directors and officers who have become the subject of investigations or
enforcement proceedings by the Securities and Exchange Commission, state securities regulators, or industry self-regulatory
organizations like the National Association of Securities Dealers, Inc. and the New York Stock Exchange. A number of our
attorneys (such as Derek M. Meisner, who was until recently a Branch Chief with the SEC’s Division of Enforcement) have
served in SEC staff positions and play leadership roles in professional and securities industry organizations. This enhances
our ability to provide focused advice on unusual and difficult securities disclosure, compliance, policy, litigation, and
regulatory issues.
K&L’s interdisciplinary Life Sciences Practice is a nationwide network of lawyers experienced in solving the complex legal
and regulatory issues facing our pharmaceutical, biotechnology, health care, and medical device clients. We practice in areas
as diverse as corporate and securities, intellectual property, antitrust, FDA and other regulatory compliance, litigation, real
estate, and tax law. Our clients range from tiny biotechnology start-ups to some of the world’s largest multinational
pharmaceutical companies, from medical research institutions to life sciences venture capital funds. The breadth of our
group—across legal practice areas, geographical regions, and industry sectors—keeps us abreast of new information of benefit
to our life sciences clients.
For more information about our securities capabilities in service of the life sciences industries, please contact one of the
attorneys listed below. Also, we invite you to visit our website at http://www.kl.com for more information on our Securities
Enforcement and Life Sciences practices.
BOSTON
Eileen Smith Ewing
617.951.9227
eewing@kl.com
Derek M. Meisner
617.261.3114
dmeisner@kl.com
LOS ANGELES
Thomas J. Poletti
310.552.5045
tpoletti@kl.com
NEWARK
Stephen A. Timoni
973.848.4020
stimoni@kl.com
NEW YORK
Nanette C. Heide
212.536.4813
nheide@kl.com
Lorraine Massaro
212.536.4043
lmassaro@kl.com
SAN FRANCISCO
Peter S. Heinecke
415.249.1077
pheinecke@kl.com
WASHINGTON
Alan J. Berkeley
202.778.9050
aberkeley@kl.com
Suzan Onel
202.778.9134
sonel@kl.com
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