Biotech’s Disclosure Issues

Biotechnology companies are frequent defendants in securities class actions, with the plaintiffs’ allegations often focusing on statements related to the new drug approval process. An article in today’s Boston Globe notes that the Food and Drug Administration (“FDA”) and the SEC “are in talks to develop new guidelines on cooperation” concerning disclosure issues. Last summer, the FDA announced that it has begun making referrals to the SEC when it believes its discussions with a company are being misrepresented to the public markets.

Quote of note: “Just how the FDA and SEC should interact is among the most sensitive issues for biotechnology companies. Their fortunes depend largely on showing investors they are making progress getting approvals for drugs that can cost hundreds of millions of dollars to research. Yet many executives believe that the two agencies work at cross-purposes. While securities rules require wide disclosure, repeating all of the technical detail the FDA conveys about an experimental drug can make a stock extremely volatile, said Carl B. Feldbaum, president of the Biotechnology Industry Organization, a trade group in Washington. ‘I think we need to come up with a coherent system where biotech CEOs aren’t cross-cut, like logs, between the FDA and the SEC,’ Feldbaum said.”

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