Company Stock Prices Before and After Public Announcements Related to Oncology Drugs

• Published in: JNCI : Journal of the National Cancer Institute Vol. 103; no. 20; pp. 1507 - 1512
• Main Authors: Rothenstein, Jeffrey M., Tomlinson, George, Tannock, Ian F., Detsky, Allan S.
• Format: Journal Article
• Language: English
• Published: Cary, NC Oxford University Press 19-10-2011; Oxford Publishing Limited (England)
• Subjects: Antineoplastic agents; Antineoplastic Agents - economics; Antineoplastic Agents - therapeutic use; Biological and medical sciences; Clinical trials; Clinical Trials, Phase III as Topic; Commerce; Confounding Factors (Epidemiology); Crime - economics; Crime - prevention & control; Drug Approval; Drug Industry - economics; Drugs; General aspects; Humans; Investments; Mass Media; Medical sciences; Oncology; Pharmacology. Drug treatments; Private Sector - economics; Private Sector - ethics; Private Sector - legislation & jurisprudence; Retrospective Studies; Stock prices; Time Factors; Treatment Outcome; Tumors; United States; United States Food and Drug Administration; United States; North America; America; Antineoplastic agent; Cancerology; Decision making; Price; Regulation; Pharmaceutical industry; Food and Drug Administration
• ISSN: 0027-8874; 1460-2105
• DOI: 10.1093/jnci/djr338

Background
Phase III clinical trials and Food and Drug Administration (FDA) regulatory decisions are critical for success of new drugs and can influence a company's market valuation. Knowledge of trial results before they are made public (ie, "inside information") can affect the price of a drug company's stock. We examined the stock prices of companies before and after public announcements regarding experimental anticancer drugs owned by the companies.
Methods
We identified drugs that were undergoing evaluation in phase III trials or for regulatory approval by the US FDA from January 2000 to January 2009. Stock prices of companies that owned such drugs were analyzed for 120 trading days before and after the first public announcement of 1) results of clinical trials with positive and negative outcomes and 2) positive and negative regulatory decisions. All statistical tests were two-sided.
Results
We identified public announcements from 23 positive trials and 36 negative trials and from 41 positive and nine negative FDA regulatory decisions. The mean stock price for the 120 trading days before a phase III clinical trial announcement increased by 13.7% (95% confidence interval = −2.2% to 29.6%) for companies that reported positive trials and decreased by 0.7% (95% confidence interval = −13.8% to 12.3%) for companies that reported negative trials (P = .09). In a post hoc analysis comparing the stock price averaged over 60 trading days before and after day −60 relative to the clinical trial announcement, the mean stock price increased by 9.4% for companies that reported positive trials and decreased by 4.5% for companies that reported negative trials (P = .03). Changes in company stock prices before FDA regulatory decisions did not differ statistically between companies with positive decision and companies with negative decisions.
Conclusions
Trends in company stock prices before the first public announcement differ for companies that report positive vs negative trials. This finding has important legal and ethical implications for investigators, drug companies, and the investment industry.