Biotech Strategy Blog

Commentary on Science, Innovation & New Products with a focus on Oncology, Hematology & Cancer Immunotherapy

Posts from the ‘Legal’ category

Medivation investors hoping for a windfall will be disappointed to hear that on December 20, 2012 a California judge ruled the company had no rights to what is now known as Aragon Pharmaceuticals’ ARN-509, a next-generation androgen receptor (AR) antagonist for advanced prostate cancer, similar in chemical structure to enzalutamide (Xtandi).

Enzalutamide (formerly MDV3100) was developed in the UCLA laboratory of Drs. Charles Sawyers and Michael Jung and licensed by Medivation from the University of California. Medivation believed their licensing and sponsored research agreements gave them rights to any follow-on compounds. However, instead of giving Medivation first right of refusal, the University licensed what is now ARN-509 to Aragon Pharmaceuticals, a privately-held company whose owners include Sawyers and Jung.

You can read more about ARN-509 on Pharma Strategy Blog: “Is ARN-509 potentially better than MDV-3100?” Sally Church (@MaverickNY) also interviewed Dr Charles Sawyers in May 2011 just before Medivation commenced a lawsuit against the University of California, Sawyers and Jung claiming breach of contractual agreements.

Concern about the ownership of intellectual property rights to ARN-509 has overshadowed Aragon with many thinking Medivation had a strong case. This has likely hindered the ability to raise capital or obtain a potential partner, although Aragon did announce on October 4, 2012 they had raised $50M in series D financing. However, ARN-509 has been slow to move through development and has yet to enter phase 3 clinical trials.

Based on the limited public information available about the lawsuit between Medivation, University of California and Aragon, my thoughts last year were that the case would settle as none of the parties would want a trial that exposed sensitive intellectual property and financial information.

However, in a December 20, 2012 Order, Judge John E. Munter of the Superior Court of California granted summary judgment to The Regents of the University of California on a number of issues, finding that Medivation’s contracts with the University gave them no ownership or licensing rights to ARN-509.

Medivation v University of California IP dispute court docket

Many thanks to biotech investor (@lomu_j) for sharing the news on Twitter – definitely worth following if you do not do so already.


Based on the evidence submitted by the parties, Judge Munter decided that the University of California did not breach the Sponsored Research Agreement (SRA) with Medivation.

According to the court Order, the SRA provided that Medivation would have “a time-limited first right to negotiate an option or license, which may be exclusive” with respect to “Subject Inventions” that occurred during a specified performance period i.e. the University of California was required to disclose follow-on compounds such as ARN-509 to Medivation during this time.

However, anyone who has been involved in contractual disputes will know the devil is in the detail, and the court Order explains why Medivation did not prevail, as many had expected.

The SRA defined “Subject Invention” to be an invention that was “first conceived” and “actually reduced to practice” during the performance period which it was agreed would start on November 1, 2005. However, during discovery The Regents of the University of California presented evidence from a research scientist, Dr Samedy Ouk that A52, the compound that became ARN-509, was conceived and reduced to practice prior to this date. You can read more in the following excerpt from Judge Munter’s Order:

Superior Court of California Order excerpt MDVN Aragon ARN-509 dispute

Since the University was only obligated to disclose inventions after November 1, 2005, the court found they did not breach the SRA by failing to give Medivation the right to option or license a compound that was invented prior to this. A close call when you look at the dates, but that is what the parties agreed to in writing.

The court Order discusses several of the claims and disputes between the parties, some of which remain ongoing. It is of course possible that Medivation might appeal, but I was persuaded by Judge Munter’s cogent opinion. In essence the court ruling, unless it is overturned on appeal, means Aragon can move forward unhindered with the development of ARN-509.

Here’s my take from this case:

  1. When negotiating a contract, the devil is in the details. Good contract drafting should avoid the need for future litigation. Negotiating contracts can take months, but it’s never wise to sign anything just for the sake of expediency.
  2. A contractual dispute can occur years after an agreement was signed highlighting the importance of document retention, e.g. laboratory notebooks, especially where intellectual property is involved.
  3. Contracts typically have an integration clause that says what is written reflects the “entire understanding of the parties.” This means a court will only look to what is in written down and not what may have been said or verbally agreed prior to signing the agreement. It’s important to make sure the written contract is clear and unambiguous.
  4. IP litigation can delay a potential competitor and deter others from investing or partnering. By the time ARN-509 makes it to market, the prostate cancer landscape will be more competitive than it is today.  Through the delay Medivation ends up winning irrespective.
  5. Aragon may now be an attractive partner for companies with an established urology/prostate franchise who would like to compete against Medivation.

While many are excited about ARN-509 in advanced prostate cancer, it must be noted that Aragon have yet to show that ARN-509 is more effective than enzalutamide in patients. A phase 3 clinical trial of ARN-509 in the post-docetaxel prostate cancer setting will not be easy given it will most likely require comparison to the current standard of care (Xtandi or Zytiga) and not placebo.

The prostate cancer market remains a dynamic one with multiple new products in development and the potential for combination approaches. The forthcoming ASCO GU meeting in Orlando, from February 14-18, 2013 is worth watching for new updates.

Update May 29, 2013: Medivation announces they will appeal decision in favor of Aragon

According to the SEC filing that @ColfaxCapital kindly shared the link to last month on twitter, Medivation have not unsurprisingly announced they will appeal the California court decision in favor of Aragon.

The Medivation SEC 8-K filing notes that the appeal was filed on April 15, 2013 and will most likely take 12-18 months, so a California Court of Appeals decision is not expected until sometime in 2014.

There is also ongoing litigation between the University of California and Medivation over whether the company has to make royalty payments to the University when it receives commercial milestone payments from Astellas and a trial on this issue is scheduled for July 2013. Another trial over Medivation’s allegations of fraud against Dr Jung is set to start in October 2013.

There’s still plenty of legs left in this story and a time to go before we have a definitive outcome given that any trial decisions will most likely also be appealed in due course.

Update June 17, 2013: Johnson & Johnson announces acquisition of Aragon Pharmaceuticals with $650M upfront payment

J&J have this morning announced the acquisition of Aragon, and the rights to ARN-509 in a deal with a $650M upfront payment and contingent milestone payments of upto $350M.

Here’s a link to the press release published on the WSJ.


The decision expected this Thursday by the Supreme Court of the United States on the constitutionality of the Patient Protection and Affordable Care Act (PPACA) may impact the development and approval of biosimilars.

US Capitol Photo Credit Pieter DroppertPart of the PPACA signed into law by President Obama on March 23, 2010 was the Biologics Price Competition & Innovation Act (BPCI).

This amended the Public Health Service Act (PHS) to create a pathway under section 351(k) for the licensing of biological products that are “interchangeable” or “biosimilar” to an FDA-licensed product.

In addition, to a licensing pathway, the regulatory framework introduced “exclusivity” periods that prevented approval of a 351(k) application until 12 years after the first license of the reference product. I doubt very much that Congress will want to have to negotiate exclusivity provisions again.

I am not a regulatory expert, but my understanding is that if the Court declares the PPACA unconstitutional in its entirety, the BPCI would be lost too.

At the risk of venturing an opinion, I don’t think the Court will want to cause collateral damage to uncontroversial parts of the PPACA such as the BPCI, but it is something to watch out for this Thursday.

Many commentators think it likely the Court will uphold certain parts of the PPACA and invalidate other provisions. This was the approach the Court followed in a decision earlier this week on Arizona Immigration Law (Arizona v. United States).

However, until a decision is published by the Court, nobody knows.  Thursday is set to be a landmark day whatever the Court decides.

Update June 28, 2012

In a 5:4 opinion, the Supreme Court has upheld several provisions of the Patient Protection and Affordable Care Act (PPACA). The Court did not rule the PPACA unconstitutional in its entirety which was the only way the biosimilars provisions would have been lost. Therefore, from a biosimilar regulatory perspective, nothing has changed as a result of today’s decision – the exclusivity and approval pathway are maintained. This is good news for the biotechnology industry.

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Yesterday, it was announced that Google had reached a settlement with the United States Department of Justice and would forfeit $500M in gross revenue received from Canadian online pharmacies advertising to US consumers through the Google AdWords program.

According to the Government, these advertisements then led US consumers to buy and illegally import prescription drugs from Canada.

The settlement with the Department of Justice (DOJ) was in many ways inevitable.  Once the Government decided to go after Google to the extent of submitting fake online ads on behalf of fake online pharmacies, that Google ran and provided customer support to, the question was not if Google would settle, but for how much?

$500 million sounds a lot, but in the context of 2010 revenue of $29.3 billion, it’s only 1.7% of last year’s sales (if my calculations are correct).  It comes across as a slap on the wrist as Google is only required to forfeit to the Government the “illegal” revenue they obtained over the course of several years.

When Google advised investors earlier this year that they had accrued $500M in anticipation of a possible settlement, the company noted (emphasis added):

“Although we cannot predict the ultimate outcome of this matter, we believe it will not have a material adverse effect on our business, consolidated financial position, results of operations or cash flows.

There is no fine or punitive damages. Reaching a settlement to avoid a criminal prosecution makes sound business sense.

In the Google AdWords case, the reality is that many prescription drugs are cheaper in Canada. Many senior citizens living close to the border go to Canada to obtain their drugs. Although open to abuse, there is nothing inherently wrong in consumers wanting to buy the same product cheaper, if they can readily do so. The power of the internet to reach consumers wherever they may be has brought the power of economics and market forces to all of us.

What the Google/DOJ settlement doesn’t do is address the underlying reason why are many prescription drugs more expensive in the United States compared to Canada?  In other words, it shoots the messenger rather than deal with the underlying problem. If prescription drugs were the same price in both countries, this problem simply would not exist – there would be no market for online pharmacies in Canada.

The settlement announced yesterday and all the compliance features included within it will not stop the practice of US consumers looking to Canada for cheaper drugs. It just means that one advertising and marketing channel has been eliminated.

As Sally Church noted recently on Pharma Strategy Blog, the increasing price of new oncology drugs in the United States is unsustainable.

Why should US consumers pay more for drugs than their neighbors in Canada? After all the currencies are similar in value, and I’d argue the countries are comparable in terms of industrialization, wages and society i.e. we are comparing similar countries in terms of economic development. We are not comparing the price of drugs in a developed country to the price in the third world.

As the world’s largest market for pharmaceuticals, why does the US have the highest prices for prescription drugs? The difference is in the health care systems – the US is a free market where the price is what the market will sustain. Drug prices are not regulated, imports from cheaper countries are prohibited, and the payors (insurance companies) are able to pass on the cost of higher drugs direct to the consumer through higher insurance premiums.

In Canada, the Provincial governments are the payors and they regulate and control the price of drugs.  The United States is a great market for pharmaceutical companies (maximum profits) but poor for the consumer who picks up the price of branded prescription drugs whether through high co-pays or higher insurance costs.

As a result the healthcare system in the United States remains fundamentally broken, despite recent attempts at reform, and to me the Google/DOJ settlement is yet another reminder of this.

Richard Hsu (@hsutubeesq), a Silicon Vally technology lawyer and partner at King & Spalding has a new blog that I’d like to recommend.

Named “The One Page Blog”, it aims to showcase Richard’s knowledge of IP and technology law using one page posts. Most of the posts have a downloadable PDF with a useful framework or summary. A picture tells a thousand words.

I particularly like Richard’s recent post on how to analyze a confidentiality agreement. The model Richard proposes will be useful to lawyers who are not IP-experts or those who need to talk to their lawyers about some of the issues that should be considered.

The challenge I find with a non-disclosure or confidentiality agreement is always one of negotiating an agreement that is fair and reasonable to both parties. Typically the boilerplate I receive from biotechnology and pharmaceutical companies is far too much in their favor. Redlining and negotiation then follows!

Richard’s blog also has a 48 second video entitled “making my own magnetic rubik’s cube.” It is excellent and a standard I aspire to as I seek to do more video blog posts:

I look forward to more posts and video from the “The One Page Blog.”

Although I had to leave BIO 2011 early due to illness, I did shoot some video during the time I was at the meeting, and have now put this together into a short 2 minute video that you can watch below.

This post wraps up my coverage of the 2011 BIO international convention in Washington DC. Next week, I’ll be writing more about innovative science and new products in the pipeline that have caught my attention.

A happy holiday weekend to everyone in North America.


I am excited to be attending, for the first time, the Biotechnology Industry Organization (BIO) international convention that takes place in Washington DC in just over a week’s time from Monday June 27 to Thursday, June 30th.

This meeting has something for everyone interested in the biotechnology industry whether it be deal making, partnering, licensing, drug discovery or personalized medicine. There are 16 specialized tracks where industry experts provide insight and best practices.

In addition, there are numerous networking and social events plus an exhibit hall that showcases the world’s biotech regions and how they are promoting innovation.

At meetings where there are parallel sessions, I apply “the law of two feet” (thanks to Podcamp for this) that says if you are not getting what you want from the session, it’s OK to walk out and go to another one.

My top 10 sessions at BIO reflect my personal interests in innovation, science and new product development:

Tuesday June 28

  • How will we afford Personalized Medicines?
  • The Biomarkers Consortium: Facilitating the Development and Qualification of Biological Markers
  • Personalized Oncology: The emergence of Personalized Medicine Strategies in Oncology Clinical Development and Deal Making
  • Navigating the New Law on Licensing Biosimilars

Wednesday June 29

  • Lessons from a Mature Public-Private Partnership. The Alzheimer’s Disease Neuroimaging Initiative
  • Emerging Markets. The Future of Growth for Biologics?
  • The Role of Imaging Biomarkers in Early Phase CNS Drug Development
  • The Promise of MicroRNA-based Therapeutics in Cancer

Thursday Jun 30

  • After the Fall. Venture Capital and the Biotech Funding Landscape
  • Regulatory Issues for Tissue Engineered Products

If you have plans to be at BIO 2011 do say hello after one of the sessions or receptions. You can reach me at the meeting via twitter (@3NT).  See you in DC!

Follow 3NT on Twitter

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The Supreme Court of the United States (SCOTUS) heard oral argument today in William Sorrell, Attorney General of Vermont versus IMS Health Inc., a case involving the right of Vermont to regulate the use of prescription drug data for marketing and sales purposes by pharmaceutical companies.

You can read my previous blog post with a background to the case, and also my correct prediction yesterday of what the Justices would focus on.  A transcript of the oral argument is available on the Supreme Court website.

Justice Scalia and Chief Justice Roberts started the oral argument by Vermont’s Assistant Attorney General with concerns that what Vermont was seeking to do was prevent the use of the data by pharmaceutical companies for marketing purposes when it could be used for other purposes such as clinical trials or university research.

JUSTICE SCALIA: So what the Chief Justice suggested is right, that the purpose is to stop them from using it in order to market their drugs?

Justice Scalia appeared sceptical about what privacy benefit the physician obtains from only restricting pharma company access to his prescribing information, when physician prescribing data is widely available to others e.g. through insurance claims.

In further questions, Justice Scalia pursued the topic that the consent of physicians was only required for marketing uses, when the data could be given away for research without the physician’s consent.

JUSTICE SCALIA: So the only thing it assures the physician who prescribes is that he won’t be bothered by drug companies who, on the basis of their knowledge of information which other people have, approach him in order to market their drugs? That’s basically all it assures the prescribing physician, right?

Justice Scalia certainly seemed to have the bull by the horns in his questioning of Vermont’s Assistant Attorney General, Bridget Asay. The following exchange is a good illustration:

JUSTICE SCALIA: How does it increase the prescribing physician’s right of privacy that the data about his prescribing can only be given away, but can’t be sold? Does that make him feel happier about his privacy?

MS. ASAY: What it allows the doctor to do is to avoid an intrusive and invasive marketing practice.

JUSTICE SCALIA: He can do that by saying: I don’t want to talk to you.

MS. ASAY: The doctor cannot shut off any communication and any information from the pharmaceutical companies by slamming the door on the detailers, but that’s not necessarily in the interest of doctors or patients.

JUSTICE SCALIA: That may well be, but then just don’t tell me that the purpose is to protect their privacy. Now you’re arguing a totally different purpose: it makes it easier for the physician to cut off approaches by drug companies that want to sell drugs. If that’s the purpose of this statute, it’s quite different from protecting his privacy.  His privacy isn’t protected by saying you can’t sell it but you can give it away.

Justice Sotomayor asked why Vermont couldn’t adopt an opt-out approach for doctors from the use of their data, rather than an opt-in.

JUSTICE SOTOMAYOR: Well, but, given the restrictions on speech, why is that a bad thing? Meaning you don’t really intend to tell us that the State couldn’t and wouldn’t — just like we got all of that advertising relating to the opt-out on telephone solicitations, virtually every American knew they could do it if they chose. Maybe some didn’t, but a vast majority did. You can’t really say Vermont’s incapable of telling doctors in a mailing or in some public professional magazine, if you want to opt out, here’s the number?

Justice Ginsburg pursued the issue of whether it was right to restrict the commercial speech of pharmaceutical manufacturers in favor of generics companies.

JUSTICE GINSBURG: There’s another there’s another purpose that I would like you to comment on, and that is the, the State is interested in promoting the sale of generic drugs and correspondingly to reduce the sale of brand name drugs. And if that’s the purpose, why doesn’t that run up against what this Court has said that you can’t, you can’t lower the decibel level of one speaker so that another speaker, in this case the generics, can be heard better?

Throughout oral argument, the Justices focused on the regulation of speech by Vermont.

CHIEF JUSTICE ROBERTS: You want to lower your health care costs, not by direct regulation, but by restricting the flow of information to the doctors, by, to use a pejorative word, but by censoring what they can hear to make sure they don’t have full information, so they will do what you want them to do when it comes to prescribing drugs, because you can’t take, I gather, direct action and tell them, you must prescribe generics, right?

Reading through the transcript of the Justices questioning, I found the Assistant Attorney General of Vermont entirely unconvincing in her answers.

The message I took from this transcript, and others may differ, is that Vermont’s chance of having their Statute upheld is low.  The Justices appeared to be unpersuaded and unconvinced by Vermont’s case.

I previously wrote a post earlier this year that the United States Supreme Court (SCOTUS) had granted a writ of certiorari to hear the case of Sorrell v. IMS Health Inc., in which Vermont sought to restrict the ability of companies to data mine pharmacy prescribing data.  Oral argument is scheduled for tomorrow.

A brief background as an introduction; in 2007, Vermont passed a law that restricted the use of prescriber-identifiable (PI) data for marketing or promoting a prescription drug. Vt. Stat. Ann. tit. 18, § 4631 (2007).

This law had a major business impact on companies such as IMS who analyze prescriber data and sell it to pharmaceutical companies to assist them with their sales and marketing strategy, so that they can identify which doctors are prescribing their products or those of a competitor.  This helps them focus their sales detailing.

Similar laws in Maine and New Hampshire were upheld on appeal, but the United States Court of Appeals for the Second Circuit overturned the Vermont statute, resulting in a conflict between the circuit courts of appeal that the Supreme Court has decided to resolve.

I think the Supreme Court will decide this case narrowly and to the disappointment of many will not create expensive new rights protecting online data.

Post Wikileaks – rights to data are a controversial topic.   Journalists would like access to as much information as possible, yet government wishes to be able to regulate this.  This case is, however, not about the right to access information, but about the ability to use information that is already available.

I don’t think this case will be the one where the U.S. Supreme Court offers their opinion on the right to data privacy in an online era.

In my view, this case focuses on commercial speech and the First Amendment.  As Ronald Dworkin states in Freedom’s Law, “The United States stands alone, even among democracies, in the extraordinary degree to which its Constitution protects the freedom of speech.”

The First Amendment of the United States Constitution states that “Congress shall make no law . . . abridging the freedom of speech.”  The First Amendment, according to Justice Holmes, protects the right to express “speech that we loathe.”  The fact that Vermont does not like the data mining of prescriber information does not mean they have the right to regulate this. Vermont argues that what they are trying to do is regulate conduct not speech.

A key question for the Supreme Court is whether Vermont’s PI data is commercial free speech that is protected by the First Amendment?  The answer to me is “yes” and I think the Justices will focus on this question.

The second question that I think the Justices will focus in on at oral argument is, if you accept that prescriber data is commercial free speech, does Vermont’s Statute violate the intermediate scrutiny test for what is a permissible regulation as set forth in Central Hudson Gas & Electric Corp. v. Public Service Commission of New York, 447 U.S. 557, 561-66 (1980).

The challenge for Vermont will be the second prong of the Central Hudson test that the government has a substantial interest to be achieved by the regulation.  The tangential leap from regulating PI information to drug price regulation is a hurdle that Vermont will have to overcome to prevail.

My prediction (for what it’s worth) is that the Court will follow the analysis of the U.S. Court of Appeals for the Second Circuit, and uphold their opinion that the Vermont statute is an improper restriction on commercial speech under the First Amendment.

Whatever the Supreme Court’s decision in IMS Health Inc. v. Sorrell, it will shed further insight into what constitutes commercial speech protected by the First Amendment.  Interestingly, the Constitution makes no reference to the word “commercial” or implies that any free speech is less valued than others.  I look forward to oral argument tomorrow.

In a unanimous decision, the United States Supreme Court decided yesterday that pharmaceutical and biotechnology companies may have an obligation to disclose adverse events to investors, even if the data is not statistically significant.

I previously discussed the case of Matrixx Initiatives, Inc. v. Siracusano on this blog and correctly predicted that the Supreme Court would uphold the decision of Court of Appeals for the Ninth Circuit.  The result is a valid securities class action fraud claim that can now go to trial, or more likely, a financial settlement will be worked out.

You can read more on the background to this case in my previous post, but at issue was whether Matrixx Initiatives, Inc. (Matrixx) mislead investors by not disclosing reports that some consumers had lost their sense of smell (anosmia) after using Zicam Cold Remedy.   Despite product liability lawsuits, complaints from consumers and medical scientists drawing the company’s attention to previous studies linking zinc sulfate (contained in the Zicam nasal gel) to loss of smell, Matrixx continued to be optimistic to investors about the company’s performance and prospects.

In the November 2003 Form 10-Q filed with the Securities and Exchange Commission (SEC), the company made no disclosure that two lawsuits had been filed over alleging use of Zicam had caused a loss of smell.

The decision in Matrixx Initiatives, Inc., v. Siracusano case has major implications for investor relations, public relations and corporate communications departments of publicly traded companies within the biopharmaceutical industry.

Under U.S. Securities and Exchange Commission (SEC) Rule 10b-5 companies have an obligation to disclose material facts related to statements that are made that could impact the purchase or sale of stock i.e. you have to provide all the information necessary to avoid a statement being misleading.  This does not mean that companies have to share all material information about their products, they control what they say, but what they say has to contain all the material facts necessary for it to be truthful and accurate.

Say a major pharma company issues positive press releases at a major medical congress announcing great clinical trial results, while at the same time the Data Monitoring Committee (DMC) is meeting to terminate the study because the drug has too many adverse events.  My reading of the Matrixx decision is that the company cannot make the positive statements without including the information about their concerns about adverse events.  In those circumstances they might be better off not making the positive press releases, rather than potential misleading investors into buying stock on the back of this data, when the drug may end up being terminated shortly afterwards.

As Justice Sotomayor states in her opinion, “the materiality of adverse event reports cannot be reduced to a bright-line rule.” Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. ___ (2011) (slip op., at 1-2).

The presence or absence of statistical significance is not the key factor as to whether an adverse event is material or not.

“A lack of statistically significant data does not mean that medical experts have no reliable basis for inferring a causal link between a drug and adverse events.”

(slip op., at 12).   As Justice Kagan noted in her questioning at oral argument and Justice Sotomayor picked up in her opinion, “[t]he FDA similarly does not limit the evidence it considers for purposes of assessing causation and taking regulatory action to statistically significant data.” (slip op at 13).

Justice Sotomayor goes on to conclude that reasonable investors may also base their decision on non-statistically significant data.  The challenge that the industry now faces is determining what information is “material” and needs to be disclosed.  A bright-line rule of statistical significance would have made this easy.

Companies, their investor relations and public relations agencies are now faced with the question of what is “material”, and what is not.  The guidance the court offers is that:

“assessing the materiality of adverse event reports is a “fact-specific” inquiry that requires consideration of the source, content, and context of the reports.”

(slip op., at 15, citations omitted).  The Court notes this does not mean that “pharmaceutical manufacturers must disclose all reports of adverse events” only those for which “a reasonable investor would have viewed the nondisclosed information as having significantly altered the total mix of information made available” (slip op., at 15, citations and quotation marks omitted).

So should all adverse events be reported?  That’s one possible way to avoid deciding what’s material, but Justice Sotomayor, clearly states that this is not the standard to be applied. She states,

“mere existence of reports of adverse events which says nothing in and of itself about whether the drug is causing the events – will not satisfy the standard.”

(slip op., at 16). What is needed is some link between the adverse event and the drug that suggests possible causality, what Justice Sotomayor describes as a “contextual inquiry.”  She goes on to say that it is this contextual inquiry that can come from other sources or reports.  In the Matrixx case this would have come from the filing of lawsuits, the concerns of academics about causal links, consumer complaints, the presentation of a scientific poster etc.

“This contextual inquiry may reveal in some cases that reasonable investors would have viewed reports of adverse events as material even though the reports did not provide statistically significant evidence of a causal link.”

(slip op., at 16).  The conclusion from the Matrixx case is that publicly listed companies should be very careful of the information that they tell the market.  As Justice Sotomayor notes:

“Even with respect to information that a reasonable investor might consider material, companies can control what they have to disclose under these provisions by controlling what they say to the market.”

(slip op., at 16).  Whatever information is given to the market e.g. investor presentations at conferences, press releases, press briefings or SEC reports, the information should not be misleading through the omission of material facts.

What the Matrixx decision does is include adverse events as possible material facts, even those adverse events that have not been proved to be causal, or have reached statistical significance.  The conclusion being that disclosure of adverse event data may need to be included, if the omission of this information could impact the decision making of a reasonable investor.

In practice, clinical departments and medical affairs will need to be more closely involved with investor relations, and judgments will have to be made as to what information is disclosed.  Any time a judgment is required, there are likely to be differences in opinion as to what is “material” or not.  Prudent companies should consider sharing more information rather than less, but how to do this in a way that does not overburden investors will be the challenge.


BBC health reported this past week on the news that Professor Dr. Joachim Boldt, the former head of anaesthesia at the Klinikum Ludwigishafen hospital in Germany had published 102 papers in leading academic journals without first having obtained ethics committee (EC) or institutitional review board (IRB)  approval for the research.

These studies on patients undergoing surgery or intensive care led to the development of new guidelines for managing the administration of colloids for fluid replacement during surgery. Questions are now being asked about the validity of these scientific findings and whether any fabrication of research data took place.

When Dr Boldt submitted research for publication he indicated that EC/IRB approval had been obtained, a claim that was not checked by any of the journals.  It now appears that EC/IRB approval had not been obtained. Last week the editors of 16 leading publications formally retracted the papers they had published from Dr Boldt.

The news that an anaethetist failed to obtain informed consent or EC/IRB approval for clinical research comes as no surprise to me.

I conducted anaesthesia breathing system research in the early 1990’s in a joint industry/academic partnership program. My research was published in the British Journal of Anaesthesia, who also published several studies from Dr Boldt.

At that time, many of the anaethestists I worked with questioned the need for patient informed consent for research with a new breathing system. They argued the patient would have to use one anyway during the operation, and even if this was a research study it was not necessary. Requiring formal signed informed consent for the clinical trials I did was a novel experience for some of the anaethetists I worked with.

Indeed, if the editors of the journals were to look closely at european clinical research related to medical devices published prior to EC Directives and standards such as EN540, ISO14155 coming into effect, they might find that many researchers did not obtain IRB/EC approval or informed consent for that work.

I think the journal editors are right to condemn the lack of research integrity that took place with Dr Boldt.  All of us in the pharmaceutical, biotechnology and medical device industries who undertake clinical trials to bring new products to market rely on the goodwill of patients to participate in the medical research process.

The news that Dr Boldt did not respect the rights of individuals, and failed to follow the Declaration of Helsinki, the fundamental “Ethical Principles for Medical Research Involving Human Subjects”, published by the World Medical Association, undermines the integrity of the clinical research process for all of us.

Moving forwards, I would suggest that the editors of journals require authors to submit a copy of the EC/IRB approval letter/notification with their manuscripts.  Any form that just requires you to tick a box or sign off to show compliance is open to potential abuse by a very small minority.

All EC/IRB approvals have to be in writing, so this step would not be an onerous burden and would provide some confidence of valid ethics approval, and in the process support the integrity of the clinical trials that we all rely upon.

If you would like to follow this issue in more detail, Ivan Oransky, on his excellent Retraction Watch Blog has been writing about this story since last October.

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