On Monday, the day before news came out about Apo A-1 Milano, an experimental drug that, when taken intravenously, acts like Drano to clear clogged arteries from the heart, the stock price of Esperion Therapeutics, the tiny biotech company that makes it, dropped 26 percent. This might surprise those who noticed the widespread and highly positive news coverage, and it should infuriate Esperion Therapeutics' investors, who, unlike thousands of reporters and doctors, didn't get advance notice about the study's results. The question is: Why would the stock of the company making this innovative and promising drug drop just before the release of an encouraging new study?
It is hardly surprising that this study was big news. Though only 36 patients received the drug for five weeks, the plaque in their arteries—plaque is what causes heart disease and stroke—was reduced by 4 percent on average. No drug has ever come close to achieving that magnitude of plaque reduction. Until this study, the buildup of plaque in the arteries, or atherosclerosis, was considered a chronic, irreversible process. Statins, the popular cholesterol-lowering drugs, used alone or in combination with a highly restrictive fat-free diet, can reduce plaque by 1 percent or 2 percent in a few people, but this takes years. In addition, Apo A-1 Milano has a compelling back story. For generations, some residents of the picturesque Italian mountain town of Limone sul Garda seemed immune to heart disease. Scientists discovered that these families inherited a supercharged version of HDL—the good cholesterol—which plays a role in transporting plaque out of the blood vessels. Apo A-1 Milano is a bioengineered version of the HDL those families carried in their veins. (LDL—the bad cholesterol—deposits plaque in the arteries. Statin drugs prevent heart disease mostly by lowering LDL; this is the first study to use a form of HDL as a treatment.) If all that didn't make the story exciting enough, the head of Esperion Therapeutics, Roger Newton, was already a medical celebrity of sorts: He played a key role in developing Lipitor, the cholesterol-lowering medication that, with sales about to top $10 billion a year, has become one of the most popular prescription drugs ever made.
To be sure, a good story, one well worth covering, but the Journal of the American Medical Association, which published the study, and the Cleveland Clinic, which carried it out, took no chances. (Both JAMA and the Cleveland Clinic operate in highly competitive environments where mention in big news stories enhances both their prestige and income.) To publicize the study, they sent out advance copies of the results by mail, e-mail, and fax to hundreds of reporters. This is routine practice in the world of medical reporting. Recipients of study results promise not to write about them until a precise time, usually several days after they've been received. For JAMA, this standard "embargo" lifts on Tuesdays at 4 p.m. ET; most of us get the study details from JAMA the previous Thursday. In addition, JAMA mails out 350,000 copies of its journals to physicians and other subscribers from its printing plant in New Jersey on Thursday. Depending on the mail service, these usually arrive on Saturday or Monday. (These JAMA subscribers are not required to honor the embargo, which is a problem when you consider that some stock analysts are doctors, and a lot of doctors play the stock market.)
The advance notice allows reporters time to prepare their stories at a more leisurely pace, increasing, one would hope, the chances of accuracy. And by getting the journals early, doctors can anticipate questions their patients might ask in the wake of the news coverage. The embargo timing also means that in practice the information goes to the public in two waves: in the Tuesday evening broadcasts and the Wednesday morning newspapers. This gives the study the urgency of a time-sensitive news event, which might not be the case if the results dribbled out over several days or weeks.
But of course all this embargoed information invariably makes its way to Wall Street. And in this case many health care, pharma, and biotech analysts did not like the study's results. Many were hoping for a plaque reduction of far greater than 4 percent. Plus, because this drug is a bioengineered protein, it is difficult to produce, and, as a result, extremely expensive. (As yet, there is no price attached to the drug, but making a protein like this costs at least 10 times as much as making a pill.) And taking the treatment is not as easy as popping a pill: The protein cannot be swallowed as a pill, because the stomach would digest it, so the drug must be given as an infusion over the course of an hour, like chemotherapy. Thus the analysts assume that Apo A-1 Milano might not be worth such an investment of time and money for what they consider to be a relatively small level of reduction in plaque.
Yet no matter what analysts think—and we know how wrong they can be—the study will certainly remain historic as a "proof of principal" that either using HDL as a treatment or finding a way to increase the body's production of HDL leads to a reversal of plaque in the arteries (and almost certainly to the symptoms of heart disease, although that remains to be formally proven). It will lead other drug companies to try to produce smaller molecules that might have the same action but can be taken as pills. And the story of the Italian families will likely occupy an important place in the annals of heart disease research. Even before this latest study, that story had gotten a lot of press attention—it is surely why many people bought the stock in the first place. Yet when investing in biotech stocks, however compelling the back story might be, it is best to remember that there are a lot of people who might be getting the next chapter before you.