Trading in Science: A Volatile Mix of Stock Prices and Embargoed Data

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Science  30 Oct 1998:
Vol. 282, Issue 5390, pp. 865
DOI: 10.1126/science.282.5390.865

When the U.S. stock market opened on Tuesday, 13 January, the share price of a small biotech company, Geron Corp. of Menlo Park, California, started to climb. The company had some hot research in press: a paper by Geron researchers, with colleagues at the University of Texas Southwestern Medical Center at Dallas, on an enzyme called telomerase that prolonged the life of human cells in culture. But the paper, under wraps at Science, was not to be released until 4 p.m. on 15 January, the day before its official publication date. Word had leaked out, and the Internet was abuzz with messages touting Geron's find.

The embargo break, ironically, was triggered in part by worries about the legal ramifications of potential publicity while the paper was under an embargo. A group called the Alliance for Aging Research (AAR), which promotes research on aging, had scheduled a news conference with some of the authors for 1:30 p.m. on 15 January to discuss the findings. Geron's lawyers, fearful that the press conference might be seen as an effort to pump up the company's stock price before the findings were officially announced, asked AAR to push the event back to 4 p.m. to coincide with the timing of Science's embargo. The group agreed, but sent out a notice of the schedule change on a business news service that also goes to stock traders. When the stock price took off, Science lifted the embargo (Science, 23 January, p. 472).

The episode—and a similar embargo break in 1995 involving a Science paper on the obesity-regulating hormone leptin (Science, 4 August 1995, p. 627)—illustrate the increasingly complex relationship between science publicity and big money. As University of Colorado, Boulder, biologist Thomas Cech notes, “Everybody knows that a Science article could be worth millions of dollars in the marketplace.” News of a biotechnology development—even one as remote from application as Geron's—is eagerly sought by investors, and companies love the publicity that publication in a major journal brings. But problems can crop up while a paper is going through review and is under prepublication embargo.

Companies can be in trouble if they pass privileged information to investors who buy or sell shares before the information is publicly announced. So, potentially, could journalists who receive embargoed press releases and their sources, with whom they discuss their stories. Indeed, Nature's weekly press tip sheet carries a warning that “Anyone dealing in securities using information contained in this document … may be guilty of insider trading” under British criminal law.

Companies must also walk a line between exaggerating the value of new data and keeping them too close to the chest. They feel compelled to reveal important information quickly to limit insider trading, but they also want the prestige that comes with publication of results in a peer-reviewed journal. There's also a temptation to publicize any favorable results, no matter how sketchy, to spur investment. Some have solved the dilemma by announcing a discovery with a general press release while withholding the science, so as not to divulge company secrets. The practice can preempt the embargoed announcement of a rival's discovery. For example, Millennium Pharmaceuticals of Cambridge, Massachusetts, did this in November 1996. Two weeks before a group at Oxford University was to publish a paper on the discovery of a type 2 diabetes gene in Nature, Millennium put out an announcement that it had found a type 2 diabetes gene. The company didn't reveal the details. In an editorial, Nature advised readers to treat the press release as “business news,” not “hard science.”

Myriad Genetics Inc. of Salt Lake City did much the same in January 1997 when it announced the identification of “the first major gene responsible for glioma,” a form of brain cancer. Myriad was in a tight race to beat two academic groups to the goal. Again, the press release contained few details (Science, 28 March 1997, p. 1877). Myriad's vice president for research, Mark Skolnick, said that the company had an “obligation to communicate whatever we say to all of our shareholders,” not necessarily to give priority to peer reviewers or journal editors.

Richard Horton, editor of The Lancet, says, however, that the embargo system can be useful in helping authors resist corporate image promoters, although he doesn't like the Ingelfinger rule itself. When a commercial sponsor is trying to get an author to release unpublished clinical data, usually to boost PR or investor confidence, The Lancet can “support the investigator,” Horton says. It can tell a sponsor: “If you exploit these data in the public domain … that will jeopardize publication of a paper in a peer-reviewed journal, which undermines the very thing that you want to achieve.”

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