This article is part of our series on clinical data considerations. Read How to Prepare for Disclosure.
For publicly traded biotech companies, disclosing clinical trial data can be an exciting milestone as you build towards an exit or public offering—but disclosure is a double-edged sword. Disclosures can position your company favorably for investors, or it can invite serious regulatory scrutiny that delays your plans.
From handling data in private investments to managing unpredictable safety signals in open-label trials, the FAQs below are intended to help prepare you to lead your company through its next data event:
To do this, understand how different options vary in flexibility when sharing confidential clinical data with potential investors. No matter which path you choose, keep fair disclosure and insider trading restrictions in mind and maintain consistency between the data shared confidentially and publicly.
In a PIPE, there can be a gap between the pricing and the data announcement, allowing investors to purchase securities in advance of the data announcement.
In a Confidentially Marketed Public Offering (CMPO), the Company is able to initially share the data with investors, allowing them to receive input on pricing before the Company publicly discloses the data launches a formal public offering.
Registered direct offerings, which are on the rise recently, are similar to a CMPO but without the “public flip.” All marketing and pricing is done confidentially, with data disclosed immediately prior to signing.
If data is announced concurrently with (or immediately prior to) signing subscription agreements, selling shares to uninformed investors could be acceptable. However, in cases where this is not viable, or investors have opted out of the data disclosure, using a pre-sale agreement, or a "big boy" letter, may be suitable where large institutional investors acknowledge and accept the associated risks.
It depends on your unique circumstances, but a good litmus test is to see how the FDA reacts.
If an adverse event is reported to the FDA and you are not placed on clinical hold, that’s generally a positive sign. However, if a clinical hold is applied, it's nearly certain that data is material, especially based on the significance of the asset to the company and investors.
If a serious condition is observed in a majority of patients, that will typically cross into the threshold of being material. In that case, you should consider taking trading precautions.
Determining when data results from open-label trials become significant or material will depend on your specific circumstances. Specifically, data likely becomes material when there's a strong probability that the trial will (or will not) meet its stated goals or endpoints or achieve results that will strongly interest investors. However, making that call usually requires ongoing discussions and guidance from experienced legal counsel.
Close the trading window. Stop selling securities. Have a disclosure plan—make sure that anyone having investor meetings knows the constraints of fair disclosure and should not share any updates.
Sequestering data with the CMO or a small clinical team isn’t always effective to avoid imputing knowledge of the data to the company, at least from the SEC's perspective.
Be ready to disclose your data. You can’t sell securities if you have MNPI, so you need to carefully consider what you’ll know at the time you launch your initial public offering (IPO) or other financing and be ready to disclose it.
For an IPO, you may be in a position to time it such that you will have most of the data and can disclose at least the initial trends—with appropriate caveats. But, if something very material occurs, it would be prudent to delay the IPO to get that data in the prospectus.