A Stem Cell Developer, A Stock Sale & Bad News

Did a developer of stem cell treatments mislead investors by boasting of success with a patient and use the good news to sell stock while failing to later disclose the patient died? This is the allegation facing Pluristem Therapeutics, which insists it did not know of the death prior to a September stock sale. A second patient died, but no details surrounding the death are known.

The events, which were reported by Bloomberg News, caused Pluristem shares to plunge by more than one-third in value yesterday after several experts suggested Pluristem execs may have violated US securities laws by failing to report the deaths as material facts.

Since Pluristem indicated “the treatment has saved the patient, that may make the subsequent death of the patient a material fact,” Jacob Frenkel, a former US Securities and Exchange Commission lawyer, told Bloomberg. "To the extent that any of the purchasers in this transaction would have found this to be material, it would have been prudent for the company to have made this disclosure.”

Shares in the Israeli developer, however, began recovering today after Pluristem responded. And what was the response? Pluristem execs argue they were unaware of the death of the patient - a seven-year-old girl from Romania - at the time of the stock sale and only learned she died after being contacted by her family and physician. They also maintain her progress not tracked because she was given treatment on a compassionate use basis and not part of an ongoing clinical program.

Moreover, Pluristem says the girl had initially survived more than 180 days, which ceo Zani Aberman told Bloomberg was a positive outcome. “What counts legally is whether there is an improvement in the physical condition,” Aberman told the news service. “When we saw significant improvement in the blood count, we declared a successful treatment.” The stem cell developer also says the girl died from an infection unrelated to treatment.

Now, Pluristem is demanding a correction (see this), although the news service ran a second story quoting yet another expert who says the stem cell developer acted unethically. How so? Pluristem issued a press release on May 9 about the girl, which was headlined, “Compassionate Use of Pluristem’s PLX Cells Saves the Life of a Child After Bone Marrow Transplantation Failure” (see this).

On August 6, Pluristem announced cells had been administered to a 54-year-old woman with cancer suffering from bone-marrow failure. Pluristem quoted her doctor, who described her recovery “as a medical miracle” (look here). On September 5, a press release was issued about a 45-year-old man with leukemia who received a “life-saving” treatment with the cells (read here).

One ethics expert believes that Pluristem has itself to blame. “Such press releases risk misleading investors by creating overly optimistic account of scientific research,” Leigh Turner, an associate professor at the University of Minnesota Center for Bioethics, told the Knoepfler Lab Stem Cell blog. “More importantly, press releases describing miracles and life-saving cures are harmful because they give seriously ill individuals an unrealistic account of effectiveness of experimental stem cell interventions.”

"Instead of being provided with a balanced, accurate account of risks and benefits generated from meaningful clinical trial data, they risk being persuaded that a company has developed an effective intervention when in fact research is at a very preliminary, inconclusive stage. I worry that science-by-press-release betrays vulnerable individuals by offering hope that is not justified. Many companies avoid this problem by reporting findings at the conclusion of clinical studies instead of issuing breathless press releases based upon short-term results in individual research subjects."

Indeed, Pluristem effectively wants things both ways. On one hand, the developer issued a press release touting the success of the treatment. On the other hand, the patient death was ignored. Even if her death occurred six months after she may have been expected to live and was due to an infection unrelated to treatment, Pluristem should have erred on the side of caution by disclosing those details as soon as they were learned, if only to eliminate the sort of confusion and suspicion that has now ensued.

Instead, the first time Pluristem publicly acknowledged her death was in an interview given to an Israeli newspaper, which raised the topic, and this was published after the September stock sale took place (read here).

Even now, Pluristem continues to appear tone deaf. In its press release today, the developer acknowledges that one of the other two patients, who were the subject of press releases, has died, but declined to say when or offer further details. And when asked by Bloomberg to do so, Pluristem still refused to disclose any information. The failure to provide discouraing or negative news is a mistake. If Pluristem wants the upside from trumpeting good outcomes, then they must also be willing to quickly and convincingly report the downside.

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