The FSMA in its opinion published in October 2020 outlined what content needed to be disclosed. This series of insights on best practices for biotech companies has already outlined how the definition of inside information under the MAR can be applied in situations that are particularly relevant to biotech companies and the timing requirements for disclosing such information. In this insight we focus on the good practices suggested by the FSMA when disclosing inside information.
Lack of clear legal requirements
Neither the Market Abuse Regulation (MAR) nor Belgian law offers clear guidance on the content of inside information disclosures. The MAR provides that information that is likely to give false or misleading signals is considered to be market manipulation, but it does not provide much further clarification. Article 5 of the Belgian Royal Decree of 14 November 2007 on the obligations of issuers of financial instruments admitted to trading on a regulated market requires that the information provided must be true, accurate, and genuine, and that it shall enable securities holders to assess the effect of the information on the company's position, business, and results.
It is therefore quite helpful that the FSMA has described in its opinion a number of good practices for biotech companies specifically, that should help them satisfy the general principles outlined in the above paragraph.
The FSMA believes that it is good practice to publish a balanced mix of technical and non-technical information, allowing investors with various levels of knowledge and experience in scientific and clinical matters to make an informed investment decision. Therefore, when disclosing the results of the phase III trial of a product, the company should include the essential statistical information or other technical details.
In any case, the technical information may not obscure the main, non-technical messages, which should always also be easy to find and understand.
The FSMA also distinguishes between soft information (company views and forward-looking information) and hard information (facts). The FSMA asks companies to disclose information as factually and objectively as possible and therefore recommends only disclosing soft information based on reasonable grounds, including, where necessary, meaningful cautionary statements and explanations. They should only disclose information based on expected revenues if a reasonable forecast can be made. For example, in the case of a licensing agreement, the company shall evaluate the revenues that can reasonably be generated and not the maximum amount of revenues resulting from the license.
In the event that information on the same matter is also disclosed by other parties (for example, a medical product regulatory authority), the FSMA asks the companies to closely cooperate, to the extent possible, with the other party and to disclose information that is the same in all material aspects in order to ensure that some investors are not deprived of essential information compared to other investors.
Before the public release of a communication, the FSMA recommends making sure that (without prejudice to the requirement to disclose as soon as possible) persons with different types of expertise have reviewed the information and that appropriate internal procedures are established for this purpose.
Efficacy and safety results
When disclosing information on efficacy and safety results, the FSMA specifies that it is good practice:
- to explain the main characteristics of the clinical trial (such as clinical phase, research question, sample size, etc.);
- to provide a clear and well-structured discussion of the most important results and conclusions, giving a balanced view of favourable and less favourable findings;
- to provide or refer to relevant contextual information regarding, indications of interest and target market, the competitive situation in relation to existing treatments and the benefit/risk ratio, the product candidate (and the active comparator, if any, used as control group) and how the company believes that it will be able to meet a need by improving the benefit/risk ratio compared to other treatments; and
- to mention the next material step and, to the extent possible, the expected timing.
Regarding objectives and endpoints, the press release should include an explicit and unambiguous statement on whether or not the primary objectives and endpoints (for the primary analysis sample) have been met. Preferably this information is also reflected in the summary in the beginning of the press release. If there are also secondary objectives and endpoints leading to important findings, an analysis of the results obtained should be included for the primary objectives and endpoints, and the key secondary ones (clearly distinguishing between them). If the clinical trial includes a control group with a placebo or active comparator, an analysis should be included of post-treatment outcomes versus the baseline situation (pre-treatment) and the control group (clearly distinguishing between them).
The disclosed information should provide an objective and unambiguous discussion of the specific results with sufficient quantitative information to support the main conclusions. The FSMA also encourages biotech companies not to overestimate the significance and novelty of the results, but to draw a clear distinction (where relevant) between statistical and clinical significance, mentioning important study limitations and ensuring that the novelty of the results is clear.
When disclosing a deviation between the actual and expected level of patient recruitment, the FSMA considers it good practice to provide, to the extent possible, a revised indication of the timing for the disclosure of new results, the end of the ongoing trial, the start of the next material step and mention, in the case of a recruitment delay, the actions that will be taken or at least under consideration to resolve the problem.
Decision to halt a clinical trial
The disclosure of the decision should mention the fundamental underlying reason and considerations, provide, to the extent possible, information on the probability and (earliest) timing for a potential resumption of the trial or the potential start of a new (modified) trial and mention, if relevant, the potential impact on other trials with the same product candidate or the absence thereof.
Marketing authorisation decisions
The disclosure should explain the scope and any limitations or restrictions and mention the next material step and, to the extent possible, the expected timing.
Entry into or termination of a partnership
When announcing a new partnership, the FSMA recommends disclosing sufficient qualitative information. This can include a description of the partner, the partnership’s objective and advantages, the transferred rights, their scope and the degree of exclusivity, and material clauses with important rights and obligations, as well as quantitative information such as deal structure-payment terms. In this respect, the FSMA finds it relevant to disclose whether or not there is a direct cash impact via an up-front payment and the amount, to distinguish between the other main financial components such as milestone fees and royalty payments, and to indicate if and to what extent the company will continue to bear (part of) any significant R&D or other costs.
When disclosing the end of a partnership, the FSMA considers it good practice to mention, to the extent known, the fundamental underlying reasons and considerations and disclose not only the direct financial impact (e.g., termination payments), but also to provide longer-term considerations (e.g., new partner search or alternatives).
Addendum of the Opinion
In an addendum to the opinion, the FSMA elaborates on the disclosure of information during interviews, presentations, and scientific publications. The FSMA understands the practice of revealing relevant information on special occasions such as scientific conferences, but wants to emphasise that inside information should not be disclosed to a limited audience only. Therefore, statements during interviews and in publications should align as closely as possible to official communications. It is also considered good practice to publish on the company’s website, to the extent possible, any presentations and publications and to make recordings available.
Overall, the opinion aims to help Belgian listed biotech companies navigate using the enormous amount of scientific and operational data that forms the basis of their daily operations. This increases the predictability of the FSMA's supervision, which will indirectly contribute to the attractiveness of Euronext Brussels as a listing venue for biotech companies. We must emphasise that most of the opinion provides guidance and recommendations, rather than hard legal requirements. This means that biotech companies will always have a certain level of discretion of what, when and how to disclose their inside information, depending on the specific factual circumstances that might be different from or more complex than the examples described by the FSMA. We recommend having dedicated specialists to support the legal, regulatory and PR aspects of evaluating and disclosing information and best managing the relationship with stakeholders.
You can find the introduction to this series here.