How To Tell When An “investigation” Of A Biotech Is Real Or Not

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On Monday the headline of the press release shouting alarming news about Juno Therapeutics, a Seattle based cancer drug developer: “Juno Executives Under Investigation for Patient Deaths”.

On Tuesday, a biotech investor with a few thousand followers posted the headline with the link. The post, was then started to trend and got picked up by FierceBiotech, which then posted the article with a similar headline: “Juno Executives Investigated Over Trial Deaths Disclosure.”

The issue was Juno (Nasdaq: JUNO) wasn’t really under investigation. A law firm that represents shareholders in fraud suits reported the release. The firm, Schubert Jonckheer & Kolbe LLP, was simply soliciting investors to join a potential case rooting from a steep drop in Juno’s stock in 2016 after the deaths of two patients in a trial of one of its experimental drugs.

In the volatile biotech industry, such releases are very common — so much so that investors and reporters usually ignore them. But in rare occasions when the releases picks up steam, they can further the misleading impression that a company is in serious legal jeopardy. As a matter of fact, these types of shareholder suits — if they are filed at all — are usually settled for relatively small amounts or dismissed by a judge. To critics of the plaintiffs’ bar, the releases are a modern form of ambulance chasing.

When talking about Juno, a variety of other plantiffs’ law firms have issued similar announcements, stating that they are “investigating” whether the company faked out shareholders. Though the deadlines of those releases, those are usually the only information that will fit in a twitter (140 character post).

The Schubert law firm’s headline had no such context as it circulated around the web Tuesday. The firm, it should be noted, has issued similar releases in the past; merely stating that one or another public company was “under investigation.” The lawyer who is soliciting Juno investors did not respond to a request for comment Tuesday on this practice.

Shares of Juno dropped 3 percent as of 11 a.m on Tuesday, although other factors might have been at fault. The company announced less-than-expected financial earnings on Aug. 3, and Kite Pharma reported on Tuesday morning that the FDA indicated it might grant an expedited approval for the California biotech’s rival cancer drug.

Temporarily, FierceBiotech has since revised its headline by adding three final word so that is reads, “Juno executives investigated over trial deaths disclosure by law firm.”

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