Sebi has asked these companies the details of disclosures made regarding new drug launches, pending patents, sourcing of input materials and new collaborations entered, said people with direct knowledge of the matter.
The development comes as pharma stocks have seen sharp price moves in recent years and the regulator wants to ascertain if all the price-sensitive information has been disclosed to the investors in a fair and time-bound manner. In some of the cases, Sebi is learnt to have found delays in disclosures while in a few other cases, no disclosures were made at all.
Most of the queries by the regulator centred on the pandemic period when pharma stocks witnessed sharp moves based on business developments.
An email sent to Sebi remained unanswered until Thursday press time.
“In one case, the queries were about a collaboration signed by a leading pharma company for distribution of Remdesivir – the drug that was used by doctors worldwide to treat the symptoms of Covid-19,” said a person cited above. “The company may have a different view on it since the development was not expected to have any major impact on the company’s business.”
Legal experts said the pharma industry is unique when it comes to disclosures since even small developments could have a material impact on short-term stock prices. For instance, the launch of a new drug or a company receiving observations from regulators such as the US Food and Drug Administration (USFDA) leads to sudden movements in stock prices.
“Some of the events like procurement of input materials may be part of routine business, but in cases where such developments are expected to have a financial impact on the company, the same must be disclosed in a timely manner,” said Mayank Mehta, partner, Pioneer Legal. “In case of lifesaving drugs being developed, the pharma company must ensure to provide pertinent information to investors including the developments about licensing or clinical trials etc.”
Some of Sebi’s queries on disclosures are being construed as a regular course of business by companies, people cited above added. For instance, in one case Sebi has sought disclosure status on the company switching to a new input material provider for a drug that it develops.
Another person cited above said Sebi’s nudge for improving disclosure standards amongst the pharma companies can sometimes be at odds with the confidentiality clauses in the commercial agreements. “Apart from being timely, a disclosure must also be accurate. Sometimes due to compliance pressure, the companies end up making premature disclosures,” said another person cited above.
In 2017 the market regulator cracked a whip against pharma companies for not disclosing the status of US FDA approvals. Since then, the disclosure standards of the industry have seen a strong improvement, say legal experts.
