Five years after a retraction, company’s stock is up more than 500%

Is ethical behavior good for business?

Five years ago this month, Swedish pharmaceutical company WntResearch immediately notified shareholders when authors retracted a 2009 Proceedings of the National Academy of Sciences (PNAS) paper on a potential cancer therapy that was key to the company’s business.

At the time, the company’s decision to disclose the retraction hurt its finances, as WntResearch delayed its planned initial public offering for three weeks. It also offered investors and shareholders the opportunity to withdraw their shares of WntResearch stock.

But, aside from one of the paper’s co-authors, “No one did that,” Nils Brünner, WntResearch’s CEO, told us. Since the company’s IPO on December 17, 2010, its stock price has increased from 6.6 Swedish Krona, (0.76 USD) per share to 37.50 SEK, (4.32 USD) as of December 1, 2015.

Instead of damaging the company, Brünner said he believed transparency around the retraction protected it from financial backlash.

There’s good evidence that’s true, according to Paul Wolpe, a bioethics professor and Director of Emory University’s Center for Ethics. In the corporate world:

Admission of error followed by remedial action is almost always forgiven.

People tolerate honest mistakes because we’ve all made them, but the public hates a cover-up more than anything, according to Wolpe:

Suspicion is the death knell of a corporate public relations.

But investors in biotech companies won’t stay onboard for ethics alone — they also need sound science. The retracted paper involved WntResearch’s drug Foxy-5, which helps tumors respond to tamoxifen. The science behind Foxy-5 involves mimicking a specific protein, called Wnt-5a, which binds to a receptor on the surface of cells. Substantial scientific literature indicates that the presence of Wnt-5a inhibits cancerous cells from spreading to other place in the body. But the actual Wnt-5a protein is too large to use for therapeutic purposes; Foxy-5, however, binds to the same receptor and is small enough to introduce to patients intravenously in drug form.

Since the PNAS paper was retracted in 2010 after the authors discovered “serious calculation errors” in one of its central figures, lead author Tommy Andersson has published several other articles in scientific journals about the relationship between Wnt-5a and metastasis.

So despite the retraction, the drug may hold promise in cancer. According to Rosa Serra, a researcher who has studied the Wnt signaling pathway at the University of Alabama:

As an overall strategy, I think it’s a good one.

Serra’s caveat is that binding to the receptor could trigger other biological process that scientists don’t yet understand — but, she added, that’s a common concern for new drugs.

WntResearch must suss out those potential side effects during the clinical trials process, which has already begun. On November 6th, the company published results from its phase 1a clinical trials, designed to test the toxicity of Foxy-5 in patients. As per the report:

The results from the study demonstrate that from a toxicological point of view Foxy-5 is a safe and well tolerated drug with no dose limiting toxicities observed at any dose.

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