Kevin is the chief financial officer of PrimeHeal, a biotech lab that researches, develops, and commercializes pharmaceutical drugs for women's health issues. PrimeHeal submits a new drug application to government regulators for a promising new drug for treating hormone deficiency. Two meetings scheduled with regulators to discuss the drug are postponed when the regulator states that unspecified deficiencies with the drug make such discussions premature. The public announcement of each meeting postponement results in a decline of more than 8% in the company stock. When the meeting between regulators and company executives finally happens, PrimeHeal presents yet-to-be published preliminary test data with favourable indicators for the drug. The regulators react positively and give PrimeHeal preliminary regulatory approval contingent on further studies. After the meeting, six sell-side research analysts covering PrimeHeal inquire with Kevin about the meeting. Kevin responds by email and indicates that he believes the meeting with regulators was "very positive and productive" and that the company was "pleasantly surprised" by the reaction of the regulators. Kevin does not share the favourable preliminary test data with the analysts. After the emails to the analysts, the stock price of the company increases 22%. Kevin's actions are (Choose the best answer.) O (No answer given) O inappropriate. appropriate because CFO responds to questions from research analysts covering the company. appropriate because CFO does not share the unpublished preliminary test data with the analysts but restricts his comments to the general tenor of the meeting. O appropriate because CFO communicates with all six research analysts covering the company.
Kevin is the chief financial officer of PrimeHeal, a biotech lab that researches, develops, and commercializes pharmaceutical drugs for women's health issues. PrimeHeal submits a new drug application to government regulators for a promising new drug for treating hormone deficiency. Two meetings scheduled with regulators to discuss the drug are postponed when the regulator states that unspecified deficiencies with the drug make such discussions premature. The public announcement of each meeting postponement results in a decline of more than 8% in the company stock. When the meeting between regulators and company executives finally happens, PrimeHeal presents yet-to-be published preliminary test data with favourable indicators for the drug. The regulators react positively and give PrimeHeal preliminary regulatory approval contingent on further studies. After the meeting, six sell-side research analysts covering PrimeHeal inquire with Kevin about the meeting. Kevin responds by email and indicates that he believes the meeting with regulators was "very positive and productive" and that the company was "pleasantly surprised" by the reaction of the regulators. Kevin does not share the favourable preliminary test data with the analysts. After the emails to the analysts, the stock price of the company increases 22%. Kevin's actions are (Choose the best answer.) O (No answer given) O inappropriate. appropriate because CFO responds to questions from research analysts covering the company. appropriate because CFO does not share the unpublished preliminary test data with the analysts but restricts his comments to the general tenor of the meeting. O appropriate because CFO communicates with all six research analysts covering the company.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Kevin is the chief financial officer of PrimeHeal, a biotech lab that researches, develops, and
commercializes pharmaceutical drugs for women's health issues. PrimeHeal submits a new
drug application to government regulators for a promising new drug for treating hormone
deficiency. Two meetings scheduled with regulators to discuss the drug are postponed when
the regulator states that unspecified deficiencies with the drug make such discussions
premature. The public announcement of each meeting postponement results in a decline of
more than 8% in the company stock.
When the meeting between regulators and company executives finally happens, PrimeHeal
presents yet-to-be published preliminary test data with favourable indicators for the drug.
The regulators react positively and give PrimeHeal preliminary regulatory approval contingent
on further studies. After the meeting, six sell-side research analysts covering PrimeHeal
inquire with Kevin about the meeting. Kevin responds by email and indicates that he believes
the meeting with regulators was "very positive and productive" and that the company was
"pleasantly surprised" by the reaction of the regulators. Kevin does not share the favourable
preliminary test data with the analysts. After the emails to the analysts, the stock price of the
company increases 22%. Kevin's actions are
(Choose the best answer.)
O (No answer given)
O inappropriate.
appropriate because CFO responds to questions from research analysts covering the
company.
O appropriate because CFO does not share the unpublished preliminary test data with
the analysts but restricts his comments to the general tenor of the meeting.
O appropriate because CFO communicates with all six research analysts covering the
company.
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