Trading on The Inside Edge

Stock deals based on priveleged information still go on, and many of them are legal

After Philip Schein, the CEO of U.S. Bioscience, told Wall Street analysts last November that regulatory approval for the firm's new cancer-therapy drug was imminent, there was a stampede to buy the company's stock. By Jan. 7, Bioscience's share price hit an all-time high of 85, before a 2-for-1 split at mid-month. But on Jan. 31 came a shocker: a Food and Drug Administration panel decided not to recommend approval of the new drug, known as Ethyol.

That sent the stock into a free fall. It plunged 46% at the next session and never recovered. The shares are now trading at...

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