February 5, 2025

Should Biotechs Hold Quarterly Earnings Calls (and What Happens if You “Set Precedent”)?

Cutting to the chase, the answer to the question posed is generally, “no,” but there are exceptions. So, let me spend the rest of this essay explaining why quarterly earnings calls are generally a bad idea for biotechs, and when those exceptions might occur.

The key word and clue is embedded within the question: earnings. On average, the typical NASDAQ- or NYSE-listed biotech doesn’t have an FDA- approved therapy, let alone sales, and especially not (positive) earnings.

Instead, the quarterly financial highlights of the average biotech are typically their quarterly cash burn, and the amount of cash they have left on hand. Neither of these two metrics normally vary substantially enough from an assumed trendline to concern analysts. Yes, cash burn can go up when you start a new trial, but trial initiations should come as no surprise to your covering analysts. As such, the financial highlights that analysts (and investors) are actually interested in what would take about ten seconds to relay on a call.

So, if the average biotech held quarterly earnings calls, what else would there be to talk about?

The subjects of most interest would of course be the company’s ongoing clinical trials and its interactions with the FDA, but providing routine public updates on each of these topics is problematic.

Let’s talk about each of these in turn.

Quarterly Updates: Clinical Trials

Clinical trials are typically blinded, meaning that a biotech is unaware of how a trial is progressing until management is unblinded to the final data (perhaps bar an early safety and futility analysis conducted by the trial’s data and safety monitoring board (DSMB)).

Even for those trials that aren’t blinded, clinical trials run at a painfully slow pace, and as such quarterly updates – even if they were possible – wouldn’t be especially helpful and could mislead. Instead, sharing data should be reserved for important milestones like interim analyses and topline results, or else once data sets reach a material level with an unambiguous signal.

Biotechs are typically unblinded to clinical trial recruitment, however. In fact, sometimes I’ve visited a client’s office and seen a giant whiteboard laden with the recruitment statistics. The problem with using this as content for quarterly calls however is that enrollment seldom follows a steady pattern (as clinical sites take time to come on board, drug supply issues can occur, trial protocols sometimes have built in “waiting periods”, seasonality takes hold, etc.) and the quarterly reporting of such numbers could cause analysts and investors to worry (needlessly) that trial timelines are behind schedule.

Quarterly Updates: FDA Interactions

Could biotech management teams talk about their interactions with the FDA on a quarterly basis? Absolutely not.

Why? Because the FDA is a keen consumer of the information put out by public biotechs (from press releases to webcasts and conference calls) and will reprimand you strongly if you are perceived to be misrepresenting their position. Furthermore, the FDA can change its mind as personnel leave and new heads of department are put in place.

Investors and analysts want to believe that a biotech’s relationship with the FDA resembles a graceful swan floating atop the water. In truth, we know that the legs are paddling furiously underneath but knowing that and seeing that in action are two very different things.

Furthermore, meetings with the FDA typically take place weeks before the official minutes of a meeting are published, and it’s those minutes that dictate what was said and what was agreed, not necessarily the impression that management came away with on the day.

Generally speaking, commenting on FDA engagement is regarded as prejudicial to the outcome of past and future meetings.

Quarterly Updates: What’s Left?

So, what content is left that biotechs could fill quarterly calls with? Market research for drug products that haven’t been approved? Fluffy commentary around how excited management is about future events that we can’t comment on for the time being? Analysts and investors see through that immediately.

And to underline the problem, even if you manage to fill fifteen to twenty minutes of prepared remarks every quarter, during the Q&A portion at the end of the call you expose yourself to analysts’ questions about all the things you can’t talk about. And giving non-answers or refusing to answer questions tends to be detrimental to analyst relationships since these people a busy group of individuals.

Is There Ever a “Right Time”?

Now, in spite of all the above, I do recommend biotechs host one quarterly “earnings” call every twelve months. It should coincide with the first quarterly report biotechs put out each year, namely the Fourth Quarter and Full Year Results in either February or March (depending on your 10K filing deadline with the SEC).

During this call you can summarize the progress you made the previous year and set milestones for the year ahead. Here you can provide new guidance and give people a reason to hold your stock throughout the coming year.

Let’s also be clear – your analysts don’t want you to hold a quarterly earnings call unless you really have something to say to them. They would really prefer it if you don’t waste their time, especially since biotech earnings tend to clump around similar SEC filing deadlines, which means analysts can sometimes have five, six or seven calls to listen to on any given day during earnings season.

Importantly, hosting one call does not set precedent.

In fact, hosting two or three or four a year does not set precedent.

As one analyst once said to me, “You can stop or start again at any time. Bring us together when you have something important to say but otherwise give us our time back.”

Assuming the FDA eventually approves your drug, there will come a time for you to host quarterly earnings calls. And these typically begin six months before your Prescription Drug User Fee Act (PDUFA) date.

In the one or two quarterly calls before your prospective approval, biotechs typically share their marketing plans and set the stage for their commercial launch. Thereafter it’s all about managing and hitting sales guidance for your approved drug.

For biotechs who take a clinical misstep and find themselves relegated to being a microcap, there is often pressure from the board to host quarterly calls to “market” the company and “use every opportunity to garner attention.”

In my experience, this is bad advice.

For me, the only way out of Microcap Hell is via transformative clinical data or a transaction (takeover, out-licensing, etc.). It has never been my experience that microcap biotechs have solved their problems by hosting quarterly earnings calls. Quite the opposite in fact.