June 4, 2025

How Should Biotechs Best Communicate Negative Clinical Trial Results?

Over the years, I’ve seen clients’ drug candidates fail in nearly every stage of clinical trial. That’s the nature of biotech, and what makes our industry so risky (and also so rewarding when it goes right).

Typically, I sit down with my client’s management team a couple of months before an expected data readout. Over the weeks that follow, we generally draft three sets of materials: 1) a press release and slides to be used in the event of “home run” clinical data; 2) a press release (and repurposed slides from (1)) to be used in the event of middling data; and 3) a press release to be issued in the event of negative data.

I’ll discuss situations (1) and (2) in another blog – because there are important fundraising factors to talk about at the same time – but what I really wanted to touch on in this article is situation (3). Why? Because it’s the press release CEOs and CFOs typically never want to write.

I get it. Members of a biotech’s C-suite are normally the company’s most vocal cheerleaders and chief marketers. Some of them don’t want to think about failure – perhaps in case they somehow manifest it into being. But thinking about a worst case scenario – and more specifically planning for it in advance as an eventuality – is vital.

Here then are some tips for how to communicate negative trial data to your investors and analysts.

Don’t host a call -The golden rule for biotech data announcements is that positive results deserve a call (with slides), while a press release alone suffices for negative data. Why? Well, because everyone on Wall Street is mildly “sociopathic”. By this I mean they are more “rational” and “pragmatic” than the general population. And they have good reason to be: often they are called upon to make snap judgments about whether a stock is a buy or a sell against the backdrop of majorly destabilizing or disruptive news (natural disasters, Fed decisions, wars, regulatory changes, product launches, patient deaths, recalls, crises, etc.). Professional experience trains them not to get attached to a particular outcome and at any given point to ask: “So, what now?”. Don’t waste their time (or yours) recounting something they want to move on from.

Of course, once you’ve issued your press release, you should obviously offer one-on-one calls to your covering analysts and biggest holders, though note: no material nonpublic information can be disclosed on these calls.

Don’t go on and on about your failed program – It’s genuinely sad that your program failed. Sad for you, your shareholders, patients and a whole host of other stakeholders. But unless you want your failure to be what the reporters write about (and Yahoo Finance reproduces), do not go into voluminous detail about it in your press release, in interviews (if relevant), or during one-on-ones. The only details you need to disclose to the investment community are that the data was negative, the program is being wound down, any cost savings associated with the wind down (RIF etc.), and (if true) that there is no read-through to your remaining drug development candidates. The title of your press release should be about the future, not the past.

E.g. “Fill-in-the-blank Therapeutics to focus development efforts on Program B, following update from Program A.”

Any condolences you wish to offer to stakeholders (investigators, patient advocacy groups, departing employees, trial participants) are better communicated via email or telephone than in your press release – the primary audience for which should be the financial community.

Clearly state your new investment thesis – Existing investors will immediately need a reason not to dump your stock when you deliver bad news. You won’t be able to convince all of them, so a clear investment thesis is also necessary to bring new buyers (potentially retail) into your cap table to mop up any sales from your top shareholders.

Clearly lay out what your development pipeline looks like following your clinical failure. Spell out the (hopefully near-term) milestones associated with your new development focus. Update your cash runway guidance if the cost savings from discontinuing your failed program mean your existing cash pile will last longer (this is super important because any perception of a financing overhang will further depress your stock price).

Don’t rush into making an announcement – Trial results are usually unblinded in dribs and drabs, culminating with tables, listings, and figures (TLFs) summarizing the trial as a whole. It’s not usually the case that you know right away the data is definitively bad – although you might be able to surmise a likely outcome. Disclosure is triggered upon materiality, which could be the data itself, but is more likely to be a board decision to discontinue a program. Plan strategically and give yourself enough time to generate answers to all (if you can) of the likely questions you will face from investors and analysts. Pressure test your investment thesis and role-play mock investor calls. Essentially, arm yourself with as much information as possible to put your best foot forward after your announcement.

Update your website and corporate deck – It’s not essential that your website and corporate deck immediately reflect your new corporate focus, but it has to happen within a reasonable timeframe, so why not prep it all to go live when you make your announcement? That way, anyone new to your stock will be able to more easily come to grips with your long-term prospects.

Embrace your new reality and work on the future – Post data, you may find that not all your covering analysts rate you as a buy, some might even drop coverage altogether. Maybe you get invited to fewer investor conferences, or you get fewer one-on-one meetings at the conferences you do go to, or maybe you don’t get meeting requests from the caliber of investors you’re typically used to, etc.

Be patient. Good data will eventually rectify everything for you. In the meantime, make the best of the hand you were dealt with and focus on running your company.