The Case for Including Investors on Conference Calls


Xconomy National — 

We are in the middle of a busy earnings season on Wall Street, which for an independent investor like me means listening to a lot of company conference calls. While that admittedly is not always the most exciting way to spend your days and evenings, I would like to relate a story about a novel thing that practically made me jump out of my seat as I was viewing a live videocast of Roche’s call last week. I hope that by telling it other biotechnology and pharma companies (or really anyone), and their respective investor relations firms, can see how this practice can be improved in a big way simply by doing a small thing. In the process, I can guarantee that you will at a minimum earn a nice piece of investor goodwill while also helping to improve the overall system.

As I was listening to analysts ask questions during Roche’s videocast from my home in Lenexa, KS, I clicked on a link entitled “submit question” and typed out one that I had about a particular clinical program I am interested in. Almost one minute later at their headquarters in Basel, Switzerland, a piece of paper was handed to CEO Severin Schwan, a man who runs one of the largest companies in the entire world, who proceeded to read my question out loud and kick it off to his chief of pharmaceuticals to answer. Now that might not sound very exciting to everyone, but to me it was amazing. I’m not talking about the technological aspect, though as someone who started investing nearly 20 years ago, I am amazed at how much things have changed. No, as an individual investor who doesn’t work for a big Wall Street firm, I think it is amazing and wonderful that someone even valued my participation enough to take the question at all. I hope more companies will follow the lead they and others are setting.

First, I think it is important to establish, as most surely agree, that quarterly earnings conference calls should be viewed as being very important to you. I am a big believer in the idea that how it communicates can make or break a company, and calls are sometimes ground zero for this. I cannot tell you how many times I have seen companies with otherwise great potential become doomed largely because they lose investors’ confidence through ineffectual communications and a resulting loss of trust. This is particularly the case in biotech and pharma where, due to the confidential nature of R&D and the regulatory process, investors are especially at the mercy of management to be telling you the truth. The things I am looking for most in a call are managers who are in command of the subject, speak clearly and concisely, and seem to express mutual respect for investors. Terms like “shareholder value” are good, while evasiveness or reading from a legalistic script might make investors run for the hills and never come back.

With that being established, I would like to make the case that including investors on calls, like Roche and others are now doing, will not only help investors, but also act as a nice benefit to your company specifically and the system as a whole. Doing so is incredibly rare these days, which is a shame because I believe that is working to the detriment of all three of these things. It is time for a change.

Why including investors will directly benefit your company

First, one of the biggest complaints I hear from management teams about running a public company, particularly from those in the life sciences industry, is how Wall Street pressures them to think or act too much in a short-term manner. If that is the case, I do not see how it is ideal to only invite Wall Street analysts, whose job by definition is to obsess about short-term details, to participate on a call. While I am not saying there aren’t also a lot of short-term thinking investors out there (or great analysts), I bet you would be surprised by … Next Page »

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3 responses to “The Case for Including Investors on Conference Calls”

  1. Joan Bar says:

    Good Points, but the reason this hardly will become a norm is because Companies lie or hide things, so management prefer to have questions from their buddy bankers whom they raised money thru secondary offerings trow them soft balls in the Q&A session, also need to be aware of crappy companies that because no analyst follow them will open the call to retail investors making it appear like they care when in truth they just opened because no analyst was going to make a question to them, actual case was in my experience DDSS Labopharm, they head faked with one of their last call opening their call to retail..

  2. Helena Smith says:

    Are there examples of quarterly earnings conference calls that are not open to individual investors? When ever I join calls I am asked my name and affiliation (to which I reply ‘None’) and the Q&A at the end of prepared presentations are open to all. I’ve even heard company employees ask questions.

    • Thank you very much for the comment/question. That is interesting to hear. My experience, especially in biotech and pharma, has been exactly the opposite. Signing in as “none” or “individual investor” usually allows you to join in a listen only mode, but you are essentially blocked out of participating in Q&A. I would say that has been the case nearly 95% of the time for me unfortunately.