Our Favorite Drug Company Conference Call Tap Dancers
Drug company conference calls with Wall Street are often dull or baffling -- a fast tide of numbers and facts extracted by spreadsheet jocks. But they're often the only chance we have to hear CEOs and other senior execs talking without the benefit of prepared remarks. Every once in while they screw up, get it wrong or -- most commonly -- try to get around tricky questions by waffling endlessly. When a CEO plays for time, hoping an answer will come, going around in circles or making no sense at all, it's called tap dancing. BNET presents a selection of our favorite recent drug company conference call tap dancers:
Tiny little Sucampo markets one drug, Amitiza, for clinical constipation and irritable bowel syndrome. Here analyst David Moscowitz of Caris & Co. asks CFO Jan Smilek about some revenue that the company is deferring. If you can understand Smilek's answer -- or identify when in 2009 the revenue will be recognized -- then you're a better person than I:
David Moscowitz - Caris & Company: Good evening, everyone. Question about the OBD revenue deferment; it sounds to me like the trials are still on track and yet you are deferring that revenue. I don't quite understand what happened in the quarter with that?
Jan Smilek: This is Jan. What we have done, as you may remember from the first and second quarter, at the beginning of the second quarter, we have actually have changed the estimate when that trial is going to be completed. And that change resulted in the deferral in that month, but he deferral actually continues until we hit from an accounting point if we hit a cumulative expenses that are going to be higher than a straight line cumulative expenses that are resulting from that change in estimates. So, we believe that we are going to continue to defer some revenue until probably through early first quarter of 2009 and at that moment the revenue will start to be utilized and as I said, most of that revenue is going to be utilized in the second quarter of 2009, or just second half of 2009.On a recent Bristol-Myers Squibb conference call, Merrill Lynch's David Risinger asked CEO Jim Cornelius why the company believes some oncologists are "confused" about the benefits of cancer drug Erbitux. If you read Cornelius' answer carefully, you'll note that Cornelius is trying to avoid saying that he hopes the docs will use the drug off-label. It's illegal for companies to encourage that, which is why Cornelius's answer is so bizarre:
David Risinger - Merrill Lynch: I have a couple of questions. First, following up to that response that you offered, could you please explain why you think community oncologists are confused? And is that to suggest that the sequential trend that we should expect in coming months for ERBITUX maybe worse than expected since I don't think that you were talking about them being confused previously?
James M. Cornelius - Chairman and Chief Executive Officer: I cannot what exactly what is going happen. But I believe that the recent publication on K-ras is going to be very useful to community oncology and other decision makers in understanding the importance of K-ras. There is 60% of their patients that are wild type K-ras. And those patients are going to benefit from the use of ERBITUX in colorectal cancer. So obviously we... there is a disalignment between the knowledge that is available and what we have in the labels. So there is a little bit of a disalignment between what we can say and promote and what is known to a broader community. And this is where I believe we must work within the boundaries of the limitation of the label, but where some education will be possible also from other parties. And again, I am confident that this K-ras is an opportunity, and it's not an opportunity years from now is a short term opportunity.On a call with Gilead, Geoffrey Porges of Sanford C. Bernstein & Co. asked a routine question about how the company manages its margins (i.e. how it keeps it expenses in line with its revenues). It was a routine question but the transcript shows that COO John Milligan suddenly lost the ability to construct English grammar properly and delivered this barely comprehensible reply:
Geoffrey Porges - Sanford C. Bernstein & Co.: A question for Robin perhaps and also for John. A number of moving parts in your margin, but looks as though your operating margin is sort of down substantially both sequentially and year-over-year. And you commented about R&D John, but could you give us a sense, is this the sort of operating margin level overall that you think is sustainable or do you think that you could see some more recovery going forward? I mean where do you think it goes from here?
John F. Milligan - Chief Operating Officer: We did have ... Geoff, it's John Milligan. We had a number of one-time items that did depress our margin a little bit. We're including the reserves that we took for some disputes on our terminations in Europe. We did have some milestones paid out, which have been one timer. We also first have the Atripla which is sales are increasing which are not only growth but operating margin as well. So I think those are one time events that drove things down a little bit. I also think that there are a lot of terms where Atripla which will continue to put some pressure on that margin. We are trying very hard to keep our expenses in line and please as well we sought R&D but I did one to plan. I was thinking about this the sales or marketing high that also one of this quarter, added up and for those results we would not have taken those that guidance up. There were almost all attributable to those reserves. So we are trying to hold the line as best we can in this area as well and keep that operating margin as high as possible.In a recent call with Shire, CEO Matt Emmens made it quite clear that his new ADHD drug Vyvanse was NOT a replacement for his old drug, Adderall XR. Fair enough. Except, as, you can see from the rest of the call, it was Emmens himself who repeatedly suggested that patients would indeed switch from Adderall to Vyvanse:
Matthew Emmens - Chief Executive Officer: I think there has been some misunderstanding. I would like to just go over kind of where we are positioning this drug and why we are doing that. It is positioned as a new class of ADHD medication and it is not, I repeat not a replacement for AXR. We used the word switch, that's probably unfortunate. That's one way of looking at it, but basically if we had chosen to have this product as a substitute for ADDERALL XR, we would by that nature of that, limit ourselves to what the market would be, A, and we would suggest that this drug could be substituted. It is not a new chemical entity, it is not a line extension and it is not substitutable in the broader sense.
... among patients who switched from ADDERALL XR to VYVANSE, 75% reported further improvement in their most bothersome symptoms.Shire CFO Angus Russell couldn't help himself either:... if we look at 8 out of 10 parents reported they intend to continue their child on VYVANSE after switching from ADDERALL XR, and this was when they were on drug for 40 days. So again, 96% said they either would, that was 80%, or maybe 16%, they're still thinking about it. But you don't see a lot of negative here.
... So the strategy for this drug was to go to broad appeal and have a larger opportunity than there would be if just... if it was just an ADDERALL switch, which probably in itself if we had done that would basically make people think that you could substitute that.
Angus Russell - Chief Financial Officer: ... that has been reduced for ADDERALL XR because obviously we are now beginning to lose share as we put VYVANSE into the market and patients are converting from ADDERALL XR use to VYVANSE.BNET readers will remember this incident in which Schering-Plough CEO Fred Hassan got stuck on the word "diversity." He mentioned it nine times, including this bizarre instance:
Fred Hassan: We have strengthen and diversity on four important fronts. First, we have diversity from diversity in our products.At Cephalon, management got into a discussion of exactly why they know Provigil and Nuvigil work:
Lesley Russell - Executive Vice President, Worldwide, Medical and Regulatory Operations: The other study which we will or also be available at the time of launch is more sharing mechanism and site of action. I think if you are familiar with the PROVIGIL label, the pictures of cat brain showing site of action of PROVIGIL the goal for NUVIGIL is to replace the cat brain pictures with human brain pictures and they have to show in a more relevant population.
Frank Baldino, Jr. - Chief Executive Officer: I am still laughing at Lesley's comment about humans being more relevant population than cats.Photo from Flickr user the Wisconsin Historical Society, CC.