The SEC Is Listening: Earnings Call Pressure Points for Life Sciences Companies
In recent public remarks, Corporation Finance Director Jim Moloney said he would rather see staff resources spent listening to earnings calls than reviewing routine shelf registration statements. Companies should take note. The staff has always compared what management says on an investor call against what the company discloses in its Exchange Act filings, but a shift in review priorities toward calls increases the odds that a stray remark gets quoted back to the company in a comment letter.
Biotech companies are particularly exposed. The topics management most often wants to discuss (program-level progress, clinical data, cash runway) are the same topics where the disclosures are most likely to go beyond what appears in the 10-K or 10-Q.
Where Biotech Earnings Calls Go Off Script
Several recurring issues stand out for life sciences companies:
Segment reporting and program-level R&D spend. A recent comment letter exchange illustrates the point.[1] The company disclosed in its annual report that it manages its business as a single reportable segment. On its earnings call, management discussed the business in a way that suggested discrete financial information below the consolidated level was both available to and reviewed by management. The staff noticed. It asked the company to explain how it considered ASC 280-10-50 in determining its operating and reportable segments and, to the extent multiple operating segments had been aggregated into one, to justify the aggregation. Responding required a detailed walk-through of the company’s chief operating decision maker (“CODM”) analysis: who reviews what, at what level of disaggregation, and for what purpose. Program-level commentary on the call also carries a separate, and more common, MD&A risk. The staff expects R&D expense to be broken out by program in the MD&A unless the company discloses that it does not track spend on that basis, and a company that takes that position in its filings while giving analysts program-level burn detail on the call has undercut its own disclosure. Tracking R&D spend by program does not by itself create an operating segment, but the company should have its ASC 280 analysis documented and current, and management should think carefully about how granularly it speaks to program economics on the call. The segment disclosure amendments under ASU 2023-07, which extended significant-expense disclosure requirements even to entities with a single reportable segment, have only sharpened staff attention in this area.
Cash runway commentary. Some version of “We are funded into 2028” appears in nearly every biotech earnings call script, and it is one of the easiest statements to get crosswise with the filings. If the call asserts a runway longer than the liquidity discussion in the MD&A supports, or one that quietly assumes an at-the-market program, an unearned milestone payment, a different funding mix than the MD&A describes, or the deferral of a Phase 3 start, the staff has asked the company to reconcile the statements. The problem is worse for companies approaching a going concern determination. An upbeat runway statement on the call reads badly next to a substantial doubt disclosure filed days later and, regardless of the proximity of a going concern, plaintiffs’ counsel read call transcripts just as closely as the staff does so it is critical to ensure that you disclose material assumptions and have robust forward-looking disclaimers.
Characterizing clinical data and FDA interactions. Anyone who has worked through an IPO or S-4 review knows the staff’s position that determinations of safety and efficacy are solely within FDA’s authority. The staff routinely requires companies to strike conclusory characterizations of trial results (that a product candidate is “safe,” “well-tolerated,” or demonstrated “potency” or “efficacy”) in favor of objective presentation of the data. Earnings calls are where that discipline most often breaks down. A CEO who describes interim data as “remarkably clean” or characterizes an FDA meeting as “very positive” has created a public statement that (i) may prompt the staff to ask why the corresponding periodic report presents the program more conservatively and (ii) becomes Exhibit A in a securities class action if the program later stumbles. The SEC has brought enforcement actions against life sciences companies over unduly positive public statements about regulatory status, including failure to disclose a clinical hold while touting a program’s prospects. The best practice is for call commentary about data and regulatory interactions to closely track the language the company has already vetted for its filed disclosure. (For the related securities litigation dynamics around safety disclosures, see our earlier post, When Should Companies Disclose Drug Safety Risks?)
Non-GAAP measures mentioned orally. Regulation G applies to non-GAAP financial measures disclosed orally on an earnings call, not just those in the earnings release. If management refers on the call to a non-GAAP measure (adjusted R&D expense, non-GAAP operating loss, “cash burn” presented as a defined measure) that is not reconciled in the furnished earnings release or on the company’s website, the staff has issued comments requiring companies to commit to reconciling all non-GAAP measures referred to orally going forward. There is a substantive overlay for life sciences companies as well. The staff has objected to excluding upfront and premium payments for collaboration and in-licensing arrangements from non-GAAP R&D expense, taking the position in correspondence with Biogen that such adjustments are inconsistent with Question 100.01 of the non-GAAP C&DIs. Now that in-licensing, including the wave of ex-China deals, has become a core and recurring business development strategy for many companies, the argument that license payments fall outside the ordinary course is a hard sell.
Partnered revenue and milestones. For companies with collaboration revenue, offhand call commentary about the expected timing or probability of milestone payments can create friction with the company’s ASC 606 variable consideration analysis. If management tells analysts a $50 million regulatory milestone is “highly likely” next year while the financial statements treat it as fully constrained, expect a question about how the company assessed the probability of a significant revenue reversal.
Practical Takeaways
Treat the earnings call script as a disclosure document. The accounting team should review prepared remarks for segment implications, non-GAAP measures requiring reconciliation, and consistency with the revenue recognition and liquidity disclosures. Securities counsel should review for clinical and regulatory characterizations that would not survive a staff comment in a registration statement, because the same standard is effectively being applied to the call.
Hold the filing until after the call where practicable. If the 10-K or 10-Q has not yet been filed when the call occurs, the company can conform the filing, as appropriate, to anything unexpected that comes out on the call, such as an off-script answer to an analyst question. Filing first gives up that safety valve.
Prepare the Q&A as rigorously as the script. Most call-related staff comments trace not to prepared remarks, which typically undergo thorough advance review, but to Q&A answers, which often do not. It is worth drafting bridging language for the Q&A in advance that returns hard questions on runway assumptions, program-level spend, and regulatory interactions to the filed disclosure.
Consider releasing prepared remarks in advance. Some public companies now issue their prepared remarks before the call and use the live call exclusively for Q&A. For a biotech management team, this front-loads the fully vetted disclosure and shrinks the universe of unscripted commentary, though it also gives analysts time to digest the remarks and arrive with sharper questions that go beyond the basics, which makes the Q&A preparation point above more important, not less.
The staff is listening. In life sciences, comments come from the gap between what management says and what the company files. Close that gap before the operator opens the line.
[1] See monday.com Ltd. response letter, dated October 9, 2025, available here.