Analyst Gets Owned at his own Conference

How normal is this? lol I just read this and a lot of people get calls wrong, but for this one to get called out and not much of a response makes me wonder what's going on behind the scenes.
For a good laugh.

Vertex - Morgan Stanley

The head of Vertex Pharmaceuticals Inc. (VRTX) used an appearance Tuesday at an investment-bank conference--normally a staid, cordial affair--to take to task one of his company's biggest critics, who also happens to work for the host bank.

Vertex Chief Executive Matthew Emmens told Morgan Stanley (MS) analyst David Friedman that he didn't think Friedman understood the drug maker in an exchange in front of a room full of investors at the investment bank's Global Healthcare Conference in New York.

Friedman rates Vertex shares "underweight," according to a Morgan Stanley website. He has been skeptical about whether Vertex's new hepatitis C drug, Incivek, will meet high sales expectations from others on Wall Street.

But Vertex shares are up more than 40% year-to-date, trading recently at $50.21, buoyed by early signs that Incivek has been a brisk seller and is outperforming a competing new drug from Merck & Co. (MRK), Victrelis.

At the conference, where Friedman introduced health-care executives and asked them questions, Emmens said Incivek's launch has been successful, and Vertex plans to file for regulatory approval of a cystic-fibrosis drug soon.

"I think we've done a little better than you thought we would," Emmens said to Friedman.

"I absolutely agree," Friedman responded. But Emmens, a drug-industry veteran who previously worked at Shire PLC (SHPGY) and Merck, was just getting started.

"Do you understand this company? I don't think so," Emmens said in remarks played over the Internet. "By what I read, I don't think you understand our company. I'm going to do the best I can to prove you wrong again and again, because it's been fun. But when does it stop, you know?"

Friedman said he is "trying to do the work that we see." To which Emmens replied: "OK. You do your job, we'll do ours. Keep it up."

Emmens didn't raise his voice, and even sounded jovial at times, but his words didn't leave much doubt about his view of Friedman's research. Friedman quickly moved on to questions about Vertex's business.

At the end of the presentation, Friedman thanked Emmens for appearing, and the chief executive reciprocated.

Vertex's road to Incivek's launch was a long one, coming 15 years after the company made a splash by publishing key research on an element of the hepatitis C virus that became the target for Incivek. The company's past drug-research efforts also were the subject of a 1995 book titled "The Billion Dollar Molecule: One Company's Quest for the Perfect Drug."

Morgan Stanley has gotten banking business from Vertex in the past, including co-managing a 2009 stock offering.

Friedman couldn't be reached. A Morgan Stanley spokeswoman declined to comment.

Region: 
United States - Northeast

Comments (28)

Sep 27, 2011

Hahahaha wao, I feel bad for Friedman. Anyway, time and the market reaction would be the best answer

As for David Friedman, am I the only one who thinks this will make one hell of a story for the bschool app? =)) (IF he is right)

My formula for success is rise early, work late and strike oil - JP Getty

Sep 27, 2011
Quarterlife:

Hahahaha wao, I feel bad for Friedman. Anyway, time and the market reaction would be the best answer

As for David Friedman, am I the only one who thinks this will make one hell of a story for the bschool app? =)) (IF he is right)

that guy is most likely an MD...

Sep 27, 2011
Solidarity:
Quarterlife:

Hahahaha wao, I feel bad for Friedman. Anyway, time and the market reaction would be the best answer

As for David Friedman, am I the only one who thinks this will make one hell of a story for the bschool app? =)) (IF he is right)

that guy is most likely an MD...

Yah, I keep forgetting that it's unlikely that they would let a newly minted analyst to give the presentation. My bad. Looked the guy up on Linkedin, though he's not a MD, he's an associate who already went to business school (HBS, no less). And as far as credentials go, he's pretty legit to cover pharmaceutical industry too (went to ugrad at Duke, general surgery resident at the Massachusetts General Hospital)

My formula for success is rise early, work late and strike oil - JP Getty

Best Response
Sep 27, 2011

Don't feel bad for Friedman kiddies. Jim Chanos was thought to be suffering from fuckfaceitis when he went about questioning Enron's numbers. I don't seem to hear any glib shit coming from Andy Fastow, Jeff Skilling or the grave of Ken Lay. The job of an analyst is to look at all possible angles, not just the rosy pink shit. If Friedman isn't simply rubber stamping a drug company and it's newest miracle product it shows he's not in their pocket. This is a good thing for everyone involved, as for getting pwn3d by a CEO...comes with the territory.

Sep 27, 2011
Midas Mulligan Magoo:

Don't feel bad for Friedman kiddies. Jim Chanos was thought to be suffering from fuckfaceitis when he went about questioning Enron's numbers. I don't seem to hear any glib shit coming from Andy Fastow, Jeff Skilling or the grave of Ken Lay. The job of an analyst is to look at all possible angles, not just the rosy pink shit. If Friedman isn't simply rubber stamping a drug company and it's newest miracle product it shows he's not in their pocket. This is a good thing for everyone involved, as for getting pwn3d by a CEO...comes with the territory.

It's always nice to see someone sticking it to "the man" even if he himself works for "the man." If you catch my drift.

Sep 27, 2011

only time can tell

Sep 27, 2011

That was a dick move by management.

Sep 27, 2011

Yeah I guess it's one of those things you won't see until later...but I think this analyst a year ago, thought that their drug would have huge issues in the beginning and has been a bear on alot of their pipeline which has done well so far. I think it's nice to see people dismiss pleasantries and go at it!

Sep 27, 2011

"Owned" is definitely not how I would characterize this exchange. An Analyst only gets owned if his recommendation is wrong, not if the CEO disagrees with his Sell rating. "Called out" would perhaps be a better way to put it.

Have you ever in the history of the world met a CEO that is happy with the analyst who slaps a Sell rating on his company? The answer is no. They are always pissed, and have even gone as far as to demand the sacking of said analyst or the company will withhold all future banking business.

In a nutshell, this story is fairly ridiculous.

Sep 27, 2011
gamenumbers:

"Owned" is definitely not how I would characterize this exchange. An Analyst only gets owned if his recommendation is wrong, not if the CEO disagrees with his Sell rating. "Called out" would perhaps be a better way to put it.

Have you ever in the history of the world met a CEO that is happy with the analyst who slaps a Sell rating on his company? The answer is no. They are always pissed, and have even gone as far as to demand the sacking of said analyst or the company will withhold all future banking business.

In a nutshell, this story is fairly ridiculous.

Good point. Management complains often over Sell and Hold ratings.

Sep 27, 2011

Well to be honest - the analyst was wrong. I just did some reading and he thought the launch of the drug would be dismal and well...the drug has been doing really well. He even admitted to being wrong. It's fine..maybe the call will work out longer term although that wasn't the original thesis.

Sep 27, 2011

Midas has it right, the first thing I thought when reading that was Enron. How petty is that for the CEO to call out an analyst like that on stage with the sole intention of humiliating him? Either the guy is an asshole or he is acting out of aggression b/c he is hiding something.

Sep 27, 2011

"show me a man who has never made a mistake, and i'll show you a man who has never made a decision" ...

Money Never Sleeps? More like Money Never SUCKS amirite?!?!?!?

Sep 28, 2011

At the same time, you have to look at it from the CEO's perspective. This analyst is far removed from the company and keeps shitting on the work and process that Vertex does in developing drugs. Many in the industry were critical of the designer molecule model used by Vertex but now they are coming out with a drug for Hepatitis this year, one for Cystic Fibrosis the next, and another the year after that. I can see why the CEO may be annoyed by the notion that some shithead 20 something in a big Wall Street skyscraper is criticizing his business. I'm not saying what the CEO did was right, but I understand.

Reality hits you hard, bro...

Sep 28, 2011
MMBinNC:

At the same time, you have to look at it from the CEO's perspective. This analyst is far removed from the company and keeps shitting on the work and process that Vertex does in developing drugs. Many in the industry were critical of the designer molecule model used by Vertex but now they are coming out with a drug for Hepatitis this year, one for Cystic Fibrosis the next, and another the year after that. I can see why the CEO may be annoyed by the notion that some shithead 20 something in a big Wall Street skyscraper is criticizing his business. I'm not saying what the CEO did was right, but I understand.

someone please correct me (and forgive my ignorance) but in equity research, aren't the titles different than in IB? like an entry-level ER guy starts off as an "associate" and only after several years of good work he is promoted to "analyst". i did a quick google search for David Friedman at Morgan Stanley, and he goes by "David Friedman, M.D." on research reports. i have a feeling this guy isn't just some 20-something smartass straight out of college.

Money Never Sleeps? More like Money Never SUCKS amirite?!?!?!?

Sep 28, 2011

Does anyone else see it as a little pathetic that a CEO would stoop to take a jab at an analyst? (and IMHO lose his cool/composure)

Sep 28, 2011

Yes, ER roles are 'backwards'. In ER, Analyst is a higher-up title.

Sep 28, 2011

Pssh, that's nothing. Back in '08 the CEO of Union Properties in Dubai spent about half the conference call railing on how retarded the Morgan Stanley analyst who downgraded his stock was and how resilient and robust Dubai property was. Analyst didn't stick around long..

http://gulfnews.com/business/property/union-proper...
Share price fell from 5 dirhams to 0.35 dirhams today. Ouch..

Sep 28, 2011

This is always easy in hindsight.

Theoretically, the analyst could even be right. Chance of a successful launch could have been 1% versus 99% of failure, meaning buying the stock would not be a good idea from a risk return perspective.

The fact that incivek was successful after the fact does not mean that it was a good buy at the time.

Sep 28, 2011

I mean this is just like Whitney Tilson beating the drum against Reed Hastings, telling him to cover his Netflix short. And well we see what an absolute disaster NFLX has become. I would be extremely skeptical of a CEO coming at an analyst like this. Something smells fishy.

Sep 28, 2011

This reminds me of one of my favorite posts from one of my favorite blogs circa 2007:

Long or Short Capital:

Bill Doyle the baller CEO of Potash Corp (NYSE: POT) recently crushed the spirit of an analyst on a conference call in a swift and brutal way that made even all of us here at LoS (who hate bad sell side research) cringe. The unfortunate recipient of this de-pantsing was Charles Naberg who had recently initiated on the fertilizer industry. He asked an innocent enough question about some capacity expansion on the 3Q call and got a terd-filled sock shoved in his mouth as a reply:

Charles: "Hi guys. Nice quarter. Had a quick question on Lanigan. How is that progressing? Is it still on time for the middle of this year -- or this coming year, excuse me, middle of 08? And can you remind me about what the size of that addition is going to be?"

Bill Doyle: "Yes Charlie [ed note: he was introduced as "Charles" and the this is the first time they have ever spoken to each other], to answer your question, what I would tell you is that Lanigan is 1.5 million tons. It's on budget and on time for next year. You know, essentially the big piece there is the mill. So we see that progressing according to plans.

You know, I read your first entree this week into the potash world. First I would say welcome to the fertilizer world and I did have just a couple comments, Charlie, just because I never have a problem with anyone's call, you make whatever call you want, but some of the factual information in your report was a little bit suspect and I would say the -- you know, the comment about Potash Corporation abandoning our discipline and I don't know what the line was, something about us being out for pizza or doughnuts -- it was cute, but if you follow the history of the company, you've got the same management team for the last 20 years and if you check back and do a little research on us, you'll find that we have always matched supply to demand and it's not how much capacity you have, it's how you operate that capacity, Charlie. And the other thing I would say is that you know, you referred to Potash mining as being high fixed cost business. Potash mining is not a high fixed cost business. You know, we can lay people off and shut down the operations. We've done that for years and years when the time required it.
Unlike our phosphate business, which is a high fixed cost business, because you've got to keep that operation hot, so-to-speak. You've got sulfuric acid plans, you've got to keep your water pumping capability in the mine site. You just really can't shut that down. So, there is a difference there that we would be happy to try and explain to you in the future.

[On] Our earnings being highly dependent on biofuels - three quarters of the new demand growth in our business is food demand. We've tried to talk about that at every stage and what I would really suggest to you, I think you know, you covered a little bit on the supply side, you didn't talk at all about the demand end. And I would say go out, visit India, pick any five cities, China, any five cities, and you'll see the demand for food and it's a very, very real issue.

You know, the other comment about consumers banking inventory before the Spring season of 2008, that's just impossible. Just isn't inventory out there and everybody is hand to mouth at this time. So I would say you know, overall less than a distinguished effort but the good news is that there is nothing but up side for you for the next go round.

Now we have a website question here that I would like to answer."

Recommendation: Don't eff with Bill Doyle and don't eff with POT.

http://longorshortcapital.com/how-to-destroy-an-an...

Sep 28, 2011

I am aware that and Analyst in ER is higher than an associate. I didn't realize the guy had an MD, but the age (he's prob 30 something) isn't the issue. I still can see how people could be pissed some dude in an office who doesn't work in the industry (per se) / doesn't know the inner workings of the company is telling them how to run their company, and is criticizing the direction, etc.

Reality hits you hard, bro...

Sep 28, 2011

The fact that company executives would care this much about what a Wall St analyst says about them makes me think that the analyst is probably right about them.

Sep 29, 2011

I thought that analysts received worst treatment at work?

Dude should swallow his pride and we all need to move on ...

He was humiliated, the CEO is classless, blah blah blah, the analyst is not an angel too

No one would remember the Good Samaritan if he'd only had good intentions; he had money as well.

Sep 30, 2011

Fact is, that CEO's presentation at the conference is putting money in the analyst's pocket. There are plenty of banks the company can go to for coverage.

Oct 4, 2011

Does this guy just doubt the company? ie frauds or is he just writing it off as some fairy tale bull story?

Oct 4, 2011
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