On May 7, 2009, MD Becker Partners LLC hosted its inaugural life sciences roundtable titled “Successful Strategies for Raising Visibility and Capital.” The meeting brought together experts from leading investment banks, life sciences companies, venture investment groups, and the media to discuss the issues surrounding effective two-way communication between a company, the financial community, the media, and other constituencies.
Michael D. Becker, moderator and president and chief executive officer of MD Becker Partners, made a number of key points and observations in his opening remarks, beginning with some upbeat comments regarding the approximate 2,000-point rebound in the Dow Jones Industrial Average (DJIA) from its low in March 2009. He also indicated that some biotechnology companies have been able to successfully access the capital markets. Specifically, investors have been backing companies with later stage pipelines that have been executing on their milestones and have solid management. Examples of financing transactions cited at the time were Allos Therapeutics, Inc. (ALTH), Micromet, Inc. (MITI), and Seattle Genetics, Inc. (SGEN).
Mr. Becker also observed improving trends in clinical trial results and regulatory approvals, such as the recent Phase 3 results for a prostate cancer vaccine by Dendreon Corp. (DNDN) and the FDA approval of a schizophrenia product by Vanda Pharmaceuticals, Inc. (VNDA).
The roundtable session that followed was an open discussion for participants from diverse backgrounds to offer shared insights and perspectives on strategies to enhance visibility and access capital. There was general agreement among the expert panelists on five key principles that biotechnology companies may want to consider in order to not only survive – but thrive – in the current environment. Participants underscored the following:
1) Communicate simply, succinctly and consistently
Biotechnology companies would benefit by embracing Albert Einstein’s famous quote “nothing is so complex that it cannot be explained simply.” In contrast to direct communications with more sophisticated investors, press releases, informal pitches for media coverage, and other general communications are not times to showcase technical terms, acronyms, and professional jargon. In a complex industry, such as biotechnology, there is a delicate balance between providing the information simply and concisely while including key scientific data. “It helps to talk to somebody who understands the business of communication,” says James E. Dentzer, Chief Financial Officer at Amicus Therapeutics, Inc. (FOLD). “Walk them through your business model and ask them for advice.”
But be succinct. “I also get a lot of people who write a pitch where they start out with a paragraph of background – most of which I already know – and I’m still looking, “where is the news, where is the news?” says Linda A. Johnson, Health/Business Writer at The Associated Press. “The best thing you can do is at the top of your press release, which should be written in English, put three maybe four sentences summing up what your news is and why it’s important. That’s the way to get a reporter to pay attention.”
Consistency is also critical, especially taking into consideration how the internet has immortalized certain aspects of investor relations. People can go online and find a wealth of past and present information about a company.
2) Engage competent and experienced external advocates
In the current environment, businesses are faced with decreasing human and financial resources, which is increasing the strain on management’s limited time and attention. Outsourcing can help a company shift its focus from peripheral activities toward work that serves the underlying enterprise of the business, which in biotech is science. For smaller organizations, outsourcing can also help companies act “big” by giving them access to the same level of expertise that large companies enjoy.
Panelists agreed that competency and experience are key criteria to look for when a company is considering outsourcing – especially when it comes to handling investor or public relations. Look for a person or firm that brings the breadth of real-world, in-house experience necessary – expertise in financial, scientific, medical and communications – all operating within the legal parameters required. “I want someone who, when I ask questions, can actually answer them instead of having to say I’ll get back to you, I’ll find out, I’ll ask someone,” says Linda A. Johnson, Health/Business Writer at The Associated Press. “That’s wasting my time. So you need somebody who really knows their stuff and who is prepared.”
Cost-cutting may be another reason for companies to outsource. Outsourcing converts fixed costs into variable costs, releasing capital for investment elsewhere in the business. This may be especially important for early-stage companies.
3) Credibility and management experience
With the crisis in confidence, now more than ever companies need to establish personal relationships with the financial community. Investors are increasingly focused on credibility. Are you achieving milestones, are you putting out information in timely fashion, are you being forthright with your investors? “Once companies lose their credibility, whether it is data release or just over embellishing a situation, it’s very hard to get that credibility back,” says Michael A. Margolis, R.Ph., Managing Director at Merriman Curhan Ford (MERR).
Be upfront, be honest, and do not hide the bad stuff. “If somebody tries to slip something by, that does create a lasting memory and you will look at what they file a little more closely,” says John George, Biotechnology Staff Writer at the Philadelphia Business Journal.
Just how important is the credibility or experience of the management team in contrast to the science and the market opportunity? “I think we’re all going to say the same thing because it’s a very critical – it’s probably the most critical – aspect of the business,” says Todd C. Brady, M.D., Ph.D., Principal at Domain Associates.
4) Be proactive
Companies have different philosophies and different approaches to investor relations, with some viewing it as largely reactive – responding to inquiries from analysts or investors as they come in. “For companies, I think one thing to be very careful of though, is to keep in mind that investor relations has to be an active – not a passive – event,” says John W. Chambers, Managing Director at Merriman Curhan Ford (MERR). “The folks that have had a reasonable investor relations campaign that’s been in existence not just in the bad market – they’re not going in for the first time in this type of market to see someone – are getting an audience.”
In the current environment, another common mistake by companies is to reduce their investor relations activity or curtail outreach to the investment community. When competing for capital, however, a company must have the proper resources to distinguish itself in the market. The more a company makes investors aware of its existence, business, and strategies – the more likely it is to be rewarded with access to capital, potential partnerships, and a fair valuation.
The process of raising capital is much longer than companies are used to in the past where they could have raised money in a matter of days or weeks. In addition, it is unusual for investors to invest in a company after hearing the story for the first time. Accordingly, time and effort spent now to get in front of investors is time well spent.
5) Growing stronger through adversity
At the start of the year, MD Becker Partners provided a positive outlook for the biotechnology industry in 2009, citing the sector’s defensive characteristics, favorable technical aspects, and improving fundamentals, such as the number of new product approvals, products in clinical trials and the brisk pace of industry consolidation and licensing transactions. Some of the panelists agreed and even hinted at a stronger biotechnology industry going forward.
“If we’re going to weather the tsunami, I see the end kind of coming because you’re seeing fundamental investors that are willing to take meetings, they’re willing to see a differentiated story,” says John W. Chambers, Managing Director at Merriman Curhan Ford (MERR). “The type of investors that folks are targeting has changed while we’ve gone through this financial upheaval, but I think we’re on a very good track to create a stronger, fundamental driven and institutionally driven market place for life sciences once we get out the other end.”
“I would expect that we are going to see the market get better over time,” says James E. Dentzer, Chief Financial Officer at Amicus Therapeutics, Inc. (FOLD). “It’s not going to get better overnight, and it’s going to be led by people who are investing in companies they already know well.”
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The roundtable was successful in producing valuable information and insights as well as suggestions for the future. Click here to request a complimentary electronic reprint of the 19-page “Successful Strategies for Raising Visibility and Capital” event transcript.
About MD Becker Partners LLC
MD Becker Partners is a boutique management and strategy consulting firm focusing on both public and private companies in emerging growth industries, such as pharmaceuticals, biotechnology, medical devices, and cleantech. The firm’s mission is to bring experience-based insights gleaned from the three independent disciplines of investor relations, strategic advisory and operational improvement together and apply them to carefully conceived and expertly enacted strategies that help companies increase visibility, unlock value and access resources to grow their business. For more information, visit the website: http://www.mdbpartners.com/
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