Innovation, progress in clinical trials, and new breakthrough therapies have been and will continue to be the bedrock of value creation for investors in the biotech sector. We expect the sector will announce strong achievements in 2023, but investors may react with restraint as we have seen in 2022, which led to generally poor stock performance. A continuation of rising interest rates, ongoing Congressional scrutiny over drug pricing, and a subdued financing environment will be just a few of the headwinds the sector must contend with as we move through 2023. This underscores the need for a back-to-basics investor relations strategy that should position companies for the challenges that lie ahead. A well-planned investor relations strategy should include the following:
1. Set clear milestones that can be achieved, and preferably surpassed. These milestones should include a clearly articulated realistic clinical development plan for key assets in the pipeline, clinical trial design timing for first patient dosing in important trials, the expectation for interim data readouts and where the data might be presented, and clear guidelines for how success is defined. Cash runway should also be included in any corporate year-ahead outlook. This information can be communicated in a press release, on a webcast with investors, or a combination of both.
2. Maintain existing buy-side relationships and build new ones. Regardless of market conditions, companies should continue to attend the right number of investor conferences, conduct periodic non-deal roadshows, participate in investor bus tours, and evaluate the appropriateness of hosting an investor R&D day if there is new content to highlight and explain to the Street. Develop a target list of key funds that should be interested in your story and interact with them periodically in the coming year.
3. Keep communications open with your sell-side analysts. Let your sell-side analysts know that you appreciate their coverage and periodic check-ins are a good way to show it. For the analysts you think are doing a great job, suggest doing a non-deal roadshow with their firm as the sponsor. Building relationships with analysts that do not cover the company should also be part of your plan, as personnel changes in research (and in banking) at investment banks occur frequently.
4. Have a plan to conduct a financing around the achievement of an anticipated future milestone. If you have an announcement about important clinical data expected later in the year, consider it a catalyst that could trigger a successful financing. Have in mind the syndicate you would like to use and maintain a dialogue with those banking firms well in advance of the news. And when the share price reflects the positive announcement, be ready to move quickly to execute a deal.
5. Be open and transparent in your explanation of unexpected setbacks. Everyone in the industry knows that clinical development is not a straight line. So, when a trial fails to meet a primary endpoint, or an unexpected adverse event triggers a partial clinical hold, provide a thorough and honest explanation about what has occurred and why. In addition, a timeline of what to expect from regulators and how the situation could be rectified should also be provided.
Employing these communication tools effectively should allow your company to stay at the forefront of investors’ minds, no matter what type of market conditions unfold. It can help to ensure that the hard work of your employees and other stakeholders receives the recognition it deserves and is reflected in your valuation.
For more details on building a solid investor relations strategy for 2023, download our Insider’s Guide to Investor Relations.