There’s never a better time than the present to chart your investor interaction strategy over the coming months. What investors do you still need to meet with this year – including follow-ups to initial meetings you’ve already held, and meetings with new investors with whom you haven’t yet connected?
Do you have plans for which conferences to attend, new KOLs to contact, or for attracting new sell-side research?
Of course, all of this consideration needs to be prioritized within the context of your company’s upcoming catalysts: clinical trial progress, data readouts, product approvals, product launches, potential financings, growth target bogeys, and other various metrics investors will use to gauge your progress.
When you get a question from an investor or analyst that seems to be from out of left field, it makes you wonder what the underlying intention is. It may be that the questioner is just new to your story.
However, the questioner could also be heavily shorting your company or long your biggest competitor. The question could be awkwardly phrased or come across as a bit sneaky because the investor is trying to get you to elaborate on an answer or provide more detail on a topic than you have in the past.
Development-stage healthcare companies typically need to raise money every one to two years. As they grow, they typically attract larger and more varied forms of financing until the time comes for them to either be acquired or go public. Many companies will opt to run a dual-track strategy at such a time to maximize the value that has been created.
But what if the market isn’t quite ready for your IPO, as we saw throughout most of 2016? How can you keep your development engine running while waiting for the right market conditions to make your debut as a public company?
Failing to plan, the old saying goes, is planning to fail. This is certainly true when it comes to your investor relations strategy. Yet even though strategic planning is every bit as important to your IR success as it is for every other part of your business, we find that many companies fail to plan correctly, if they plan at all.
IR planning is about delivering the right story to a well-defined audience, and about refreshing your message in a way that will continue to resonate with investors. Every good annual plan starts with the same question: What do you want to be different at the end of the year? So it’s vital to articulate your goals before formulating a strategy.
Good CEOs and CFOs know that they only get a limited number of interactions with their buy-side and sell-side analysts each year. Analysts are busy people, with perhaps dozens of listed companies under coverage or on their watch lists. An earnings call is thus one of the few times that companies can have the undivided attention of their covering analysts and interested buy-siders. Use that time wisely. Here are some pointers to consider before you host your next biotech earnings call.
Some people are a little surprised to hear that a decent percentage of our clients at Westwicke are private, venture-backed healthcare companies. “Why,” they ask, “do private companies need investor relations?”
Having spent the majority of my professional career on the buy side at one of the first U.S.-based healthcare crossover firms, I typically respond by saying: “I often wonder why it takes private companies so long before they do reach out to the buy side!”
“The analysts are projecting your revenue for next year” — a year in which you have not provided guidance — “at $50 million. Are you comfortable with this projection?”
Most CEOs and CFOs of public companies have heard a question like that — a “trick” question for which it seems any answer you give can potentially cause you problems. If you say you’re not “comfortable” with that revenue number, for example, do you risk projecting weakness to the investor community? On the other hand, do you want to effectively provide guidance before you formally release it?
In investor relations, credibility is everything. When your authority is damaged, everything you tell the Street will be filtered through the jaded minds of professional skeptics who remember your past failure to deliver, or a time they felt misdirected. That’s why it’s vital to maintain a constant focus on sustaining and growing your level of trust with investors.
Often in meetings, investors will ask a CEO or CFO about a competitive product. Doesn’t the other drug work faster? Aren’t there fewer side effects? Isn’t it cheaper? I hear those questions all the time during road show presentations and meetings. Usually management’s first response is to take a defensive position. While they may not totally “bash” another product, they seem to quickly start listing all of the negative attributes.
That’s not the right approach. Instead, when asked to compare your drug, product, or service to the competition, you should do two things: First, know why the question is being asked. Then turn a negative question into a positive response. Let me walk you through my thinking and how the positioning can actually be shifted in your favor.
Few will deny that analyst research still plays a key role in any investor relations strategy. And every time one of us sees a stock getting a healthy bump in the markets following an analyst upgrade or initiation, we can easily be tempted to believe that analysts wield an enormous amount of influence over a company’s valuation and success.
Should you make expanding research coverage your top IR priority? Have you found yourself pre-occupied with making the cut with analysts and adding more research coverage to your ranks?
However, before you potentially find yourself off course with a misguided plan, let’s consider a few perspectives.