Hawaii is indescribably beautiful, but it’s not the best place for a publicly traded, highly diversified company to be based. ‘I’m always one meal behind you, one step behind, one phone call behind,’ admits John Kelley, vice president of corporate planning and investor relations for Alexander & Baldwin (A&B), the Honolulu-based company best known for its agricultural holdings. ‘That is not a good investment premise.’
Tough as it is to be the sole biotech company in oil country, or a big manufacturer in the middle of nowhere, IROs everywhere can go to sleep after a bad day thanking their lucky stars they are not John Kelley. Sure, he lives in paradise; and he’s really not complaining. But he’s not paid to walk the beach at sunset with a daiquiri. He’s meant to be in constant touch with analysts, shareholders and the media. He’s the face of a stock that vacationing newlyweds dream about, but few on Wall Street can place.
‘We’re the largest sugar grower in Hawaii and the largest coffee grower in the United States,’ he explains. ‘We’re to Hawaii what GM is to Detroit!’ And yet, analyst coverage is ‘distressingly thin’, limited to one sell-side analyst and two research houses.
What’s a Hawaii-marooned IRO to do? Kelley urges his staff to use technology, especially e-mail and voice mail. He says it’s important to respond to all inquiries immediately, even if they haven’t found the requested information, ‘just to let them know we’re not polishing our surfboards.’ But he’s especially proud of posting A&B’s annual meeting on the company’s web site.
Naturally enough, the company holds its meeting in Honolulu, ‘But no one shows up,’ Kelley concedes. ‘We put an inordinate amount of energy into a presentation that just about no one ever heard.’ But by loading the meeting on the web site, he says, the shelf life is longer, and the information is disseminated as widely as Wall Street or Pakistan.
Kelley says it’s impossible to get even the most serious analyst to come out and have a look at A&B’s planned communities and sugarcane holdings in Maui; their shopping centers and office buildings in Honolulu or their lush coffee plantation in Kauai. Not to mention the shipping facilities that ferry goods back and forth between Hawaii, Guam and the West Coast. ‘Can you imagine how that trip would sound? Hey boss, I have to go to Hawaii this winter.’
It doesn’t matter that A&B posts more than $1 bn in sales annually and was founded 130 years ago. Sometimes, Kelley says, analysts will stop over on their way to somewhere else, or will build in a few days of research during a pleasure trip. But – with a note of impatience in his voice – he says it’s impossible to count on such serendipity.
The worst part about his isolation, according to Kelley, is not so much the misperception about the resort, but the inconvenience of trailing the East Coast of the US by six hours and the West Coast by three. ‘I get into the office by 7am,’ he admits on a phone interview that took at least five or six trans-continental calls to set up.
Isolated IROs
There are a dozen reasons why a company could be planted far from Wall Street or San Francisco. Follow the money. Or the customers. Or the research universities. Or the natural resources. Or the boss’s summer home. The location may make sense from a business standpoint, isolated investor relations professionals acknowledge, but time differences, unfamiliar area codes, and even big-city chauvinism clearly don’t make their jobs any simpler.
Pamela Murphy is the vice president of corporate communications for Texas Biotechnology. Houston is a nice town for the company to be based in, she says, but it’s oil and gas country, not exactly a biotech hotbed. ‘We’re here because of MD Anderson [Cancer Center], Baylor [University], University of Texas,’ she explains, ‘But those universities don’t make my job any easier.’ On the contrary, Murphy says she has to work harder to attract the attention of analysts and the enthusiasm of shareholders. ‘It’s really out-of-sight/out-of-mind down here,’ she summarizes.
While life-science corridors generate their own sub-culture of services, down in Texas it’s pretty difficult for a biotech company to attract attention from first-tier business media, interested analysts, venture capitalists and shareholders. The elements are co-dependent, as the thousands of exchange-listed companies that lack even a single analyst’s coverage can attest. ‘If you want analyst coverage, you have to go out and get it,’ Murphy says of her company, which develops and markets drugs for a range of heart and blood-related conditions. ‘This year was hard. We were on the road maybe 40 or 50 percent of the time.’
She usually leaves Houston on the last flight out, after a full day at the office, and spends two consecutive days racing to as many as seven appointments each day. Murphy says it’s not unusual to fly into a financial center such as New York, Boston, Philadelphia, San Francisco or even Denver, and then hit a second city on the same trip. ‘I have a terrific husband, and a terrific staff, and I work out a lot. You have no idea how important that is,’ she exclaims, in tacit acknowledgement of the strain the constant travel has taken on her personal and professional life.
And it’s not just the investor relations department that feels the distance. ‘Recruiting people is so much more difficult because they are reluctant to leave Boston or California or Maryland to come to Texas,’ Murphy explains. ‘What if they don’t like it? How do you move your family and then move them again?’ She says many of the company’s best hires are qualified people who want to live around Houston, and are already looking for something in the area. But that doesn’t solve other shortages – the qualified consultants, specialized lawyers and others who have an industry background and are more likely to settle themselves in established biotech corridors.
IR heartland
Biotech support firm Genomica is also located pretty deep in the IR heartland: Boulder, Colorado. But director of IR Derek Cole says that for him, Colorado is less of a problem than one would imagine. ‘It’s not exactly Rockville [home to the government-funded National Institutes of Health], but there are other biotech and similar firms out here, and we’re pretty much here for the same reason,’ he says, carefully noting that the draw was the University of Colorado rather than the glorious peaks of the Rocky Mountains.
Cole says that Genomica – which offers software and professional services to support pharmaceutical, biotech or academic research efforts – is less impacted by location than by size. With clients based around the country and abroad, he says, the company could as easily be located anywhere in the nation. ‘As a smaller-cap company, we do IR on the fundamentals and with persistence,’ he explains, ‘developing a relationship with the buy side, getting additional analyst coverage, identifying appropriate targets, tailoring the story, making it as easy as possible for them to make a decision.’ Cole says that for any small-cap company investor relations is a relationship building process.
Admittedly, Genomica – which doubled its sales to nearly $1.6 mn last year – has had a bit of luck which other isolated or small companies can learn from. It figured out how to ride the coat tails of an 800-pound gorilla. Genomica has created proprietary versions of its Discovery Manager software for Applied Biosystems Group, one of the largest drug developers in the business. The product allows client corporations and their partners to track complicated drug discoveries and trials. At a conference call with analysts in early January, Applied Biosystems executives talked about the new system, praising Genomica by name. The effect has been similar to having a personal introduction from a trusted mutual friend.
‘We didn’t know that was going to happen,’ Cole remembers, ‘but it has generated a lot of name-recognition.’ Among those lifescience analysts, this event gave the company ‘extra leeway to get into the door and talk to someone,’ Cole reports. ‘When I call them, they’ve heard of Genomica.’ He adds that the billion-dollar sister-companies Celera Genomics Group and Applied Biosystems ‘could have chosen anyone to provide their solutions, but they are partnering with us.’ He stresses that the collaborations are strictly technical, not media or market-oriented.
Cole acknowledges that he can overlook many geographical boundaries because he has an advantage that many other small firms and recently public companies lack: resources. His board and management agree that IR is so important that they are willing to commit the resources – both time and money – to make sure Genomica is both seen and heard.
‘Management has given us the resources to make it happen. If we were a company that didn’t have the money to travel, to go to New York, I could see it being a definite problem.’ He says that he will go to the big financial and media centers, sometimes for two weeks at a time, and schedule as many meetings and presentations as he can.
His senior management, including CEO Teresa Ayers and CFO Dan Hudspeth, are willing to commit their own time as well. ‘At my previous company, a real estate financing company which will remain nameless, that was not the case.’
Local interest
It is interesting to note that few IROs speak of fishing in the local waters for regional analysts and local banks that could, presumably, allow their cold business assessments to be tempered by a bit of civic pride. Biotechnology, for example, is an especially hard fit – the payoffs are riskier and require more patience than some investors have. Besides that, venture capitalists like to keep an eye on their investments. ‘The VCs come down here and scout research projects at the universities and then relocate them to San Francisco or Philadelphia, where they can keep an eye on their progress,’ says Murphy. ‘You lose a lot of research to other markets.’
No IR professional will advise their colleagues to undertake tricks, per se, nor will they advocate guerilla marketing or other risky ploys, but many IROs say it never hurts to punch above their weight – first locally and eventually on a national scale.
One swift way to do this do this, they suggest, is to court the local press and establish their professional or scientific staff as the go-to experts for any number of subjects, even if the article isn’t going to nudge the share price. Accessibility pays off immediately by creating an aura of knowledge and familiarity, they say, and can have more concrete rewards later, when industry-, issue- or company-specific coverage is planned.
However, they warn, if your industry is not part of the local culture, or involves a steep learning curve, don’t be surprised if the clip you’re counting on turns out to contain some errors you were sure you’d addressed. ‘The local media, even the business sections, don’t always know what’s important,’ says one IRO whose company is ‘burned’ regularly by well-meaning but unsophisticated reporting.
When all else fails, or takes too long, some companies attempt to move the mountain. Pam Murphy has taken a novel and somewhat ambitious approach: Instead of moving closer to the US financial centers and biotech clusters, Texas Biotechnology is one of several companies that has joined forces to attract tech-savvy people to Houston. The company is a founder of the Houston Technology Center, a business incubator that focuses on the biotechnology sector, among other industries. By attracting talent – and keeping it – Murphy hopes that Houston will soon earn respect as a biotech corridor on a par with other university-fed concentrations in the northeast.
‘By showing the Houston business community the need to really support biotech start-ups and make access to capital and resources easier, we’re really helping ourselves,’ she said. As a result, three venture capitalist firms are scouting for deals in the Houston area, which she says is ‘a very, very good sign.’
