Are there differences in managing communications and IR across all industries? Are the basic skills that you would apply to other industries transferable to biotechnology?
An IRO’s job in any industry consists of several key elements including messaging, targeting institutional holders, obtaining sell-side coverage, attending/presenting at financial conferences, and communicating with the Street. A survey of IROs from different sectors would demonstrate many similarities in the function. That said, however, biotech IR is an exception.
All biotech companies require substantial capital to fund product development and are subject to Food and Drug Administration (FDA) regulation. Obviously, companies in all industries need access to capital, but biotechs generally burn millions of dollars in research and development of a product over a five to ten-year time frame, often without a successful product in the end. Capital is one of the key components to their success.
In biotech, financial messaging is important for companies that have products on the market. For the majority that do not, the emphasis is on cash position and level of R&D spending. The financial metrics are often secondary to the inherent strengths of the company’s future product pipeline and the markets it will serve. So the IRO’s expertise focuses on articulation of the company’s technology and clinical trials.
For very small companies – which many biotechs are – the CFO may handle IR. The CEO or a top scientist may also be available for day-to-day communications about scientific or medical content. In effect, any of these individuals is the investor relations officer. This is not typical of companies that have products on the market and in-house marketing functions. The job requires an integration of experience in investor relations, public relations, corporate communications, and an understanding of the regulatory process as well as life sciences. The role can also include interactions with other communications, marketing and IR officers at pharmaceutical companies with which the company has partnerships.
When a biotech company matures and becomes an operating company, the IRO’s functions usually split. At that point, the skills required are the traditional ones of most product companies.
Many think that if IROs possess the required marketing and financial skills, they can perform the function in any industry. However the nuances of the messaging and tactics are different in biotech.
This is because a biotech company’s story is event-driven, based on things such as a partnership with a pharmaceutical company, the discovery of a gene, or the release of clinical data.
Almost everything is material to these companies, and the release of scientific and clinical information is tricky. It is especially challenging since the adoption of Reg FD. When you do not have earnings, there are many gray areas where the regulations are not specific.
Many companies file 8Ks with the SEC whenever developments arise, even attaching copies of scientific or clinical presentations.
As with most companies these days, biotechs webcast almost any group meeting that includes members of the financial community. This is sometimes viewed unfavorably by large pharmaceutical partners, whose primary interests are often focused on the release of data from a marketing perspective. In the past I have found myself in the middle of this balancing act. The pharmaceutical company is considering how the medical community will perceive the data and the biotech company wants to get the message out to the financial community to support the stock or to comply with Reg FD.
Companies also need to balance the need to communicate with the constraints of FDA oversight. Thus an understanding of life sciences in addition to an understanding of the regulatory process are needed if you are to communicate successfully to the Street and keep your company out of trouble with the FDA and the SEC. Indeed, there is a select group of institutional investors with MDs and PhDs on staff to sift through a company’s product pipeline, technology platform and clinical data. The IRO has to speak their language.
What is clear is that biotech IR requires unique attributes like an understanding of the regulatory process and an ability to articulate a scientific story. As biotechs mature into development-stage companies with products entering the market, financial skills become more important. At this point there are lessons to be learned from other companies in other industries.
