Reality-based disclosure on new products

Some of the most meaningful forward-looking information a company can provide is insight into a new product and its expected economic value. Those new products drive our future growth, so their market profile and prospects are a key message for shareholders.

A column in the Oct. 1 issue of Genetic Engineering & Biotechnology News, “Reining in New Therapeutic Hype is Critical,” raises an important point about new-product guidance. Executives and the cadres of experts who support them in new product creation often are unbridled champions:

This is one of the critical challenges for biotech executives – to see beyond their own natural enthusiasm for an emerging treatment possibility and the positive support of consulting medical thought leaders – who may be somewhat removed from the actual practice in market conditions.

The PhDs are talking about biotech companies in this case, but the same principle applies to technology and consumer products. While a company’s consultants naturally tend to buy in to the excitement of a new product, the real decision makers out in the marketplace can be very skeptical. Uptake of a new product can take years. Market penetration can top out at 2% rather than 20%. The authors cite evidence of widespread physician reluctance to new drugs and call on biotech executives to do real market research, critically evaluate and realistically profile the prospects.

Management, of course, should possess the very best information on the characteristics of a product and the market it will serve. Investor relations professionals would serve their managements well to ask tough questions and press for rigorous, in-depth, reality-based information on the market potential and risks of new products. The tough questions investors ask.

And that will enable IROs to provide shareholders with the most accurate, complete information possible on the prospects of new products – and enable investors to size up their economic value.

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