Archive for the ‘BioPharma’ Category

Looks mainstream to me

September 8, 2009

If you’re still wondering if social media are too far “out there” to consider using for your company, think again. As Exhibits 1 & 2 for the idea that social media have become mainstream for corporations talking to investors (among other audiences), consider Johnson & Johnson and Pfizer.

These two mega cap pharmaceutical companies, despite regulatory hurdles, legal worries and their status as conservative blue chip companies, are getting out there in the world of Web 2.0. Regardless of what business you’re in, you may be interested in comments from their execs as reported in Medical Marketing & Media:

JNJ began dipping its toe in social media three years ago and has been getting more involved since, media relations director Marc Monseau says in the August 2009 issue of MM&M. Now JNJ has a corporate blog, JNJBTW, a Twitter account @JNJComm, a JNJ YouTube channel and so on.

“It hasn’t been easy, and there certainly have been some stumbles along the way,” Monseau tells MM&M. He shares some lessons learned:

  • Understand your audience. Begin by listening in online communities.
  • Start small. Try out some low-risk activities in social media.
  • Work with legal. Address those regulatory concerns by working together.

Most of the social media effort is soft-sell marketing about health issues, but JNJ has done some interesting things in IR – such as live blogging its annual meeting on Twitter. You might think dishing up an annual meeting in three dozen 140-character tweets borders on silly, especially since people could hear it live on a webcast. But JNJ, like many companies, is experimenting to see what works best.

Pfizer is newer to social media. In the September 2009 MM&M, Ray Kerins, PFE’s VP of worldwide communications, talks about launching on Twitter (@Pfizer_News):

We’re trying to become transparent, but we’re doing it slowly and cautiously. For us to jump in with two feet would be stupid.

First step for Pfizer was monitoring Twitter, then being sure the right people were on staff to implement social media tactics, Kerins says. PFE has only been on Twitter for seven weeks, but already about 2,000 people are following – getting tweets ranging from earnings and merger updates to links to news stories on PFE.

Other companies do social media, too – and JNJ and PFE weren’t pioneers in IR 2.0, as some tech companies were. But their learning can contribute to our learning.

A dry summer ahead for funding?

April 8, 2009

The financial crisis and depressed market are a life-threatening drought for many biotech companies, according to an April e-newsletter from the Biotechnology Industry Organization. Says BIO:

There may be no summer lovin’ for biotechs. By most accounts, investors will remain tight-fisted with their cash for some time, opening up their wallets for only the most promising investments.

Writer Eric Wahlgren cites Burrill & Company estimates that more than a third of 344 public biotechs were down to less than six months cash on hand at the end of the first quarter.

Despite the gloom, there’s still investment money out there, but companies will have to work harder to get it, experts say. The key to being successful at raising money in the current environment will be to think creatively, remain flexible, and start talking to potential investors well before there is an urgent need for cash.

In the BIO piece, industry players suggest biotechs may have to tap existing venture capital investors for inside-led rounds, consider venture debt, outlicense more compounds for the cash, set up special financing structures and the like.

One example of creative dealmaking is Exelixis, BIO says:

The advice for companies looking for cash, [Exelixis CFO Frank] Karbe says, is that they should always be having lots of discussions with all types of investors, including bankers, venture capitalists, specialty funds, and other biotech and pharma companies.

Thinking creatively and working harder, by the way, may mean experiencing more than the usual pain in fundraising and valuation – for example, selling the company when you’d rather just raise cash.

The advice to biotechs – work hard, stay flexible, be creative – probably applies to investor relations teams in many industries. Money doesn’t seem likely to rain down on anyone in 2009.

Biotechs & the Big Three: We all need a plan

December 2, 2008

dna-bluepurple1In any business, a collapse in stock price tends to stimulate soul-searching. Biotech companies have suffered, along with almost everyone else, a painful loss of value in the current bear market. Investments in R&D are risky, in a time when risk hasn’t been paying well. And the financial crisis has pretty much dried up equity offerings for biotechs or anyone else.

So the In ViVo blog, an offshoot of the business-of-medicine magazine of the same name, has been fretting lately about the state of biopharma companies. Today, the In Vivo blog noted that biotech industry leaders – like the Big Three auto companies’ CEOs – recently went hat in hand to Congress to beg for financial aid. The carmakers got a tougher reception, however, as Congress demanded the execs go back to Detroit and work out plans to revive their businesses.

Says In Vivo:

What’s odd to us is that BIO didn’t get the same assignment from Congress. We’ve never gone so far as Socrates in suggesting that the unexamined life isn’t worth living. But we do go so far as saying that the unexamined business plan sure isn’t worth funding. We’re all for biotech investors getting some additional incentives for funding the industry, but we’d also – for the good of investors, patients and taxpayers – like to see some ideas for how biotechs ever plan to make back the money they’re asking for.

The issue isn’t innovating scientifically. Or even clinically. The challenge is getting products approved and paid for.

And at the moment, biotechs aren’t doing that well enough to justify their funding.

Lurking in that exhortation for biotechs is advice that makes sense for all: Let’s go back to the business plan. Be sure we understand the path our companies are charting to achieve future sales and profitability. Let’s not focus so much on the minutiae of this quarter’s issues that we overlook the fundamental strategies to create value.

Especially in tough times, surviving and thriving – for companies and shareholders alike – is all about basics. So is investor relations.

Communicating value … to an 800-pound gorilla

November 5, 2008

One upshot of the current environment, for some companies, is a change in the identity of our true audience. As an investor relations person, I’ve always thought of investors – individuals, portfolio managers, value, growth, whatever – as the audience.

But it’s not always so.

I was reminded of this by “Preparing for a Shrinking Economic World,” a column in the Nov. 1 issue of Genetic Engineering & Biotechnology News. Speaking of the biopharma business (as you might guess from the publication), the article notes that giant pharmaceutical companies are awash in cash – $9 billion on average among large caps – while the bear market limits the options of smaller companies:

Alas, there is one liquidity event that won’t be appearing any time soon: the biotech start-up going public. Since the first of several painful Wall Street events began, there have been several biotech companies that have withdrawn their plans to go public … This clearly leaves biotech in a state of vulnerability, as IPO hopefuls may seem further from exit. This also means that ready, willing, and able buyers from Big Pharma will perhaps make a strategic acquisition.

A piece in the Nov. 10 issue of Fortune, “Big Tech Goes Bargain Hunting,” makes exactly the same point about small to mid-size tech companies and the cash-rich giants of technology.

Truth is, this applies to many industries. I’ve heard entrepreneurs in a variety of businesses talking about exit strategies: Private companies no longer count on doing IPOs, but view their most likely exit as being acquired. In the public company world, too, smaller companies are thinking more about acquisition as a path to maximizing shareholder value.

So let’s talk about the 800-pound gorilla. Our audience may not be a mutual fund analyst in Boston or a little old lady in Kansas City. The real target audience (or at least one) may be a bigger company that, in a few months or years, may replace our many shareholders with a single 100% owner. And our public disclosures also influence these potential acquirers.

Are the messages the same, or different, for an M&A audience? As investor relations professionals, committed to maximizing shareholder value, we need to study up on this class of investors. They may be strategic acquirers in the same industry, or financial buyers like private equity funds. I don’t know all the answers, but we ought to re-read The Quest for Value and pay attention to news and trade articles explaining the motivations and structuring of acquisitions.

My impression from a few M&A experiences is that deal-oriented investors do have different information needs, or preferences. Earnings per share are out; the acquirer or i-banker will apply ratios to EBITDA or net income. Enterprise value, debt on the books and cash in the bank are intensely relevant. Assets that can be sold matter. Working capital and cash flow. In the biopharma field, and perhaps others, future products also drive value – again, often via multiples of projected cash flows.

I remember, years ago, writing an annual report for my employer – our last as a public firm – while top management was negotiating to sell the company. The deal was finalized in the same time frame as the annual report. It was gratifying when, a few weeks later, someone on staff with the new owners told me their top management had been especially impressed by the extensive new-drug pipeline graphic that had been a labor of love in this annual report. IR mattered.

Reality-based disclosure on new products

October 2, 2008

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.