The 10 Must-Dos for an Effective Biotech Investor Plan
Why would anyone invest in a biotech or biopharma company? After all, most are development-stage companies based on complicated science that consume cash voraciously, have no revenue or earnings, and need to sell a dream that could be years away from commercialization.
The risks are enormous. Yet they attract investors because the payoff can be huge. Here are the 10 must-do items that all public biotech companies should address in an effective IR program in order to attract the right investors.
1. Under promise and over deliver. It’s a classic adage for a reason, but it’s even more important when you’re a biotech selling a dream or potential cure. Management credibility is key, so build in a safety cushion to your business plan so that you can meet or beat the timelines you provide to investors. Credibility can buy you time and the benefit of the doubt should things go wrong.
2. Quantify your commercial opportunity. Back up your estimates with facts and be upfront about your assumptions so analysts can run their own numbers and you’re not accused of hyping. Small-cap biotech companies can make the transition to large cap by developing products with significant commercial opportunity. Sell the dream, but back it up with the facts.
3. Right-size your investor presentation slide deck. Your investor deck must not be too long (25 to 30 slides is “normal”) and needs to be investor-centric. Investors aren’t as close to your subject as you are and can be sent to sleep or to checking email if you provide too much scientific information.
4. Talk about your funding runway. “We are funded for at least XX months” or “into 2023” are good approaches and are not too specific. It is always good to have at least a year of funding and to describe it in a way that does not tip your hand regarding future financing activity. Don’t ignore the subject. Investors will ask.
5. Try to look like peer companies. Follow best practices based on what your peers are doing. Too much quirkiness does not go down well. For every Richard Branson there are a thousand, respectable, solid, conformist CEOs. Wall Street doesn’t always like “odd” or “unique.”
6. Explain your intellectual property position and strategy in simple language. Have key patents been issued? What are they? What blocks competitors from doing what you are doing?
7. Talk about the origin of your technology. It could be based on the work of a founder, from academia, or from another company. If it was an acquisition, why did the people sell it and how are you developing it differently from the previous owners? Telling a coherent investment story is key for investors to buy into your ideas and your business plan.
8. Don’t take analyst recommendations personally. For every investor that buys your stock, there has to be a seller. A policy of not talking to an analyst that has a sell or neutral recommendation on your stock is pointless. You need different views to create a market, so engage with the negative analysts and, better still, prove them wrong!
9. Strike a balance between investor relations and running your company. You need to take part in investor calls, conferences, investor days, and non-deal road shows, but you also need to run your company. You don’t want to be too available or you might come across as a little desperate. Be mindful that having a scarcity factor could make you more desirable for a one on one investor meeting.
10. Articulate your milestones and catalysts. You have no revenues or profit. Consequently you need a series of ongoing events to keep Wall Street interested, and as a way for them to rate your execution capabilities and potentially increase your company valuation. Milestones for the next 12 months are typically in most investor presentations and include regulatory filings, clinical trial results, Orphan or Fast Track decisions, or acquisitions.
Explaining your investment thesis, underlying science and business strategy in an effective and concise manner is the goal. Remember, there are over 400 public biotech companies out there and if you don’t grab and keep the attention of Wall Street, investors have 399 other companies actively vying for their consideration. The attention span for investors is short, so once you have it, be ready to maximize the opportunity. Westwicke’ can help you execute a highly effective investor relations program. Contact us if you’d like to discuss what we can do for your company.
ICR Westwicke is the largest healthcare focused investor relations firm in the country. We provide customized investor relations programs and independent capital markets advice to small and mid-cap healthcare companies.
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