A fair market value should be the goal of excellent investor relations in any publicly traded company. For those who work in an IR role for a biotech company, it is important to realize that the market will value your company differently from other companies.
Companies in any industry are valued on the basis of their expected profitability, cash flows, and potential investments. However, biotechs can expect to lose money over the medium and short-term and achieve profitability in the long-term. This future is also subject to significant risk.
Biotech investor relations are a special beast. To be successful in the game of biotech IR, you must follow certain guidelines.
Technology
Biotech companies' principal asset is technology. Unfortunately for entrepreneurs and investors, the technology is only partially developed. It can still be a huge asset. biotech investor relations firm companies commit the biggest error in investor relations when they are too closely involved with science and too obsessed with unproven technology.
It is difficult to support your claims and explain the technology without a Ph.D. You have a problem if you don't know what makes you unique, where it was developed and why it cannot be replicated by others. It's good to know that investors in biotech are highly skilled, with many having medical or scientific backgrounds. Your investment and technology stories should be clear, concise, and compelling.
Risk
Biotech stocks are among the most risky investments on the public markets. Companies must first overcome development risk. This includes creating and developing a drug that works and has a safe profile. The regulatory risk is another. Can you convince international regulators to approve your drug? Then there is the commercial risk. Can you convince patients to buy it, their insurance companies to cover it or their public health authorities to give it?
Biotechnology is the most heavily regulated industry. Unexpected hurdles can arise at every step of the regulatory process. The regulatory process can be complicated for biotech companies. They must provide a clear and understandable plan that will guide them through the development and approval process, as well as a solid business plan.
Opportunity
Pharmaceutics are big business. Small companies that have a great product can be a worldwide sensation overnight. If you invest in a biotech success story, your return on investment can be multiples of what you initially invested.
Therefore, biotech companies must provide a fair description of the potential market for their potential drugs products. Credibility is the key. Your market data and assumptions may be challenged. You are likely to face competition. If you truly believe that the opportunity is available, don't be afraid to use large numbers. However, it is important to be prepared to defend your assumptions as well as share your calculations.
Your company's value will be determined by a multiplier of the projected peak or average sales for your products. These estimates will be required to be provided in some way, explicit or implicitly, to allow investors and analysts to project what the future holds.
Finance
Biotech companies are known for their insatiable appetite for cash, or worse, they lose money. Most biotech companies need to go back to the capital markets to raise funds to finance the next stage in their development pipeline. Planning a corporate lifecycle with a variety of value-creating milestones and milestones is crucial in creating an event landscape that encourages sequential capital raises.
Investors expect biotech companies today to raise funds after they announce positive Phase 2 and Phase 3 clinical data. Biotechs are expected to file ATM financing facilities within the first year of public listing. The investment community has a lot of expectations. A successful biotech management team will ensure that the documents are in place to comply with best biotech practice.
Westwicke's Life Science team is an expert in advising biotech companies at all stages of their corporate lifecycle. Get in touch to learn more about how we can assist your company.