Scott Newstead, Account Executive, Investor Communication
The biotechnology sector is a significant contributor to both the health of our world today and into the future, it’s also a significant economic driver and employer.
As a nation, Australia is transitioning from a resource reliant economy to one driving innovation and science. Currently, we have approximately 900 life-science companies that employ around 45,000 staff but the current translation gap between conception and outcome means many drugs don’t make it through the therapeutic discovery pipeline.
The issue is often not the science, but rather the funding strategy and the multiple capital raisings needed to progress from one milestone to another. This is especially challenging for companies in earlier stages of the development cycle where risks are higher and potential returns more distant. This challenge has ramifications for the whole industry as it bottle-necks the flow of research that can be validated.
To raise funds, companies need to effectively communicate their tangible and valuable investment proposition to potential and current investors. However, keeping investors informed and engaged is time-consuming, potentially costly and often forgotten as companies are tied up in the day-to-day operations and developing the science. This can be to their own detriment, as investors want and need to know more about the companies in which they invest, and chief executives expect their investor relations teams to actively engage with and supply information to their register.
With so many companies vying for investor attention and dollars, how do you cut through the noise and keep investors with you for the whole journey?
Communication is key
Best-practice investor relations requires a comprehensive, multi-channel integrated communication approach that harnesses the right connections.
The business media landscape is increasingly fragmented, yet investors are requiring greater access to information about their investments. This scattered media landscape makes it imperative for companies to communicate via multiple channels in what is a crowded market.
Valuation within the therapeutic drug discovery pipeline is a substantial barrier to funding access. It is particularly difficult compared to other intellectual property (IP) development. It usually comes down to some combination of the potential market size, access to market, and how novel the discovery is – is it going to be a primary, secondary or tertiary preventative/treatment option? All this is very straight forward, until you consider risks of success or failure of every milestone in the process.
Investors who understand the full spectrum of drug development, and the risks involved are rare, though do exist, both in Australia and globally. These networks are important to sustainably fund research through to commercialisation. A clear and consistent message must be developed to engage both retail investors and institutions, particularly for the much sought after medium-to-long-term capital. This is critical not only for new capital, but also to maintain and grow essential liquidity for sub-$150m market cap companies.
Often more of an art than a science, message development can take years of experience and an understanding of the often-complex science behind the potential investment, in order to be translated into an attractive value proposition.
Additionally, with equity research in continued decline, increasing pressure is placed on companies to create value through better communication. The need for companies to market themselves with digital content has never been greater. If you’re not embracing digital communication – you will be left behind.
Companies need to invest (pardon the pun) in their investor relations teams or consider an experienced and reputable communication partner to ensure they provide the necessary guidance to investors through all stages of the drug discovery pipeline.
At WE Buchan, we are passionate about the companies we work with – lifesaving and life-changing treatments are only made possible through funding that results from the effective communication of value.