Public Relations for Biotechnology Companies

Luxury or necessity?

---

BY DOMINIC SICOTTE

The expression “public relations” was first used by Thomas Jefferson, third president of the United States, back in 1802. Times have changed a great deal over the past two centuries. Because of increased business competition and the tremendous evolution of communications, public relations today are a key aspect of the healthy management of many businesses. In Canada alone, a recent report on the biotechnology industry1 identified 417 biotechnology organizations, 80 of which are public. For biotechnology companies, especially public ones, public relations enable them to stand out from the crowd and showcase their true value.

In fact, a public corporation offers two products: on the one hand, the results of its operations and, on the other, its financial product. The two products are obviously targeted to different audiences — the scientific community and the financial community, respectively — the latter consisting of shareholders and investors (individual and institutional), brokers, analysts and financial reporters.

There are many aspects to public relations, two of which will be addressed here: investor relations and media relations. Every biotechnology company should be aware of the need for open communications, the components of a good investor relations program, and some basic advice on improving its relations with the media.

Open Communications

The path of any company is paved with both success and difficulty, but communication channels must be kept open at all times. “No news is good news” definitely does not apply to public corporations: releasing little news is in fact likely to scare off investors. This statement is especially true in the case of biotechnology companies, whose business potential often depends on their research and development projects. Communicating the various corporate, scientific and financial developments maintains shareholder interest and attracts investors. Open and candid communications also reduce the risk perceived by investors — a particularly important factor in a bear market. Investors have been hard hit in recent years and are now rightfully afraid to invest in the biotechnology industry, despite its most encouraging outlook.

Given their complex scientific nature, biotechnology companies need simple communications that allow the investor to easily grasp the scope of any news and the various wealth-creating factors.

Visibility, which results from sustained and effective communications, ideally paves the way for trust; trust translates into greater demand for the stock; and this demand favours higher share prices. For a company seeking funds to finance its various R&D projects, a strong share value minimizes shareholder dilution and maximizes shareholder wealth. A company’s visibility, the trust in its management and its outlook, and the demand for its stock are therefore the three major objectives targeted by any good public relations program for a public corporation.

Investor Relations

Because of the large number of public corporations, it’s often difficult to attract stakeholders’ attention, especially for a low-capitalization company. As investors aren’t very enthusiastic about the biotechnology industry right now, the task is doubly demanding for companies in this sector. To optimize results, an investor relations program must be proactive, original and integrated.

As a biotechnology company’s value is not usually based on earnings, it is subjective and fluctuates on the basis of investors’ perception. Releasing good news is simply no longer enough to influence this perception.

First, the company’s financial documentation — annual report, investor profile, press releases, Web site — must be clear, complementary and professional. The news must then be disseminated in a proactive and original manner. Today, some of the key tools of a good investor relations program include presentations and telephone calls to brokers and investors, e-mails, mailings, conference calls to discuss major events, reporting of events on the Internet, etc.

Fundamental analysis, technical analysis, market timing, low-cap, blue chip, high-tech, biotech, income trusts… There are as many different investment strategies as there are types of investors, so it’s important to reach as many people as possible. Renmark Financial Communications represents some 40 publicly traded companies of all sizes, including a dozen biotechnology companies. Some investors leave clients’ presentations completely convinced, while others just aren’t interested. In fact, it’s curious to realize what attracts a potential investor: management’s credibility, solid financial health, business outlook, the technology’s merits… So you have to knock on a great number of doors to open a few.

A good investor relations program must also be integrated. The various components should fit together to yield the expected results. For example, a major event should be announced via an explicit press release. This press release is followed by a conference call for which management is well prepared. The conference call is then available on the company’s Web site. Over the next few days, the announcement is covered in several newspapers, and management organizes presentations to explain the impact of the event. Subsequent followup with a number of parties — major shareholders and brokers, analysts and reporters — is always constructive and helps foster solid and durable business relationships. By experience, such an integrated approach optimizes a company’s visibility, the trust it inspires, and the demand for its stock.

Media Relations

In this period of economic and geopolitical uncertainty, depressed stock markets and financial fraud, reporters should be keen for good news, but experience has shown that bad news makes more ink flow. So achieving good press coverage is a real challenge for a small-capitalization biotechnology company. Here are a few tips to improve your chances of getting the press coverage your news deserves.

First, develop a network of reporters. You must identify the reporters likely to be interested in your company. Try to build a relationship of trust way before releasing your news. Whether those reporters are local, national, business or biotechnology specialists, you will always be a winner if you have already treated your contacts with respect and professionalism.

To ensure the process is effective, prepare a complete press kit on your company, then send it to reporters by mail or e-mail. Take the time to enclose a short text summarizing your company, the news and its context. You should always consider the fact that any reporter writes for his readers’ interest. So find the aspects and effects of your news that might potentially interest his or her clients. In fact, the easier you make his work, the greater your chances that your news will be covered.

Leave him the time to become familiar with your information. Call him back some time later and highlight the different interesting angles. You have to arouse his curiosity and enable him to cover the news from an original standpoint.

Finally, a company’s visibility, the trust it inspires and the demand for its stock often depend on its senior management’s credibility. Given that fact, endeavour to make your president a resource person for reporters. The reporter, your company and you will all come out winners.

We live in challenging times that test our determination and abilities. It’s important to remember that it may not be what happens to your company that matters so much, but rather what you do about it. Investor and media relations could very well be part of the answer.

Reference
1) Statistics from Peter Winter’s Canadian Biotechnology Industry Report 2003, January 2003.

Dominic Sicotte has been director of Media Relations at Renmark Financial Communications Inc. for the past three years.