Communicate With Confidence

September 1, 2002
Carol Ruth

Carol Ruth is president and CEO of the Ruth Group.

Pharmaceutical Executive

Pharmaceutical Executive, Pharmaceutical Executive-09-02-2002,

Investors have lost confidence in the market. Specifically, they have lost confidence in the information coming out of corporate America.

Investors have lost confidence in the market. Specifically, they have lost confidence in the information coming out of corporate America.

Since the beginning of the year, the S&P Supercomposite Pharmaceutical Index has decreased 32 percent and the S&P Supercomposite Biotechnology Index is down 37 percent. That is bad news for small companies that need capital to fund their research.

On the bright side, there is investor interest in the healthcare sector. It is still seen as one of the market's growth areas. But for those looking to raise money, the scrutiny is high and valuations are low. For profitable companies, growth strategies are the focus. Investors looking for development companies seek those with late stage products or a clear game plan and an execution capability offering metrics to gauge progress.

For emerging companies with good science, Big Pharma is still looking for partners and investments that will enhance its pipeline and valuations. Those companies must stay visible as well as ensure news about them is is well understood and that it gets the attention of the relevant analysts and the media.

Raise Confidence, Reduce Risk

What can corporate executives do to improve the situation? There is only one place to start-at one's own company.

PR professionals can highlight the manager's expertise. An experienced management team carries a lower risk than one new to public companies or new to developing and bringing drugs to market. PR can prominently display the curriculum vitae of top managers, scientific advisory board members, and board of directors on the company's website.

Outline the company's objectives, accomplishments met, and goals for the future. A track record of meeting expectations and goals is a risk reducer. Set reasonable expectations for earnings and accomplishments. Fight the urge to set unrealistic timelines and goals. Missing an important metric or deadline will harm credibility with management and raises investors fear of risk.

Put together data that outlines metrics set and accomplished over the last three to five years. Use it as a slide in corporate presentations and recount it in news releases.

Endorsement by those who are well regarded in the industry is also a risk reducer. Highlight partnerships and investors clearly on the website and in all news releases. Companies also are judged by the company they keep. Underscore the "burn rate" and where money is being deployed each quarter. Clearly sharing that the company is spending money prudently decreases the risk concern of investors.

Don't wait for the hard questions related to recent developments and proposals. PR pros should reinforce confidence by offering information such as the composition and compensation of the board of directors and the make-up of board committees. If the company needs to make changes based on recent events and regulatory recommendations, take the initiative. Announce the planned changes.

Investors and analysts are scrutinizing quarterly reports as never before. Erase the term pro-forma from the corporate vocabulary. Be prepared to discuss earnings after the company expenses stock options. In fact, put that in a news release and join those companies already announcing they will do so.

Now is not the time to pull back on investor and public relations. Companies need good strategic communications counsel-inside and outside. Consultants are usually more likely to be objective and forthright with management. Even if the news is bad, communicating it is a necessity. Remember, bad news is often less risky to the market than no news at all.

The web is the first place that investors and media seek information. Ensure that information on the company's site is current, complete, and includes the items previously mentioned. Add a section on corporate governance.

Finally, get on the road. Visit shareholders. Make sure they understand the business model and strategy. Keep them informed and up to date and they will be more likely to stay vested in the company.