Monthly Archives: August 2009

An article by Ben Bland in the August issue of IR magazine discussed the importance of good investor relations (IR) practice by all companies and how investors are willing to pay a premium for such a service.

A survey conducted by the Singapore Management University and Investor Relations Association Singapore, concluded that 89% of portfolio managers will pay more to invest in companies with credible IR practices.  Two thirds of survey participants would pay at least 15% more for companies that will benefit from good IR.  However, during an economic downturn managers tend to cut back on IR resources. 

The article urges managers to educate themselves on the value of IR and the effects on their companies.  Old perceptions have to be reshaped for companies to fully understand and benefit from the value of good IR practices. 

A recently published perception study conducted by Thomson Reuters and Biotechnology Industry Organization (BIO) reported on Wall Street’s assessment of the biotechnology industry.  

 The majority of the investors, analysts and portfolio managers that participated in the survey expect the biotech sector to outperform in relative and absolute terms in 2009, stating that it is either a “good” or a “very good” time to invest in biotech.  A positive performance is also expected in mergers and acquisitions coupled with advancements in the clinic and some FDA approvals, boosting overall valuations in the sector.

 However, investors remain cautious with an increased focus on companies’ cash position and their ability to obtain the funds they need to sustain operations. The majority of survey participants expressed their preference for mid-cap companies with late-stage products although there is still great interest in smaller companies in the early stages of R&D. Investors will stay away from companies that will come under regulatory scrutiny.

 The survey concludes that although overall perception of the biotech industry is positive, in-person meetings with senior management remains paramount to investors and analysts.  Clear, regular and consistent communication will increase a company’s chances to attract the right investors.

 Year-to-date (Aug. 25, 2009) the NASDAQ Biotechnology Index increased by 11.54% to 813.76.

This week, Russo Partners talked with Shehan Dissanayake, CEO of Tavistock Life Sciences, about his perspective on the current life sciences investment market.

Although the recession has made some people wary of the general market, Dissanayake believes that strong investment opportunities are still available to investors who are willing to look for them.

“Tavistock Life Sciences is extremely excited about the current opportunities in the life sciences marketplace,”  he said. “As investors, we are being presented with more opportunities today than ever before. For companies seeking investment, however, the situation is challenging as numerous companies are seeking an ever-decreasing pool of investment dollars.”

In the current market, Dissanayake explained, companies must aggressively solicit financing to survive. Although this higher level of fundraising activity has led to a significant increase in the volume of life sciences investment opportunities in the past year, “the number of ‘quality’ opportunities has not [increased], thus making the filtering process even more important for investors,” he said.

Dissanayake takes a positive stance on the state of the market, but he stresses the importance of making educated decisions when investors choose where to stake their resources. “It is a great time to invest in life sciences,” he said. “As with the general market, valuations are depressed and excellent investment opportunities can be found. However, due to the current surplus of companies seeking financing it is more important than ever for investors to choose their opportunities wisely.”

Dissanayake recommends that investors take the time to do advance research and educate themselves about any companies they might be interested in supporting. “In addition to scrutinizing a company’s technology and the market it seeks to penetrate, potential investors should also carefully examine the organization’s operations, fundamentals and management team,”  he said. “At the end of the day, high-quality companies with a good story will attract funding.”