Unlike most businesses, biotech investor relations require careful nurturing and a special focus on potential returns. Unfortunately, biotech companies generate some unique challenges for investors, such as prolonged development and testing times, uncertainties about FDA approval and possible patent challenges.
The Risk Factor of Investing in Biotech
Unfortunately, there is extreme risk in biotech investments, but the potential payoff can be tremendously lucrative. The right biotech investment can set up an investor for life, but the investment risks include a host of potential problems and delays. Many investors don’t have a solid grounding in the scientific underpinnings of new medical technology, and researchers need to tone down their excitement over technological breakthroughs and explain how these advances could generate solid financial returns for investors.
The risks of investing in biotechnology include:
• Balancing huge risks against the prospect of massive rewards
• High investment costs for any biotech product
• Lengthy development period when no returns are available
• Risk of backlash from different segments of society
• Affordability issues for certain drugs and procedures
• Possible side effects and interactions
• Risk of environmental damage
• Bioterrorism risks
Educating and Nurturing Potential Investors
It’s critical to work more closely with biotech investors than investors in other business opportunities. Educating investors requires a deft touch that doesn’t appear condescending but takes the time and resources to answer questions and concerns accurately and promptly. These might include issues like patent protection, human testing and winning FDA approval for a new drug. The latter can be especially stressful for inexperienced investors, like lifesci advisors, in the biotech industry because getting drugs approved for use can be a prolonged and onerous process.
During testing, which could take up to a decade, a promising drug or procedure might prove ineffective or too dangerous to use. Statistics show that about 68% of new biotech products don’t make it pass the intermediate stage. Billions of dollars in investments might be at risk. Other risks include the possibility that new technologies could render a biotech product obsolete, too expensive or less effective than a new approach
Managing Biotech Investor Relations
That’s why it’s so critical to manage biotech investor relations in a transparent, cooperative and sensible way. For example, investors who need immediate returns on their investments aren’t good candidates for biotech investing. Investors who can afford the risk and deal with the long development time are an incredible asset for biotech companies, and they should be treated accordingly. Some of the best practices for educating and nurturing biotech investors include:
• Developing a fair market value based on long-term potential earnings and income from ancillary drugs and processes
• Explaining that biotech companies expect to lose money over the short- and medium-term for specific investments
• Educating investors about the technology and what has been partially proven in clinical studies
• Explaining tech in a way that doesn’t require a science or medical degree to understand
• Analyzing the realistic prospects that patients and insurance companies will pay the price of new products
Expert Help for Managing Biotech Investor Relations
Investors expect a lot from biotech companies, but most talented researchers don’t have the business skills to nurture anxious investors through the long development process. That’s why hiring an experienced management team is an important step for raising the necessary funds through Phase 1, Phase 2 and Phase 3 fundraising.