About Us

Analyst Interactions with Biotechs

This past Tuesday, May 2nd, Gilmartin Group hosted a webinar with TD Cowen’s Joseph Thome, PhD (Managing Director) and Tyler Van Buren (Managing Director), moderated by Gilmartin Managing Directors, Laurence Watts and Stephen Jasper to discuss analyst interactions with biotechs. Below are the key takeaways from the dialogue.

Moderators:

Laurence Watts, Managing Director, Gilmartin Group
Stephen Jasper, Managing Director, Gilmartin Group

Guest Speakers:

Joseph Thome, Managing Director, Cowen
Tyler Van Buren, Managing Director, Cowen

Key Takeaways:

Standing Out to Analysts & Making Yourself Known
When establishing your company name and story, it’s important to have a strong management team with a record of credibility to “stand out” to analysts. It’s advised to be supportive of your story and company vision, but to be careful to not exaggerate or mislead the analysts. In addition, having novel, differentiated science relative to competitors, such that you’re either the sole player in the space or standing among a few other competitors is valuable. It’s preferable to be going after a large market—Cowen’s Managing Directors noted that what we’ve learned from early targeted oncology or orphan launches is that you’ll only get so much credit for going about small markets, especially in tough environments.

Determining Coverage
When determining what companies to cover, analysts look at a number of factors, but in the ideal scenario, the company would align with the analyst’s interests and scientific training. Scientific rigor is important, but there are common threads when analyzing companies no matter what the indication is and despite background, analysts can be put in front of any company and be able to provide value. In addressing the question of whether an analyst would cover a company whose deal the bank wasn’t involved in, Van Buren and Thome noted, from an institutional perspective, the company would have to be $1B or above in market cap, as analysts need to have enough flow and interest from investors to make it worthwhile in covering. If the companies aren’t coming from the banking or institutional side, it’s a hard pitch for the company to have an analyst potentially take up a coverage spot when they have a finite capacity.

Fostering Analyst Relationship with Companies Through the Lifespan of Coverage
Beginning—
The who/what/when/why of analyst coverage is dependent upon a number of factors, but timing, relevance and investor interest play a significant role. When engaging with private companies ahead of an IPO, most biotech analysts wait for the vetting to come through from the bankers. That being said, if analysts are trying to build a relationship with a company for the long-term, engagement should start well before the bankers reach out, with post-B round being ideal timing for beginning the relationship prior to syndicate decisions.

During—
In fostering a strong relationship with your covering analyst, an open and honest line of communication is key. When confronted with an error on an analyst report or a disagreement on analyst conclusions, it’s best to communicate quickly and clearly to remedy any discrepancies and clear up any confusion.

End—
Analysts cease coverage of a company if they are no longer relevant, if there’s a lack of interest on the investor side or if companies violate trust or have been misleading to analysts and investors. Every biotech company experiences a low, often during the execution period, where stock prices go down, but this is just a function of time. Unfortunately, investors’ time horizons are short, but analysts don’t necessarily drop coverage during that period. That being said, analysts are likely to drop coverage if there’s a lack of interest and some component of the story is broken from a credibility standpoint or from the fundamentals of the asset.

Biotech Earnings & Analyst Communications
While cadence and frequency of analyst communication depends on the news flow of each individual company, communication should be largely milestone-driven. Frequent calls and conversations are never frowned upon if the company management team has something new and meaningful to discuss. If your company story is changing frequently or if investors are asking differentiated questions, it’s recommended to touch base once a quarter to ensure the analyst is level set. In quieter periods where companies have 3-6 months without news flow or milestones, less frequent communications are advised to help companies and analysts to make the most of their time.

With regard to biotech earnings, companies shouldn’t feel obligated to host earnings calls every quarter. Earnings calls should be held if the company has a revenue-generating drug or if there’s a data readout that coincides with the quarter in question. From an investor standpoint, it’s much more preferable to host earnings calls only when there is something new or noteworthy to discuss. In short, don’t hold an earnings call solely because you did so last quarter.

Analysts & Embargo
When determining whether to bring an analyst under embargo, companies should focus on setting good expectation instead of jumping into the embargo process. Analysts prefer for companies to use embargos limitedly—with analysts engaging with investors 7 days a week, there’s never a fully convenient time to put an analyst under embargo. In these cases, analysts note that it’s almost less helpful to do so, as they already have established conclusions around what the data should look like and what the investors want the data to look like. Instead, it’s advised that companies set up time with the analysts to mention that they’ll be going into a blackout period ahead of the data and set expectations of what they’re looking at for the data set. This method helps companies behind the scenes as they prepare for what they’re going to show and what they’re going to emphasize. It’s important to note that analysts can digest information quickly, especially when they know the company story well and expectations are set thoughtfully.

TD Cowen Recent Acquisition:

TD, the second largest bank in Canada, closed the acquisition with Cowen at the beginning of March. TD Cowen is now the 6^th largest bank in North America. In addition to the $1.4 trillion safe balance sheet, TD Cowen is rated the number one safest bank, a particularly important factor in this environment. From the biotech research perspective, the Cowen heritage and culture that has been developed over decades will remain the same and it was a big part of the negotiations with management at TD and Cowen. TD Cowen has 7 senior biotech analysts and 10 total biotech covering analysts.

In conclusion, relationships with analysts should be governed by open and honest communication with strong expectations setting and thoughtful approaches to relationship fostering. Gilmartin Group has deep experience working with both private and public companies across Biotech and the larger healthcare space. For more information about how we strategically partner with our clients, please contact our team today.

Authored by: Rachna Udasi, Analyst, Gilmartin Group

Macro-Environment Effects on Investment Decision-Making in Life Science Tools & Diagnostics

This past Wednesday, April 26th, Gilmartin Group hosted a webinar with three sell side analysts, Dan Arias (Managing Director, Stifel), Dan Brennan (Managing Director, Cowen) and Mark Massaro (Managing Director, BTIG), moderated by Gilmartin Managing Director, David Deuchler, to discuss macro effects on investor sentiment in the sector. Below are the key takeaways from the dialogue.

Moderator: David Deuchler, Managing Director, Gilmartin Group

Guest Speakers:

Mark Massaro, Managing Director, BTIG
Dan Arias, Managing Director, Stifel
Dan Brennan, Managing Director, Cowen

Key Takeaways:

The size and global exposure of a company determines how much they are impacted by different macro factors.
The companies that operate globally and have exposure to industrial chemicals are seeing more disruption from China. To a lesser degree this year, the war in Russia and Ukraine is pressuring growth for some companies, as seen by Illumina’s first quarter earnings report. Biotech funding, which fueled growth for bioprocessing parts of the LSTDx world for the last decade, is now experiencing pressure among their divisions that service biotech, and we’re already seeing this with Danaher’s earnings report. Interest rates are also a concern, and we expect the smaller companies that are burning cash to bear the brunt of this macro factor.

Get cash while you can, not just when you need it.
Interest rates and the increasing cost of capital are making it more challenging for companies with negative cash flow to maintain a healthy balance sheet. This in turn makes it more challenging for investors to provide them with capital. Essentially, companies may find it easier to raise money long before they are close to running out. The panelists advised raising money when you can and not just when you need it, even in a down-round scenario.

The next class of IPOs will be prized unicorns, or at least have a well-defined, large market opportunity.
Our panelists deliberated on the composition of the next group of companies to go public in LSTDx. Potential criteria that would attract smart money include $100 million in revenues, a clear path to profitability in 3-5 years, or a large TAM or SAM. Regardless of the size of the addressable market or revenue amount, having a massive undefined number as an addressable market will no longer fly. In a more risk averse environment, companies will need not only need to have a large addressable market, but a clearly defined one. They’ll also need to demonstrate their ability to take share in that market by having a better mouse trap.

In conclusion, the macro factors weighing on Life Science Tools and Diagnostics companies in the present market environment include interest rates, China trade relations, and to a lesser degree, Russia’s war. Which of these factors impacts what company and to what degree largely depends on their size, stage, and global exposure. The webinar panelists believe that capital markets will come back around, and when they do, companies will no longer be able to win over investors simply by stating they have a $12B TAM.

Gilmartin Group has deep experience working with both private and public companies across Life Science Tools and Diagnostic and the larger healthcare space. For more information about how we strategically partner with our clients, please contact our team today.

Authored by: Nina Deka, Vice President, Gilmartin Group

Navigating Today’s Liquidity Environment

On Tuesday, April 18th, Gilmartin hosted its inaugural Private Company Showcase, highlighting innovative private companies across various healthcare verticals. To kick off the day of presentations and fireside chats, Gilmartin Group Managing Director, Vivian Cervantes, moderated a panel focused on navigating today’s liquidity environment. The panel featured insights from notable thought leaders in the space with contributions from Greg Garfield, Senior Managing Director at KCK group, Bruno Stembaum, Managing Director at Bank of America, and Hutch Corbett, Managing Partner at Armentum Partners.

Moderator: Vivian Cervantes, Managing Director, Gilmartin Group

Guest Speakers:

Greg Garfield, Senior Managing Director, KCK Group
Bruno Stembaum, Managing Director, Healthcare, Bank of America
Hutch Corbett, Managing Partner, Armentum Partners

Key Takeaways:

The market for deal-making remains open, yet macro uncertainties and sentiment continue to dampen activities, with a shift to selectivity in investments

Compared to the height of deal activity in 2021, investors have become increasingly selective on new investment ideas. Investors today are slower and more considerate when making an investment decision. In general, funds continue to focus on their current portfolio companies needs, how they deliver on milestones and efficiently scale the business. Despite current selectivity, the deal-making market remains open, with companies encouraged to be more proactive and prepare for financing activities with 12-18 months of cash runway vs previous 6-9 months.

“Marking Milestones” mindset replaces “Growth at all Costs”

Investors mindset has shifted to sustainable or quality growth, as they evaluate investment opportunities that well-manage the typical tension between investments to be made to drive to a target milestone, with a focus on capital efficiency. Prudently managing the cash burn while executing on key initiatives and milestones will help a company stand out as an attractive investment opportunity. If a company needs to spend, it is important to prioritize what will be most impactful.

Cash burn, execution and keeping an eye on profitability targets

Given the heightened focus on fundamentals and financial discipline, the line of sight towards cashflow breakeven has become even more important. For management teams, it is vital that they understand and clearly communicate how they plan to get to that inflection point of their business, in addition to other catalysts. Investors generally want to see the capital they invest fuel the commercial activities geared towards growing the business organically. If the company effectively uses the invested capital by showing a track record of execution upon their communicated plans for growing the business, their credibility increases among investors.

Flexible evaluation of financing structures and valuation

In the current environment, there may be opportunities for both debt and equity structures. Prior to the IPO slowdown, MedTech companies were going public with an average of $30 million to $50 million of debt on their balance sheet (approximately 1x revenue). Given the preference for new equity capital to be deployed into the business vs repay existing debt, evaluate opportunities for debt refinancing. In terms of valuation, IPO valuations of 8x to 10x 2-year forward revenue may revert to historical averages of 4x to 6x 1-year forward revenue. While such multiple compression may be difficult, a potential silver lining to a down round is the completion of a financing that realistically gives the company resources to step-up to upcoming value milestones.

Be ready

It is hard to predict when the market will turn, but when it does, it is expected to turn quickly. Therefore, be ready. There were many healthcare IPOs that were put on hold beginning late 2021, with a goal of going public when the window reopens. Management teams in this position must be prepared further in advance and be able to clearly communicate their financing needs and goals.

In conclusion, companies should proactively manage their financing needs, evaluating opportunities for both debt and equity, with a focus on capital efficiency. Given ongoing multiple compression and expectations for a return to historic average multiples, valuations may continue to face pressure, and companies should plan accordingly for a more efficient capital allocation. Ultimately, there is a lot of capital waiting on the sidelines, ready to be deployed.

To register to watch a replay of the webinar, please visit the Gilmartin Group Private Company Showcase website here.

Gilmartin Group has deep experience working with both private and public companies across the healthcare space. For more information about how we strategically partner with our clients, please contact our team today.

Co-Authored by: Jack Droogan, Associate, Gilmartin Group and Steve Yeung, Associate Vice President Gilmartin Group

Navigating IR: What Healthcare Executives Need to Know

Last Wednesday, April 5th, Gilmartin Founder & CEO, Lynn Lewis, moderated a panel at Biocom California’s CFO Breakfast & Networking Event in San Francisco. Joining for the discussion were John Craighead, PhD, CFO & Head of Corporate Development for Elpiscience, Celia Economides, CFO of Gritstone Bio and Jason Mills, Executive Vice President of Strategy at Penumbra. The panel covered topics relevant to both private companies navigating the institutional investor landscape as well as issues facing publicly traded companies in today’s environment. This was part of the Biocom California’s CFO Series, which is a program intended for chief and senior finance executives within the life sciences industry. Below are our key takeaways from the panel.

Moderator: Lynn Lewis, Founder & CEO, Gilmartin Group

Guest Speakers:

John Craighead, Ph.D., CFO and Head of Corporate Development, Elpiscience Biopharmaceuticals
Celia Economides, CFO, Gristone Bio
Jason Mills, EVP, Strategy, Penumbra

Key Takeaways:

Wall Street is undergoing change.

There is an increasing reliance on management teams to be more direct. This indicates an onus on the company to communicate with the sell side and to provide clear direction, in turn holding more influence on research published. The talent landscape on Wall Street is also shifting to young professionals as turnover among more experienced professionals increases.

An effective IR strategy is crucial.

Companies that develop and maintain deep relationships with the investor and analyst communities will establish credibility, trust, and ultimately differentiate themselves from their peers. Allocating focus to investors who are excited about the story, for example, is a key differentiator. Investors who understand the opportunity will become company advocates, generating additional interest among the buy-side community. This dynamic creates responsibility for executive teams to aggressively manage their schedules, refine messaging, and conduct thoughtful outreach. It also highlights the importance of listening to investor feedback.

Gilmartin Group has deep experience building and executing comprehensive Investor Relations strategies for both private and public companies across the healthcare space. To learn more about how we can support your company, please contact our team today.

Guiding expectations while not disclosing sensitive information is a balance.

In today’s risk-averse climate, it’s essential to establish realistic goals and carefully consider which metrics to disclose. Less is more from a quantitative perspective. At the same time, being very specific in the earnings script will help guide conversations with analysts and investors in quarters to follow, allowing for direct conversation while being RegFD compliant.

Preparing to go public.

Private companies should start to build analyst and investor relationships as early as two years before the company plans to IPO. Attending the right industry and banking conferences will increase the company’s exposure and generate more interest among analysts and investors. At this stage, it’s important to engage with an advisor like Gilmartin who can make recommendations in line with the company’s long-term vision. Having a cohesive story combined with a clear pathway marked by milestones and capital raises provides confidence in management’s ability to execute.

Generating interest in the absence of a catalyst is delicate.

Science moves slowly, and investors want to see catalysts; strong relationships with long-term shareholders can mitigate the short-term pressures. Investors with a longer-term horizon will be more prepared to hold while the longer-term catalysts play out. At this stage, the “less is more” philosophy remains intact. Investors will try and gather enough information to track capital needs and will map clinical milestones, as an example, over the cash burn curve to know when an investment can be made at a discount. And if a metric like patients enrolled is disclosed, it will become the company’s responsibility to disclose that metric on an on-going basis. As companies wait for longer-term catalysts to have an impact, they can also supplement their strategy validation process by leveraging data published by their peers.

In conclusion, the Wall Street landscape of responsibilities is shifting, and companies can differentiate themselves with the right investor relations strategy. That means walking the line between being too broad and disclosing too much information, at the same time as managing buy side and sell side relationships.

Gilmartin Group has deep experience working with both private and public companies across the healthcare space. For more information about how we strategically partner with our clients, please contact our team today.

Co-Authored by: Webb Campbell, Associate, Gilmartin Group, Max Forgan, Associate, Gilmartin Group & Tamsin Stringer, Analyst, Gilmartin Group

5 Biotech Market Trends out of the Biocom California CFO Breakfast Panel

Biocom California recently hosted an in-person panel with three equity research analysts: Ritu Baral from Cowen, Laura Chico from Wedbush, and Josh Schimmer from Evercore. Moderated by NIRI San Diego chapter president Jason Spark, the panel discussed the current and future biotechnology climate for both public and private companies.

Our top five takeaways are below:

1.The foundation of strong relationships between analysts, corporations, and investors is credibility.
Credibility, built through objective, long-term engagement and passion for the company, remains the basis for relationship development. The return of in-person meetings is a positive trend in maintenance and construction of relationships between analysts, companies, and investors.

2. New trends on the buy side, such as increasing sophistication of funds and increasing access to information, could reverse the undisciplined investment in the sector over the past several years which generated an excess of biotech companies.
The rapid increase in the number of biotech companies has been fueled by an immense influx of capital where too often clients don’t know or understand their investments. Undisciplined investment in the past few years has caused a significant bubble to form in biotech – a bubble which is currently deflating. However, analysts view this deflation as necessary for long-term sector health. Newer and larger funds have become more creative in how they approach companies, with most large funds only addressing companies with a high market capitalization. Smaller companies face significant challenges in acquiring capital.

3. Analysts and investors look for catalysts, low risk, and a strong management team when making coverage and investment decisions.
Catalysts and stock-moving news within 18 months remains a key factor influencing investment. In the current capital market, risk tolerance has plummeted. Despite investment trending towards earlier-stage private companies, the past year has seen a reversal of this movement as investment flows to de-risked assets. People, products, patents, and cash remain essential for any successful company.

4. The outlook for biotech companies remains challenging in the short-term, but with significant long-term potential.
After a weak year of stock performance, the biotech sector has shown some signs of stabilization, bolstered by the tailwind of strong M&A activity. Initial public offerings are not occurring and will likely remain minimal until 2023-2024. Investors remain nervous about new emerging issues, including the recent rapid action on drug pricing taken via the Inflation Reduction Act. Innovation in the space remains strong, although strategic investment remains exclusive and requires a minimum level of sophistication due to the technical nature of therapeutics and drug discovery. With greater representation on small and mid-cap exchanges due to a rapidly increased number of listed biotech companies, future investment outlook in the sector remains healthy.

5. ESG is underutilized with room to grow in the biotech sector.
Most biotech companies have underdeveloped or non-existent ESG programs. Some biotech companies with resources to allocate to ESG have used the scores to gain access to larger funds. Focused metrics like clinical trial diversity and patient access are most referenced in the biotech space. As companies mature, ESG will gain urgency and influence in the sector.

Gilmartin Group has deep experience partnering with biotech innovators, both public and private, to develop sustainable messaging and build nuanced investor relations and communications plans. To learn more about Gilmartin’s strategic approach to Investor Relations or our healthcare focused ESG offerings, contact our team today.

Webinar Recap: Fidelity Management & Research Virtual Buy-Side Engagement Panel

Fidelity recently hosted a webcast focused on engaging with investors. The panel featured a Q&A session with several portfolio managers and analysts who offered specific tips on what matters, what doesn’t and how to position yourself for success when interacting with the investment community broadly and with asset managers at Fidelity, specifically.

Here are our top 10 takeaways:

Most Effective Ways to Engage with Asset Managers at Fidelity

Be proactive. Utilize bank-sponsored conferences to introduce yourself – propose an in-person interaction at a conference or an introductory call.
It is helpful if you can quickly provide a high-level overview of the business and comment on industry trends to start the conversation
Have organic interactions. Reach out when there are material changes outside of the earnings cycles. Most analysts at Fidelity expect conversations at least once per quarter, with a hybrid of in-person and virtual meetings.
Use Fidelity’s IR Portal. Through the IR portal, you can see who covers what company and find their contact information. If your stock is held in multiple Fidelity funds, your analyst from the portal will be your point of contact

Management is Integral to Investment Decisions

For all companies, but particularly emerging growth companies, the management team is an integral part of the investment decision for asset managers at Fidelity
As stewards of capital, you are a big piece of the equation when it comes to value creation
Fidelity looks at management incentives, specifically are incentives aligned with the creation of shareholder value and the timeframe that’s considered

Your IR Site Matters

The investor relations site matters – don’t overlook the importance of having information well organized and easily accessible
Have your presentation, key performance indicators, and company summary in a visible and prominent location on the site
If you have supplemental data, such as information you refer to on calls or trends that you want to highlight, link it directly to the IR site
Include any ESG data that you have and/or your sustainability report on the IR page

Structural Dynamics Do Matter in Investment Decisions

Average trading volume, the float, and market cap all factor into structural considerations and considerations in investment decisions
From Fidelity’s perspective, for illiquid or structurally challenging companies, the expected return threshold needs to be materially higher given the risk profile

Investment Criteria and Holding Periods for Fidelity Investments

The holding period at Fidelity varies across strategies, but as a starting point, 2-3 years is typical
When evaluating a longer (or shorter) holding period – asset managers consider several financial metrics, including past and expected ROE, ROIC, earnings to cash flow, valuation, and margin profile
For small caps, your balance sheet is a key consideration when evaluating risk

How Do You Look at Distressed Companies (i.e., in biotech)

Portfolio managers tend to focus on understanding the maximum downside, whereas analysts also focus on the upside
Capital structure and cash position/burn are important considerations

Comments on Guidance

Guidance is useful and helpful – but needs to be grounded in confidence and visibility
In areas out of your control, or where you do NOT have visibility or confidence, Fidelity’s advice is not to try and guide
You do not need precise on all metrics; high-level trends are helpful

How Does Fidelity Use the Sell Side vs. Internal Research?

Fidelity analysts and portfolio managers view the sell-side as their partner
Analyst reports are very helpful when ramping up on a stock or serving as “feet on the street” in international markets

View on ESG for Smaller Companies?

Fidelity understands that small caps have less IR and ESG resources and that they should allocate resources to business growth and development
For smaller companies, it is important to get any ESG information that is available on the IR site
ESG is part of the investment mosaic and will be increasingly so going forward

EXAMPLES: Who are the best companies from an IR perspective?

ATKR: Very thoughtful about having robust, but concise data on their calls
PTC: Releases the transcript and data ahead of the call and jumps directly into Q&A on the call
ESG IR communications: PBH, TPR, WSM
Companies with great investor decks: EHC, LHCG, AMED, CSWI, YETI, LGIH, FOXF

Management and Investor Relations teams must balance many stakeholders and dynamics in an ever-changing environment. Properly and fluently communicating company objectives to the buy and sell side in the context of the overall market Is a challenge we at Gilmartin embrace! Great partners like Fidelity help build lasting relationships, ensuring respect and strong communication. To learn more about Gilmartin Group and our offerings, please visit gilmartinir.com.

This blog post was co-authored with Fidelity Investments.

Keynote Recap: MedTech Financing in The Current Market

In the event you missed it, Gilmartin held its Inaugural Emerging Growth Company Showcase featuring a Keynote Panel on MedTech Financing in The Current Market that was joined by Morgan Stanley’s Peter Harrison (Managing Director, Investment Banking), Piper Sandler’s Neil Riley (Managing Director, Equity Capital Markets), and Wilson Sonsini Goodrich & Rosati’s Philip Oettinger. The panel was moderated by Lynn Lewis (Founder & Chief Executive Officer of Gilmartin Group).

In this post, we are sharing some of the Key Takeaways on the IPO Market from our Keynote Panel:

IPO Market

There is an expectation that the IPO market will begin to pick up in 2023
While expectations have been pushed further out than originally anticipated, panelists believe that there would be a pickup in the IPO market beginning mid-2023 (2Q23 at the earliest).

The IPO market may generally favor quality versus growth when the IPO market reopens
Companies with scale, strong balance sheets, and prudent management would be choice candidates.

Investors are looking for more prudent management during the IPO process
Market sentiment has shifted towards a more balanced approach to topline growth and profitability. Management teams need to evaluate the amount of capital being raised and whether it is sufficient to reach the point of profitability. In the current environment, investors need assurance that management teams are mitigating the amount of dilution.

IPO Readiness

Most companies begin to work on their corporate governance structure and IPO readiness checklist about a year out before going public
If your company is a choice candidate (i.e., at scale with a strong balance sheet) for when the IPO market reopens in mid-2023, you should begin to think about what needs to be accomplished or at least start the process of drafting the S-1. For a more comprehensive look at considerations in the 12 months before going public, check out our post here.

Completing a crossover round prior to an IPO has been the general advice over the past few years
There is an advantage to having a strong investor base for the crossover round because they will help build the investor group going into the IPO process. However, it is not a prerequisite for MedTech companies, and this mainly applies to Biotech. The best scenario for completing a crossover is when investors are approaching your company, which may be easier now as there is a significant amount of dry powder on the sidelines.

It is difficult to perfect the timing of an IPO to optimize price.
In practice, if a company is looking to go public, it should be at a time when a company can leverage the capital infusion to drive growth (i.e., when the company has a built-out salesforce and/or pipeline).

Conclusion

Given the current market environment, it’s hard to perfect the timing of an IPO to optimize price. The panelists expressed confidence that the market will be open next year and advise companies to look at it for the long game. Leverage your capital infusion at a point in time when the fundamentals can accelerate growth, or in other words, when you are ready from a sales team, pipeline, etc. perspective. Though it’s easier said than done, setting reasonable expectations and being thoughtful about your cadence with strategies and investors will be paramount in the end.

The last piece of advice and insight from our panel on MedTech Financing in the Current Market is this: companies are bought, not sold. Dialing for dollars is successful, at most, 50% of the time. Where companies find success is in fostering relationships with strategy and putting effort into investor relationships. Preparation and strategic planning will be key heading into 2023. The Gilmartin Group can ease the pre-IPO process and set you on the right track as you embark on becoming a public company. To learn more about Gilmartin and how we strategically partner with our clients, contact our team today.

Financial Forecasting During a Period of Macro-Economic Uncertainty

When investors evaluate investment opportunities, they look to management teams who accurately forecast and deliver results at or above guided levels. With macro-economic factors placing increasing pressure on financial results and expectations, it is as important as ever for companies to outline a plan they can confidently execute against. Generally, guidance metrics include top-line growth, gross margins, operating expenses, EBITDA, or net income as they allow the Street to evaluate company performance and benchmark across the industry. However, additional levels of detail and qualitative commentary may be necessary when there are mounting macro factors that may impact actual results.

In this blog, we will discuss a few items to help you think about forecasting and guiding Wall Street while navigating a challenging macro environment.

Modeling Internal Scenario-Based Forecasts – Plan the Work

It is important to have a deep understanding of the business and financial strategy to establish a plan to successfully execute against. A detailed financial forecast not only helps you track performance but provides the framework behind establishing guidance that is either achievable or beatable. It serves as a company’s internal roadmap and includes various levers responsible for top- and bottom-line performance. In addition to understanding the magnitude of each lever, it is imperative to know the drivers and how to track and demonstrate progress. That said, forecasts should always remain internal and never be referenced in conversations with analysts or investors.

Providing Achievable Public Guidance – Work the Plan

While internal forecasts influence guidance, additional factors that can impact expectations must be considered to provide a reasonable estimate, or range, for external communication. This is where performing a sensitivity analysis on your internal model can help incorporate a buffer into the guidance, which can be narrowed throughout the year (ideally). That said, while beating and raising top-line guidance was a sure way to drive value in the past, a detailed path to profitability and cash runway is becoming more valuable to investors’ decision criteria. This can include timelines as well as initiatives aimed at balancing growth vs. managing expenses, such as scaling operations and efficiently deploying capital. Companies that can message their ability to adapt to circumstances and execute according to plan will be deemed less risky when institutional investors are evaluating positions. Furthermore, many institutional investors are looking to defend investment theses in existing positions, so providing clear and achievable visibility into operations is important to retaining confidence. Not only is it important to achieve your plans internally, but you must also demonstrate your ability to “do what you said” externally.

Ensuring Consensus Reflects Guidance – Enforce the Goal

This is where effectively messaging future expectations is a key part of the strategy. Covering analysts rely on publicly disclosed guidance, in addition to actual financial results and market conditions, to update their estimates and ultimately the consensus for the company. In periods of uncertainty, analysts may put more weight on qualitative commentary to justify their expectations than the quantitative guidance alone. Since this sets the basis to be measured against going forward, it is imperative to deliver a message that accurately reflects the intended guidance.

Though companies are faced with similar macro factors, the key disclosures to instill investor confidence vary based on the business. It is crucial to understand what metrics are important to your investors and accurately reflect your performance. Gilmartin Group has deep experience and expertise in helping companies disclose key performance indicators that enable informed investment decisions and establish credibility among the Street.

For more information on forecasting, guidance, and consensus, please contact our team today.

Emma Poalillo, Vice President

Common Questions Entering a Bear Market

Coming off the heels of a record breaking 2021, the first half of 2022 has shaped up to be less than ideal. With no one key driver in our current climate, factors such as eastern unrest, high inflation and interest rates, supply chain complications, and labor challenges due to wage inflation have indicated a looming recession. So, what does that mean for private and public healthcare companies? After several of our team leaders, we address some of the common questions and concerns our clients—and those in the space—have been left wondering.

What are healthcare investors most focused on moving forward?

Investors have put a significant emphasis on the ability of companies to deliver on their financial guidance without the need for additional capital.
Investors want to see clear messaging on the timeline for additional raises if necessary.
Remaining focused on operational performance and delivering better than expected financial results is one key way to drive new interest.

We have been watching our stock price plummet. How do we reverse this?

Look to control the fundamentals of the business.
Focus on hitting your timeline and delivering upon milestones. Losing sight of the importance of these smaller accomplishments can have a detrimental impact on company credibility.
Search for alternate ways to drive success: partnerships, ways to maximize cash flow, efficiencies in operational expenses, etc.

We need to raise capital, but this is not the right time. What are some alternatives?

Alter the conversation so as not to put a sole focus on raising capital, but pivot to preserving cash flow and growth. For example: tweak the presentation to represent a shift to cost containment versus revenue growth at any cost.
Execute on presented messaging by finding a pathway that emphasizes profitable growth and cash positions.
Look to operational expenses like traveling to in-person conferences. If asked to attend, consider if the entire management team needs to join, if those attending are investors that will bring the most value, or if they are even an ideal target.
Turn to advisors to drum up interest with investors through virtual meetings or 1x1s.

How do we navigate these unique times, simultaneously showing results, driving value, and differentiating ourselves in the market?

Turn to alternative tools, like ESG reporting. ESG has become a staple to show growth and evolution of a company, which is a win-win for private market investors looking to drive value while transforming unsustainable business models into green ones. Underwriters have taken serious measures to assess climate risk, with firms unwilling to run the risk of mispricing their investments.

Be discerning with how and which investors or banks are being targeted. Choose those that cater to a company’s sector and size to maximize a successful partnership.

Find alternatives to conferences with unique ways to get a company’s name and brand out. Examples could be KOL days, appearance on an expert panel, making introductions to smaller firms and family offices, or unique marketing activities.

Look to be strategic in how you are raising capital. Viable options include grants, partnerships, non-dilutive capital options, or licensing deals with productive co-partners.

Though everyone is weathering the same storm, not all strategies are universally applicable. It is important to understand the nuanced strategies, cash positions, and pathways a company can take to have productive, fruitful conversations with investors and achieve success beyond this bear market. No matter what size, stage, or sector, Gilmartin Group partners with healthcare pioneers, both public and private, to build corporate strategies and develop clear messaging that positions them to build credibility over time while highlighting the value they provide.

If you would like to discuss how Gilmartin Group can best help position you emerge from the current bear market, please contact us today.

Brynna O’Leary, Analyst

The Return of In-Person Meetings

As COVID-19 became widespread in early 2020, global gatherings came to a complete standstill, emptying sports stadiums, airports, and restaurants. Investor events were no exception, with many investment bank conferences and industry gatherings being outright cancelled or postponed during this time. Many executive teams concerned over the disruption of the pandemic on the market and their ability to access investors and the Street turned to Zoom for relief. Now, two years later, in-person events are making a return, leaving many asking, “What is the future of investor communications?”

What was intended to be a temporary fix evolved into a new practice we expect to stick around long after the pandemic resolves. Below are some of the many benefits to virtual events:

Flexibility and inclusivity. Company executives and shareholders can meet essentially without geographic restrictions. Corporate duties and personal obligations that may have previously impeded one from attending a multi-day conference now has the option to tune into the event for an hour or two at a time. Management teams are more accessible to investors; meanwhile, companies can maximize their exposure to investors near and far.

Cost-effectiveness. Online meetings eliminate costs associated with venues, travel, and accommodations.

Analytics. With virtual conferences comes sophisticated analytical software that can more easily track attendees and engagement in real time.

Considering these benefits, why would we ever go back to in-person meetings? A 2017 study found that face-to-face requests are 34 times more effective than email requests. In-person gatherings offer more than what Zoom can capture on screen. Below are some of the reasons why in-person interactions may outweigh virtual ones:

Long-lasting relationships. The power of small talk cannot be understated when building trust in a genuine and meaningful business relationship. Casual conversations in between meetings and during lunch breaks allow people to showcase their personality, which is often invisible behind the camera.
Effective communication. In-person attendance requires the full attention of its participations, resulting in limited distractions. Non-verbal communication such as body language and social cues facilitate a smoother conversation that may be otherwise be interrupted by a faulty internet connection at home.
Increased engagement. In-person attendance requires the full attention of its participations, resulting in limited distractions. It is tempting to multi-task during virtual meetings when email and ping notifications are cluttering the screen.

Despite the many benefits of in-person interactions, the pandemic introduced new challenges related to safety and health concerns. We recommend developing an in-depth plan inclusive of local and conference guidelines to ensure the safety of you and conference attendees. Take note of local travel restrictions, mask and vaccine protocols, and COVID-19 testing requirements.

The pandemic has changed how we navigate meetings and conferences, resulting in the virtual versus in-person dilemma and a new need for balance. We believe the future of investor relations is a hybrid model that integrates both virtual and in-person elements to reap the benefits of both. The hybrid solution offers participants the flexibility to build and sustain relationships according to their unique needs.

If you want to develop a strategy for developing a hybrid solution that makes sense for your team, we can help. Contact us today.

Laine Morgan, Analyst