Gaining Street Cred

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Never overpromise and underdeliver. Sounds like the sort of bland shibboleth you might see propping up a photo of some dolphins on a motivational poster. But that was the lesson mighty Pfizer, famed for its airtight communications apparatus, learned as its vaunted developmental drug torcetrapib foundered days after CEO Jeff Kindler pumped it up at an analyst meeting.

It was a lesson in humility for an industry seen as being oftentimes cavalier in its dealings with investors and the analyst community. Ironically, it came as Pfizer opened up a transparency initiative much like that Merck undertook, to great effect, following the precipitous decline in its share price after the company pulled Vioxx. Today, Merck is on the rebound. “I don't think anything's really changed at Merck except the communications,” Tony Butler of Lehmann Bros. told MM&M, praising the company's five-year forecast as a bold step toward reestablishing trust. “It's been my view and that of many of my peers that the European companies do a much better job of communicating with Wall Street and investors than the US companies, which unfortunately don't choose to address what's really going on in their businesses.”

Investor relations experts say the whirlwind nature of the pharmaceutical business makes preliminary hype a potentially nasty pitfall for companies large and small. “The hurdles here are a little different,” says Pam Murphy, VP communications and investor relations at Wilmington, DE, biotech Incyte. “You have the regulatory issues, and then you have medical and scientific hurdles that are somewhat out of your control, which is why your reputation for personal integrity is so important. They have to trust that you'll tell them the truth and be realistic in your forecasts of both the upsides and the downsides.”

IR execs in the pharma space must be conscious not only of the onerous regulatory requirements warranted by Sarbanes-Oxley and other laws governing the financial industry, but also of pharma-specific regulations. “If you don't have a good process in place to ensure that disclosure rules are followed, this can create big problems,” says Nancy Hober, SVP communications and investor relations at industrial distributor W. W. Grainger. Moreover, IR execs should ensure that anything communicated internally is fit for consumption, as it's more than likely to get out—especially in an age when employees maintain blogs and visit message boards.

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