Rodman & Renshaw backing biotech at a record pace
The top-ranked banker for private investment in public equity (PIPE) since 2005, Rodman & Renshaw sets a record pace during 2009 closing 57 transactions valued at over USD 1 billion in just 6 months.
One year after a market meltdown that sent other banks running for coverage under the TARP fund, Rodman reported it had expanded its business, posted record revenue and was hiring more staff.
“You might say it was a slingshot effect,” said Benjamin Bowen, a Managing Director in the Rodman & Renshaw Investment Banking group where he advises life science companies.
And with all the excitement one expects from an investment banker, Bowen explained the secret of this success was simply, “we kept on doing what we have always done best.”
“We went out and met with companies,” he said. “We continued to visit with boards of directors, we attended conferences. “As a result of this continuity during the down cycle, when things began to move again in the second quarter of 2009, we were really in touch with the life science sector,” he said, adding, “We knew the needs of companies”.
Bowen said there are 275 to 300 publicly traded small-cap companies in the life science sector, and many of them found themselves squeezed as the crisis hit its lowest point with half of them operating with less than a year of cash, compared to the historical average of two years of cash.
The market thaw that began in March 2009 released an acute, pent-up demand for cash and Rodman accelerated to post a banner year.
“Many of these companies may have shelved some B-level projects to slow their cash burn, but they could not stop the advance of their A-level programs, which is the basis for their value and the promise they need to deliver,” he explained. “They cannot afford to stop clinical trials due to the high cost of restarting them, nor do they want to lose valuable time for intellectual property that has a fixed lifespan.”
Moving forward, Bowen said mergers and acquisitions will continue to see what he called a “vibrant level of activity.”
“As pharmaceutical companies become less vertically integrated, they need the small-cap companies to continue feeding new programs and projects,” he said. “That is the principle driver, and it is a sustained trend.”
On the other end of the dealmaking, he said, “private companies will continue to be driven toward M&A where in a better market they might have sought an initial public offering. Reverse mergers or mergers of equals will continue to be attractive between small public companies and private companies of an equivalent size.”
While Bowen said he could not offer any break-through insights for the large universe of thinly traded small-cap and micro-cap biotech companies, his advice would be to sharpen the focus on marketing efforts.
“First and foremost there needs to be a good story, and they need to know how to tell it well,” he said.
“After saying that, I would advise these companies to distinguish clearly between aspirational buyers of their stock and the practical buyers,” he said.
“While it seems attractive to include attention-getting names on a marketing list, it is likely too early to expect purchases by the large mutual fund complexes. Instead they should spend their efforts positioning the company favorably with funds that have a biomedical focus, with regional funds, or with smaller hedge funds,” Bowen advises.
With respect to financing tactics for small-cap biotech companies, Bowen emphasized that timing is a “key-, often overlooked” factor. Stocks in this sector can be “highly volatile, with valuations that go up and down not only with the company’s news but also because of external macro-economic influences.” He emphasized that companies should work with experienced advisors who understand the sector so that companies can avoid the need to finance at inopportune times.
“There are the big names for advising companies and they have a lot of horsepower, but a big bank can be like setting loose a bull in a china shop,” said Bowen. “Yet a smaller niche bank with a stronger intellectual or scientific perspective might identify the most appropriate investors more readily.”
“I would encourage companies to consider an appropriate bank that knows the sector. And yes, that’s a plug for Rodman & Renshaw,” he concluded
Related Posts
No related posts.