Shire Pharmaceuticals is rising high – from nowhere to the FTSE 100 within a couple of years of going public. Investors and analysts attribute at least part of its continuing rise to the assiduous IR of Cla Rosenfeld, whose cosmopolitan background equips her well for the far-flung stockholder base of the company.
French, educated in Switzerland, and a management trainee in New York, she launched into IR by joining Technimetrics four years ago, and stayed when Technimetrics was acquired by Thomson Financial. There she was in sales and marketing, mostly for Scandinavian and FTSE 100 companies. ‘But very soon I began looking to the IR world. I wanted to get into an in-house position, and my preference was the pharmaceuticals industry. Telecoms would have been very challenging, but the pharma sector was my main preference,’ she recounts.
So she was excited last year when she saw a small ad in the Financial Times seeking an IRO for Shire – ‘a small company then but fast growing and fast moving.’ She was even more excited when CFO Angus Russell and CEO Rolf Stahel picked her to handle global IR in May 2000. That globality was no empty promise since the company is listed both in London and on Nasdaq, with the US side accounting for over half the shares.
Russell and Stahel are very investor focused but they had a company to build and were struggling to make time for proactive IR. ‘There wasn’t really a targeting process or prioritization of the type of investors they were going to see, so management’s time was not always appropriately allocated.’ That may have worked in the early days, but management agreed with her that it could not carry on and supported her efforts to strategize. The announced merger with Canada’s BioChem Pharma in December 2000 increased the urgency.
Reflecting her professional background, Rosenfeld immediately cast the IR strategy in marketing terms. The company had to be sold to investors in Europe, not least since the 65 percent US holding on the antsy Nasdaq created tremendous volatility while reducing liquidity for the ordinaries in London. ‘It was very difficult for British and Europeans to get into our stock. So part of the strategy was to shift that to a more balanced proportion – around 50/50.’
Shire’s target for investors was long-term institutional, preferably growth. ‘When I began last May the mix was different, but we have been very proactive and, with Merrill Lynch’s help, we have put management in front of the right investors, and they bought quite quickly.’
The efforts to rebalance the center of investor gravity to Europe were helped in November when Shire joined the FTSE 100 at 84th place, which brought in UK index trackers who, even if not as numerous as their American brethren, were enough to increase London volumes. Generally LSE volume is 2-4 mn shares a day. ‘Not bad,’ Rosenfeld ponders. And enough to resolve the liquidity problem she had identified. Currently Italian investors are showing plenty of interest, joining others from Germany, Spain, France and even Scandinavia.
At present retail holdings are very small, below the level worth identifying, and there are no specific plans to attract more. However, Rosenfeld is impressed with Nokia’s retail targeting and has been thinking that once the merger and its attendant hedge funds are behind her, she may return to the issue. She recognizes the differences, though: Nokia also uses its retail campaign to build brand loyalty, and it’s easier to do that for cell phones than it is for Alzheimer treatments. However, she is interested in using ownership to reduce volatility, with which the arbitrageurs have so recently overdosed the stock (see sidebar, Big deal).
Rosenfeld watches the stock like a nurse tending a patient in intensive care, using her old firm Thomson Financial/Carson for daily market surveillance, augmented by information from corporate brokers like Merrill Lynch in London and Bear Sterns in the US. ‘I need to keep on top of those hedge funds, and I need to ensure that I don’t have any institutional selling. Effectively those guys are our clients, and losing an institutional client is losing an account.’
Rumor mill
Once again, Rosenfeld’s choice of image reflects her marketing experience, which also sharpens her proactive approach. ‘You can’t stop institutions selling, but you can make sure they are being communicated with properly. You don’t want long-term investors to sell because bearish rumors have sent the stock plummeting.’ During one recent week, just such rumors were growling around, causing her to call the 17 analysts covering Shire as well as the company’s key investors to put them right.
The success of such strategy depends on existing good relationships – a company with strained IR could well find it spreads rather than cures the bear syndrome. And, Rosenfeld adds engagingly, ‘Any opportunity to call the analysts is good – they are our clients as well. And these guys are very knowledgeable. We communicate with them either on a conference call or on a one-to-one. I ask them if they have heard what’s flying around, and then respond with the Shire view. They then pass on the story to their trading desks and on to their clients.’ She concludes, ‘I am very lucky with Shire – people are very generous in guiding us.’
Corporate communications and IR need to liaise constantly, and in Rosenfeld’s case full cooperation is assured since she handles both functions. She does use outside help, however, in the form of PR agencies BSMG in the US and Financial Dynamics in the UK. ‘It keeps me very busy, but the job is very IR focused,’ she testifies. ‘Communication with the press is very important and we have a lot of time for them. The trade press like Scrip and the Pink Sheet are very important; they know about the key issues.’ Rosenfeld’s assistant, Anne Sallis, helps with corporate communications as well as internal communications and the annual report, and she provides support in other roles as well.
For a more direct approach to investors Shire brings visitors to its headquarters in Basingstoke, outside London. The CEO, CFO and group head of R&D Wilson Totten form the vanguard of the IR presentations. ‘We’re lucky – all of them have tremendous charisma,’ Rosenfeld comments.
Since the company’s accounts are prepared in accordance with US Gaap, there are no difficulties with US investors or Nasdaq, right down to the quarterly meetings Rosenfeld webcasts. And she declares firmly, ‘Of course we have no issues with Reg FD since we always ensure that we are in compliance.’ Which is just as well since 80 percent of Shire’s revenue is from the US. The strong dollar has meant few, if any, currency issues – though this may change with the merger with the more Euro-based BioChem.
But any such issues will be dwarfed by the company’s impressive track record. It is easy to accentuate the positive in IR when you have a lot of positive to accentuate. And Shire does. ‘Analysts like us being a specialty pharma – very focused. We don’t need a big sales force since they can all be trained in our four therapeutics areas – central nervous system disorders, metabolic diseases, oncology and gastroenterology.’ As a result, last year, Shire had one of the highest revenue-to-employee ratios, at $500,000 – ‘something that investors absolutely loved.’
In the know
Of course, the analysts and many investors covering Shire are usually pharmaceuticals specialists, and even those who aren’t specialists have an extensive knowledge of the mechanics of the industry. Rosenfeld finds the tight focus of the company helps her understand developments and explain them to others. ‘It’s a small niche, but a very good market, and I am surrounded by doctors – so I know about what analysts and investors are looking for.’
In this specialized area, there is less weariness with sell-side research than there is in some more broad-based sectors. And Rosenfeld can testify to its effects on investors. Last year CFSB downgraded Shire to a hold and the stock plummeted. But just after she joined, Merrill Lynch said buy and the stock went up 7 percent. ‘So the sell side does have a tremendous impact.’
After a year on the job, Rosenfeld is still excited about being at the sharp end of investor relations ‘interacting with very bright people.’ She regrets she hasn’t interacted more with other IR people, although she’s now joining the UK’s Investor Relations Society to solve that problem.
When she does meet other IROs at investor conferences she is happy to exchange ideas. ‘You can learn a lot from picking the brains of others,’ she admits candidly. But mostly she’s learned through experience. ‘Since I came to Shire, I’ve had a management crisis, along with a very complicated merger deal, and the launch of a product with the submissions and the approval.’
Not all IROs see their profession as a marketing one, but Rosenfeld has no such inhibitions. ‘IR is so interesting, so varied, and I manage to keep up my marketing skills, because it is effectively selling the story to investors and analysts.’ However, she also touches upon the aspect of IR that brings out the renaissance person in so many practitioners. ‘I get to learn so much inside an interesting and exciting industry. You feel that you’re in the center of the action, that you have great input into the company.
‘And you learn on a constant basis, inside and outside the company.’ And that indubitably sums up IR job satisfaction for so many practitioners – mood enhancing without popping a pill.
Big deal
Shire’s merger with Canada’s BioChem Pharma presented some major investor relations challenges. The deal structure, based on an average of closing share prices over 15 days and ending three trading days before completion of the deal, created a happy hunting ground for arbitrageurs. ‘It’s scary when these guys get into the stock,’ IRO Cléa Rosenfeld says of her baptism by fire. ‘The arbitrageurs and hedge funds long BioChem and short Shire, effectively to drag our share price down so Shire would have to issue as many shares as possible. The arbs calculate their ratio on the pricing period, so it is important for them to know when we will close the deal.’
When it was announced that the deal was likely to be held up by Industry Canada, for example, Rosenfeld found herself handling calls from denizens of the investment world who IROs do not usually meet except in their nightmares. As she says with some insouciance, ‘Hedge funds could lose a lot of money so they phoned us all the time. They were panicking.’ All that activity drove the price down, increasing the trading volumes to levels that deterred some of the more desirable institutions from getting into the stock.
What the analysts say:
Nigel Barnes, Merrill Lynch
‘Cla Rosenfeld is very knowledgeable about the business, and conveys the relevant information well,’ considers Barnes. ‘She’s very approachable, very helpful, and very responsive, and she facilitates a broader understanding of what Shire is all about. If Cla doesn’t know the answer to a question she will not mislead or have a stab at it herself; she’ll go away and seek the right person to give an informed answer.’
Jonathan Senior, Credit Suisse First Boston
‘Rosenfeld is excellent,’ Senior concurs. ‘Shire’s IR department is proactive and certainly the best we deal with. Cla always tries to get us the right information in a very timely fashion, which is the most important thing from our perspective, and she gets access to the right people in the company when we need it. She doesn’t just try to palm you off with duff information or a glib answer.’
David Steinberg, Deutsche Bank
‘Shire has a more difficult job than most companies because their stock is owned in so many different countries, with its dual listing, large stock ownership in the US and UK and emerging ownership in Europe. The fact that they are well thought of is even more impressive given that they have so many time zones to deal with. They are very good at keeping investors and analysts in touch with developments in the company and presenting information in a user-friendly format. They are very good at keeping us up-to-date with key scientific papers relevant to their products. They also did a nice job last year hosting investors and analysts at the world Alzheimer’s conference.
