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Ep. 7 Josh Schimmer: Science And Development Is A Business – A Relationship Business
59 Plays9 months ago
Josh Schimmer is the preeminent equity analyst in the biotech industry; he's seen the good, the bad, and the ugly. Join us as we dive deep into his experiences reviewing corporate decks, the consequence of a deck falling short and the missed opportunity for a relationship.
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Transcript
Introduction to Spark Time and its Mission
00:00:00
Speaker
Hi, everyone, and welcome to Spark Time. I'm Dani Stoltzfus. And I'm Will Riddle. Of Mighty Spark Communications. Our mission is to use scientific innovation to drive transformative change. We believe that compelling storytelling is the most effective tool we have in our arsenal to motivate and inspire audiences to invest themselves in audacious goals. We are scientists by training, storytellers by experience, and entrepreneurs by nature. Let's get started.
00:00:29
Speaker
So today we're sharing a very special experience.
Interview Focus: Trust in Biotech Relationships
00:00:32
Speaker
Will and I had the privilege of chatting with Josh Shimmer from Cantor Fitzgerald. First of all, Josh is an incredible source of knowledge and I always feel so energized after conversations like this one. It was truly a special experience.
00:00:45
Speaker
I especially enjoyed how we kept coming back to this one common theme and that is trust. Trust is such an important part of relationship building and he spent so much time detailing how to build trust and that feels like such valuable insight from someone who is at the very tippy top of the biotech analyst industry.
00:01:05
Speaker
Right. And I was particularly interested to hear how Josh thinks the trust in the relationship between investor and management teams really kicks off with the corporate deck, as well as the first conversation that goes with that deck. On that note, he did give very practical advice about what has to be communicated there. So what else were you interested in during today's conversation, Danny? The other theme that we touched upon a few times was time scarcity.
00:01:34
Speaker
We asked Josh for his thoughts on how to best use his time or investors' time generally.
00:01:39
Speaker
And the takeaway here was, well, actually I'm going to make you listen to find out. Well, exactly. And I think to cap this intro, the real nugget that Josh imparted to us was how building trust comes through and how the data is presented and how the time is spent between the investor and the management teams.
Who is Josh Shimmer?
00:01:59
Speaker
So a combination between trust and time well spent on the important ideas can lead directly to financing.
00:02:07
Speaker
So let's jump into it. Today we're joined by Dr. Josh Shimmer, who is currently managing director at Cantor Fitzgerald, where he focuses on healthcare and biotech equity research. Prior to Cantor, Josh worked at Evercore ISI, where he served as a senior managing director on Evercore's biotech research team with a primary focus on small, mid, and select large cap biotech companies.
00:02:28
Speaker
Josh has been the number one ranked analyst and institutional investors all-America research team for five consecutive years and runner-up in 2015 and 2016. Before his time at Evercore, he held positions at Piper Jaffrey, Lazar Capital Markets, Laring Partners, and Cohen & Company. Dr. Schimmer earned his MD with subspecialty training in internal medicine and rheumatology from the University of Toronto and an MBA from Harvard Business School. So like I said, welcome, Josh. We're delighted to have you here. How are you doing today?
00:02:56
Speaker
I'm great. How are you? Likewise. I'm doing well. Thanks, Josh. So I'd like to dive right in.
Josh's Journey from Medicine to Biotech Research
00:03:02
Speaker
Could you tell us about your journey to becoming a biotech analyst and what motivated you to take this path? Sure. It certainly wasn't where I expected to wind up. I started in internal medicine and rheumatology in Toronto, but realized that I wanted to be closer to innovation. I just really didn't know how to get there, so I went to business school.
00:03:25
Speaker
And then at the end of my business school training, I was looking around for potential jobs. It was quite frustrating since I was either overqualified or underqualified for most of the opportunities. So I kind of stumbled into biotech equity research, thanks to a fortuitous introduction by a business school friend and classmate to an analyst at Deutsche Bank, and as they say, the rest is history. That business school friend is Rod Wong,
00:03:51
Speaker
eventually went on to found RTW, one of the biggest life science investment funds. Honestly, I'm not sure where I'd be today if it were not for that one connection that he made for me a couple of decades back. Yes, very fortuitous. Yeah, that's awesome. I very much understand the feeling of stumbling into a career path.
Crafting an Effective Corporate Deck
00:04:10
Speaker
The world of equity research is just fascinating, so really looking forward to hearing more about that.
00:04:16
Speaker
I want to begin with asking you a question about what we like to call the good, the bad, and the ugly when it comes to corporate decks. No doubt in your role, you've seen everything. And if you had to give people advice that we're presenting, what were the three things you definitely want to see in a deck? And what are the three mistakes that people make that just make their pitch fall flat and not very convincing?
00:04:37
Speaker
Sure. I think an important place to start is recognizing that every company, every story is different. Every company is in a different therapeutic category at a different stage of development with a different pipeline. Just like every company is different, so is every potential prospective investor.
00:04:55
Speaker
Some investors have deep science backgrounds, some have deep medical backgrounds, some have deep finance backgrounds, some have none of those. Trying to craft a deck for a company to capture the interest of all those different potential readers is challenging, but in general,
00:05:16
Speaker
What I want to see in a corporate deck is everything I need to know to make at least a reasonably formed investment decision for that specific company or decide if it's something that I really want to learn more about. For me, the single most important quality in a corporate deck
00:05:35
Speaker
is that it should be easy to read, easy to follow. Each slide should lead into the next slide in a clear and crisp narrative. Complex topics should be explained with basic language that doesn't require a PhD to understand. Even someone with just a basic science background should be able to follow the narrative of a good deck.
00:05:58
Speaker
If the slides are easy to read and they're well crafted, there really isn't a limitation on how many slides there should be. The deck tells the story. Capture my interest as an investor. If it's an easy and interesting read and I'm learning as I go through, I'm happy to take the time to read.
00:06:18
Speaker
It should also have the things that, as a prospective investor, I might be concerned about. What I really don't like is finding important data points that have been buried in 10Ks or other SEC filings or journal publications where there's a lot, a little print, and you have to go through nuances and the details. I don't want to be surprised to find out
00:06:46
Speaker
There are 200 million warrants outstanding for a company because it wasn't flagged in the corporate deck. I don't want to be surprised that a trial actually failed its primary endpoint or had an inverse dose response because that information wasn't in the corporate deck.
Learning from Unsuccessful Pitches
00:07:01
Speaker
I don't want to be surprised that the IP on the product expires in the next five to seven years because it wasn't included in the corporate deck.
00:07:09
Speaker
It's not just a way to communicate the story of a company. It's also the beginning of the foundation of trust. What a company is telling me is fair, balanced, and not cherry picking just the information that a company hopes I'm going to focus on to garner the best valuation
00:07:33
Speaker
while brushing important facts and information under a rug in the hopes that I'm not going to find out. As much as we're in the science and development and innovation business, it's also a relationship business and that trust factor starts in my mind at the corporate deck.
00:07:58
Speaker
Absolutely. I want to follow on from what you're saying about building that relationship. We know that investors have these long memories and for good reason, they put a lot of money into the companies. So when the team is not so convincing in their pitch or they're not looking successful, maybe something like what you just described happens where they're
00:08:20
Speaker
brushing information under the rug. Can the management team recover and come back to that investor? Or do you think it's better to just invest time in new audiences? How is that relationship changed by that?
00:08:33
Speaker
At the end of the day, there's just a finite pool of investors that companies will talk to. I think it's always pertinent to continually cast fairly large nets, including investors who might have heard the story previously. Sometimes it just takes a few iterations with a company to start to get comfortable, to start to drive interest.
00:08:55
Speaker
The reality is that that first meeting sets the tone. If there's interest, it's likely going to be obvious and the investor will be keen to follow up.
00:09:10
Speaker
If it didn't resonate, then I think it'll be apparent in an investor's lack of interest in subsequent meetings. Again, it's always very nuanced. I think one of the best ways to figure out is that
00:09:31
Speaker
Is it worth additional follow-up in addition to directly asking? It's asking other questions about whether the presentation was clear, whether there are any areas that could have been presented better or areas that weren't resonating that could be clarified. So that's a good way to kind of figure out whether it's worth having any follow-up.
00:09:58
Speaker
Sometimes the reality is that the first pitch is so poor that it becomes a real turnoff.
00:10:11
Speaker
I've certainly had that in my own experience. Presentations that I felt were just so poorly done and poorly crafted that I really just didn't want to spend any more time with the company. But even on occasion with those companies, give it a few months to cool off and try another shot.
00:10:31
Speaker
But I think the reality is that if it didn't resonate the first time, something has to be done different the second time, whether things need to be explained more clearly, or sometimes the story just needs to evolve more with additional data being generated for it to resonate. So I don't think you ever really give up on any prospective investor. You're always looking for both
00:10:59
Speaker
new investors who've never heard the story and ones that have that you can continue to hone the narrative for. Josh, that was really interesting and it really sets up my next question really well and the topic that I want to dive into with you. I want to also circle back to trust because Will and I speak so much about trust and that's one of the core tenants of our company, Mighty Spark.
00:11:27
Speaker
We really believe that together as a team, as communicators, we're stronger and that it takes a village to bring scientific innovation forward to fuel transformative change.
Establishing Trust with Investors and Management Teams
00:11:39
Speaker
And we hear from some leaders that they really value working with investors that they trust and that have the ability to add value to their company.
00:11:49
Speaker
and help solve the problems that the leadership teams face. And, you know, based upon, you know, the conversation we've had so far, it seems to me that you also would feel that, you know, that ability to communicate with between leadership teams and investors and build that relationship and that trust is going to be really critical in a leadership team's success. Could you speak to that at all?
00:12:15
Speaker
I think biotech investors are some of the smartest people around, but they obviously don't all think alike. They don't always agree on the same thing. I think one of the most interesting dynamics of our industry is that you can
00:12:30
Speaker
put 50 investors in a room all looking at the exact same company and you're gonna wind up with 50 completely different perspectives on that investment opportunity. Everyone brings their own beliefs, their own assumptions, their own expectations, perspectives, and agendas.
00:12:46
Speaker
Those can be incredibly valuable, but they can also be paralyzing or worse. At times, they can be destructive to the interests of the company. None of us know the future. We're just making our best guesses in terms of what's going to happen.
00:13:04
Speaker
best estimates of the optimal strategy. While taking advice, listening to feedback, it's absolutely imperative. At the very least, for making investors feel like their views are being valued. I know when I talk to a company and feel like my thoughts and input are being valued, I have an even closer connection, affiliation for that company. I start to feel a little bit more invested
00:13:34
Speaker
in it and more appreciated. At the very least for that benefit, but also to hear different perspectives and different approaches to ultimately guide the management team to make the right decisions for the right reasons. The underlying reality here is that no one
00:13:54
Speaker
No one's perfect, no one can predict the future. Even the best intentioned investors, the best intention management teams can make mistakes, can get things wrong.
00:14:09
Speaker
Ultimately, if you've had the right communication along the way, the hope is that through the ups and downs, you'll still have loyal investors with the company supporting the evolution as long as there's still a hope, as long as there's still promise in the platform and the products to invest in. That trust, that relationship, that longevity, again, is just a continual building
00:14:39
Speaker
process for companies, investors, and analysts. I talk as an investor, but I'm a biotech analyst who tries to advise investors and companies.
00:14:50
Speaker
Yes, that is great and balanced perspective. Thanks for sharing that, Josh. Maybe we can talk now about how companies in competitive spaces are communicating their stories. I'm curious what you think is working and what doesn't work in communicating their narratives.
Balancing Company Strengths and Respectful Competition
00:15:08
Speaker
We find that a lot of people want to use the descriptors first, best, and only. For example, is that a red flag? Are there better strategies when you're in these competitive spaces? What do you think?
00:15:20
Speaker
Oh, it's a great question, great topic. It's a very gray zone with black and white boundaries, I would say. The reality is that more than ever, companies find themselves in competitive dynamics with either similar programs or different modalities.
00:15:45
Speaker
wind up having to position themselves with investors to try to highlight the merits of their product and why of all the different options out there, their company, their product is one worth investing in.
00:16:00
Speaker
There are some fine lines here. It can be uncomfortable when companies stretch a little too far to throw in cash shade on competitors and highlight defects or defaults or shortcomings of other programs, especially if it's a little bit more speculative.
00:16:23
Speaker
We always like data-driven approaches and just the facts and helping understand how different products for an education might compare. Again, we don't like to see companies cherry-picking in this process.
00:16:40
Speaker
To your point, ours is the best, the one, the only, et cetera. If that's true, then a company should be able to fairly clearly illustrate that in basic charts, graphs, and tables. But when they have to cherry pick their way to that conclusion, again, you've not only negatively impacted the trust factor,
00:17:06
Speaker
I think you've actually gone in the other direction. You've actually become disastrous and distrustful. Some companies choose to just completely ignore the competitive landscape. I understand that, where they're coming from. They're just trying to stay in their own swim lane.
00:17:26
Speaker
On the other hand, as an investor, it is important to have a clear sense of the competitive dynamics and who else is out there and what other products we should be focused on and ultimately thinking about maybe how markets may split across different modalities.
00:17:46
Speaker
prefer the settings where companies say, look, this is a large unmet medical need. There are a lot of patients where we're hopeful for all the competitors to succeed, to bring options to patients. These are the merits that we think our investors should consider.
00:18:06
Speaker
our specific program and the ones who do that to me are saying a few things. Number one, they're acknowledging competitive dynamics and competitive playing fields which is important. They're acknowledging the unmet need of patients and the mission why we're all supposed to be here is for the patients to provide them options and improve the standard of care.
00:18:31
Speaker
And then also recognizing that different patients or physicians may have different preferences for the treatment modality that they provide for patients. And so to me, that's the optimal way of addressing competitive dynamics or companies without
00:18:51
Speaker
feeling like one company is stepping on other company's toes, but also while acknowledging that the competitive dynamics do exist. Yes. Golden advice.
00:19:02
Speaker
Yeah, I really love that perspective. It feels so generous and warm-hearted as the words that spring to mind right now. If I could just add on this point, I think what companies sometimes fail to appreciate is that the more companies are kind of pointing fingers at each other, highlighting the shortcomings of the alternative competitive player
00:19:27
Speaker
the more investors just get scared off from everyone. And I see this time and time again where two or more companies are kind of battling out in fairly public ways. Investors kind of get confused. They lose sight of the big picture, which is there's a very important unmet medical need here. There are enough sick patients for multiple companies to
00:19:54
Speaker
to bring forth therapies to serve those populations, but because they get dragged down into these competitive battles, neither company sees fair value ascribed because investors are too preoccupied taking the winner as opposed to realizing that there can be multiple winners.
00:20:20
Speaker
Yeah. So everyone loses in that dynamic, unfortunately. And so it's a bit of an art in terms of managing those kind of those competitor conversations. The other thing to note is that companies may feel comfortable making comments about competitor programs behind closed doors with investors and meetings feeling like that's
00:20:52
Speaker
It's going to be more contained and confined, but invariably, those conversations do start to leak out. These do have the same effect. Having a consistent message about, again, the brought up unmet needs, focusing on the patients, plenty of room for plenty of companies to strive in the disease category, I think is important.
00:21:13
Speaker
So true, so true. And we don't want to see anyone losing, that's for sure. I think the fact that there is so many unmet needs and so many people trying to find solutions that there's got to be space for everyone to get there and really benefit the patients that are suffering. So I really love the way that you spoke about
Evolving Biotech Communication Strategies
00:21:29
Speaker
that. So thank you so much, Josh. I now want to kind of switch topics a little bit because
00:21:35
Speaker
We've spent a lot of time talking about what works and what doesn't in terms of communication. Obviously, you're a forerunner analyst in this space. Everyone knows you're like a household name in biotech. I want to ask you now, do you think there needs to be an evolution in the way that we biotech companies communicate their value proposition, given what you just said about thinking how to communicate
00:22:01
Speaker
around competition? Should there just be a different way that we approach communication in general? Well, first, thank you for the compliment. Very flattering and probably considerably overstated. It's a really interesting question. Biotech is changing and so should the communication be changing alongside it?
00:22:26
Speaker
Even the forums of communication are changing, and yet we still seem to generally revert to these standard, somewhat antiquated PowerPoint presentations. I think because for now they're still fairly efficient way to communicate a story. That said, I love those one to two minute biology videos.
00:22:49
Speaker
The ones that make you feel like you're right in a cell when you're watching the action medicine. What a unique and powerful mode of communication to express what's otherwise very difficult biology. I know that this requires some investment. I can't imagine how those are made, but I do really enjoy those.
00:23:14
Speaker
So then, you know, the form of communication or, you know, we're seeing podcasts and other venues. To some extent, there's like just an overload of information that we're trying to navigate through. And so that probably gets to want to, again, like an important area in which we should think about evolution. And that's figuring out time efficiency.
00:23:40
Speaker
How do we factor and present as much information in this concise and yet still digestible way, recognizing that while drowning in information, it's so hard to keep track of it all.
00:23:56
Speaker
And I think another trend that we're seeing that is worth considering is companies now more than ever will give updates of clinical development programs as they're evolving. What I mean is here's three patients of data treated for three months and then come back in six months and there'll now be six patients of data of which three patients are at six months, et cetera.
00:24:24
Speaker
It can be very challenging to figure out what's new, what's coaching. I think companies often lose sight of how difficult it is for us to keep track and tabs on everything. We have our notes and we do our best to try to figure out what's new, what's not new. I really appreciate when companies or their IR groups send out an email that
00:24:50
Speaker
very clearly indicates what's different from the last update. Because that's really what we're always trying to figure out. What did we learn that's new? And sometimes it would be very hard to...
00:25:04
Speaker
to sort through that in a time efficient manner. So time is all our scarce asset. And with more and more information to absorb, finding ways for that, little tweaks like that to improve our productivity is very valuable. Science is more complex than it's ever been.
00:25:30
Speaker
Very true. I would say investor's ability to understand the science is more heterogeneous than it's ever been. I see this again in corporate decks and one of the earlier questions, where do decks fall apart?
00:25:49
Speaker
too complex, too convoluted, too much scientific jargon, too many acronyms, right? Stories that are told for the super specialist but don't evolve for a more generalist life science investor.
00:26:06
Speaker
So I think finding ways to simplify the science, it doesn't mean you don't explain it because it's too complex. You just explain it in more simple terms. Trials themselves, the same thing. There are more details. There's more nuances to trials in phase one and phase two. There are more things to analyze and measure than we've ever had before.
00:26:34
Speaker
And again, just looking for the concise ways to present the information in a clear, readable form without omitting key data points, without, you know, again, another little source of frustration I find are these long side effect tables.
The Role of Transparency in Biotech Communication
00:26:55
Speaker
Like trying to figure out what...
00:26:57
Speaker
This is like a little sensory overload when I'm looking at all these numbers and all these descriptions. I'm just trying to figure out what matters. Help us understand what matters. Do so in a genuine way. Again, the point about partnership
00:27:15
Speaker
the point about trust, those dynamics are so important for ensuring the smooth process of innovation and the financing of it and how investors perceive companies and work with companies and stick with companies
00:27:39
Speaker
Not necessarily until the end of time, but until a company has had an adequate chance to prosecute the science and figure out if there really is something here that is going to have value to patients, and then overlaying that on top of
00:27:56
Speaker
you know, where we were before, 100 investors in the same room walking away with 100 different perspectives. Somehow it all works. And somehow in the midst of it, trust, transparency, communication are so core. Absolutely agree 100%. So Josh, if you could give one piece of advice to the management teams of an early stage biotech company, what would that be? One piece of advice.
00:28:24
Speaker
still trust. Yeah, I think that captures perfectly this conversation. Yeah, it's all about trust. Awesome. Well, Josh, it's been such a pleasure and such a delightful conversation. So thank you so much for joining Spark Time. Thanks for inviting me. Awesome. So much wisdom from Josh today. One of my favorite points was that anyone investing in a company should not need a PhD to understand that corporate story. To quote him directly,
00:28:50
Speaker
Science is more complicated than ever, and investors' ability to understand the science is more heterogeneous than ever. I think that's very true. And a management team has a finite amount of time to ensure as many people respond to that message as possible, as well as invest themselves in that message. What was your favorite takeaway, Danny?
00:29:10
Speaker
First of all, following on from what you just said, think about how daunting that prospect could feel if you're in the management team, that people in the audience are so diverse, and how do you capture everyone's attention? One solution that I really like that Josh proposed, and we're also big proponents of, is to use visuals like video and animation to explain detailed concepts, or at the very least, good scientific illustration.
00:29:37
Speaker
It really translates the ever increasing complexity of science in the most universal way. As to my favorite takeaway, it was probably that a corporate deck is the tool upon which you build a foundation of trust. Equally compelling was show the good, but don't hide the bad. That also feeds into the idea that the deck is where the relationship begins and the trust grows from.
00:30:03
Speaker
Yeah, I like this perspective about competition. And he said to always keep the major goal in mind to provide for an unmet medical need. And couched in that way, it becomes immediately apparent that finger pointing at competitors data, as Josh said, especially in a speculative manner doesn't do anyone any favors. So
00:30:24
Speaker
respect the competition, hope for the best for everyone, especially the patients, and make a case for your program on its merits. And that will get people to turn their heads your way.
00:30:35
Speaker
Yeah, that's so true. And another way to handle competitive spaces is to have thought about how your solution will lay on top of and be complementary to the other solutions that are already out there and that others are developing. That negates the need to point fingers and it demonstrates the debt of the strategic thinking that has gone into your own development strategy and pathway and it puts you in a position of strength.
00:31:00
Speaker
Yeah, it really does. That's a great point. And to continue off the point, Josh mentioned that that finger pointing can ultimately lead to investors getting scared off of the space if there are enough competitors doing it. And then the unmet medical need gets sidetracked because of it. And obviously, that's the result that no one wants.
Podcast Wrap-Up and Future Invitations
00:31:20
Speaker
Absolutely. So join us next time as we talk about powering scientific innovation with storytelling to drive transformative change so that we can solve our most demanding challenges.