Why social media is the IR prescription for biotech, pharma

Social media can play a crucial role helping biotech companies develop two-way communications with important stakeholder groups. But that doesn't mean they should just dive in.

Social media is clearly better for some things than others. There are specific ways that it works well in the world of investor relations, especially for biotech and pharmaceutical companies, where the emphasis is on basic research and the spirit can't help but be entrepreneurial.

But just because something is in the air – literally everywhere you turn – doesn't mean it's easy to do it the right way or that it should be done at every turn.

In this regard, the recent SEC advisory recognizing social media as an acceptable investor relations tool is an enlightening development.

Companies that previously shied away from social media either because they did not understand it, did not trust it, did not think it effective, or were concerned about violating SEC rulings, might be tempted to just plunge in, now that the SEC has essentially given its blessing to social media. That might be a mistake. How social media can be used successfully for biotech and pharma companies illustrates why.

There is a difference between the dissemination of information and the building of communities. The former is a broadcast activity; the latter is what social media is all about.

Companies with a sound social media strategy will continue to make their important corporate announcements by disseminating information through the newswires and widely read traditional media outlets. By using these traditional means, companies can adhere to SEC requirements, still in effect, that all stockholders and potential stockholders have equal access to critical information.

Social media has a supplementary and possibly more important role. Its expertise is the building of communities with a focus, sometimes with lightning speed, where information is exchanged in rapid fashion among the participants. Communities create awareness and find stakeholders. A stakeholder is anyone with an interest in the successful use of what a company has to offer. It's easy to understand why biotech and pharma companies naturally have so many stakeholders – anyone in need of a treatment or therapy better than what's currently available.

The community of stakeholders grows wider when you consider that it includes not only those suffering from certain conditions, their families and loved ones, and the medical world itself,  but also those who have the condition but may not know it yet. To the extent that new medical research, especially in the biotech area, promises more efficient, less expensive medical approaches to diseases, we all become stakeholders in any product, service, or methodology that might reduce the rising cost of healthcare, nearly 20% of GDP.

Over time, the stakeholder buzz created by social media communities can influence stockholder actions, and create new stockholders. In the current, data-driven environment where billions of people carry mobile devices with communications capabilities and processing power unimaginable only a few years ago, social media becomes a necessary part of any investor relations strategy.

Beyond that, biotech and pharma companies, naturally entrepreneurial, restore the traditional relationship between Wall Street and Main Street that many investors have come to distrust. Stockholder support is crucial to the life of these companies and the therapies and treatments they are trying to bring to life. Thus, the relationship between stakeholders and stockholders is bi-directional; social media plays a crucial role.

The recent FDA Breakthrough Designation, which outlines a more rapid approval path for drugs that can demonstrate they deal with matters of life and death, serves as further recognition and endorsement.

Jeff Ramson is CEO and founder of ProActive Capital Group.

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