That’s true, says Eric Le Berrigaud, the Raymond James analyst covering Innate with his colleague, Thierry Verrecchia. Innate Pharma came to Le Berrigaud’s attention after Novo Nordisk — a big Danish pharma he also covers — took a 20% stake in the company at the IPO. (Novo Nordisk has collaborated with Innate Pharma since 2003 and entered into a €25m deal in 2006 to develop new drugs targetting natural killer cells.) “The IPO meeting was very close to the office so I decided to go just to understand what they were doing and why Novo Nordisk was interested in the company,” says Le Berrigaud. The analysts wanted to know more about the technology Innate was using and because, as a small cap, it would not take up much time, Le Berrigaud and Verrecchia decided to initiate coverage. “Unfortunately, the stock price has not gone in the right direction but well, that’s life,” says Le Berrigaud. After floating at €4.50, the share price has slid to around €1.90. Boissel thinks the stock price is due to the poor market conditions experienced since the summer but Le Berrigaud reckons there’s more to it. He says, “2007 was a year free of any announcement and it’s hard for a small-cap firm to perform without any news flow.” Some big investors have bailed out and in France, where the biotech sector is not mature, it’s hard to get smaller, risk-averse investors interested.
So what’s in it for Le Berrigaud? “It’s hard to stop coverage with no reason other than economics,” he says. “Today, would we make the same decision to cover the stock? I’m not sure.” That said, both he and Verrecchia still believe in Innate’s work and, although they are unhappy about the share price, they’re willing to continue coverage until the first clinical data is available this summer. If the data doesn’t deliver, they’ll feel happier about dropping coverage. “Until then, let’s give them a chance to prove that they’re a good company with good management,” Le Berrigaud says.
What can Boissel do to avoid being dropped by Raymond James? Probably not much more on the IR front. The key to any analyst-company relationship is trust. “This is not something you can build overnight. It’s something that you have to build over the long term by being transparent, clearly explaining how you intend to deliver, and then delivering,” says Boissel. Transparency and explanations are not a problem — Le Berrigaud says Innate is “above average” at communicating. Delivery is another matter.
Eila Rana is senior editor at CFO Europe.