By Sally Burn, PhD
In this week’s edition of “So You Want to Be a…”, we turn to the financial side of science and find out about a career in biotechnology equity research from Raluca Pancratov. Raluca completed her PhD in pharmacology at NYU School of Medicine, before transferring her analytical skills to the fast-paced world of equity research. Read on to find out if this is the post-PhD career for you!
Hi Raluca! So, what exactly does an Equity Research Associate do?
An equity (stock) research associate analyst typically works for large Wall Street investment banks or boutique investment research firms. The associate’s role is to support the senior analyst’s stock recommendations (buy, sell, hold) for investor clients. These can include pension and mutual fund managers, as well as hedge fund managers. Research analysts forecast whether a stock will go up or down and by how much, based on the commercial outlook of the analyzed companies. For biopharma companies, stock performance is often linked to the success of drugs in the clinic and on the market. Given the complexities of the drug development process, advanced degree holders such as science PhDs and MDs are well-positioned to understand clinical data and predict the likelihood of clinical success. A good portion of the work is keeping up to date with the newsflow (scientific, clinical, regulatory, or commercial), which influences day-to-day (and sometimes minute-by-minute) stock value. Estimating the value of a stock entails analyses of financial statements and forecasting the company’s sales and expenses.
How did you get to where you are now?
I have always been fascinated by drug development and my PhD mentor cultivated a “bench-to-bedside” mentality in the lab. I also enjoyed working on a translational project. I learned about investment research at one of the many “What can you be with a PhD?” career fairs that I attended (organized by the great team at NYU School of Medicine), where alumni from my graduate program described this type of niche position within finance. I remember thinking “Ah, I could do that!” and proceeded to read as much as possible about the biopharma sector and enroll in finance classes at the NYU School of Continuing and Professional studies. In addition, I conducted numerous informational interviews with professionals in equity research and educated myself on financial modelling. I got my first job through alumni referral, and was fortunate to encounter terrific mentors that trained me how to think about strategy and market “sentiment” driving stocks up and down.
What are the key skills needed for this job, and did you develop any of them during your PhD?
First, equity research requires analytical abilities, which I honed during my PhD, designing and troubleshooting experiments. Second, the finished product of an equity analyst is a written note or report, distributed to investor clients. Therefore, written communication skills are of utmost importance. While I wrote papers, reports, proposals, and a thesis during my PhD, their style is very different from the succinct and to-the-point communications required for the equity analyst job, so I had to adapt my writing style. Lastly, I am grateful to my PhD advisor for extensive training on the ins and outs of PowerPoint and delivering presentations, which came in handy in equity research.
What would be your advice to a PhD wanting a job similar to yours?
For scientists interested in a career in finance, I would advise reading as much as possible about the current therapeutic landscape and the biopharma industry players, and keeping up to date with translational and medical newsflow. I remember my undergrad colleagues majoring in social sciences spending a lot of time taking classes on designing effective surveys. In retrospect, I wish I had taken some of those courses and I recommend STEM scientists focus on this type of research method. I also advise trying to learn as much as possible about finance and accounting, perhaps by taking advantage of local course offerings in these fields. Some universities have access to published equity research through the local library – I would strongly suggest reading as many reports as possible, in order to become familiar with the writing style and structure of the different investment communications.
What are three things you do on a typical day?
On a typical day, equity analysts wake up to news from the European markets and U.S. market press releases begin to trickle in at 7.00am ET, so they need to digest a large volume of information, assess impact to covered stocks, and evaluate if financial estimates will be adjusted. News of a drug succeeding in a Phase III clinical trial may translate into adjustments of the drug’s probability of success. Second, equity analysts spend a lot of time on the phone, pitching and discussing investment ideas to investor clients. Third, equity analysts also coordinate multiple diligence projects, pertaining to products/clinical trials of covered companies or to companies considered for future coverage.
What are your favorite – and least favorite – parts of the job?
I enjoy reading and analyzing novel drugs and therapeutic modalities, and learning about the forefront of medicine. There is a great feeling of satisfaction when a prediction or forecast is accurate, when value creating events such as successful drug development are in line with the analyst’s expectations. I also enjoy attending medical conferences in fields as varied as oncology or rare disorders, and getting to know where the field is headed and what the upcoming research directions are. My least favorite part is the constant “on call” feeling, as key news can be announced any minute (including late at night), and the work required to react to major announcements can derail a day’s schedule.
Is there anything you miss about academia? What was the most challenging aspect of moving from the bench to equity research?”
Sometimes, the answer to a molecular question can only be found by experimental means (e.g. which strategy is most effective, targeting PD-1, PD-L1, or both in cancer?) and I miss not having the means to answer it directly. I was told before I started that equity research is an effort-intensive job, and believed it would be comparable to lab research (especially paper resubmission season). However, the pace of work is more comparable to the feeling during preparation for an important lab meeting or department presentation. Except for that is the feeling every day on the job.
How do you see your field developing over the next ten years?
Biotech and pharma equity research remain niche areas within finance, and the need for freshly-minted PhDs fluctuates greatly. During the recent biotech boom (2012-2015), hundreds of new companies became public, prompting multiple financial institutions to hire more biotech analysts as coverage universes became too big for a single team to manage. However, with more and more analysts covering the same stocks, client revenue is gradually directed at the minority who conduct the highest quality and most differentiated analyses. Over the next ten years I predict a lingering need for specialized professionals to analyze drug data, thereby predicting stock moves. However, in the social media/digital era, many analysts may have to reinvent themselves and the methods they use to reach clients and deliver the results of their analyses.
What kind of jobs does someone in your position move on to?
The most straightforward transition is promotion from the associate to the analyst position. To employ an academic analogy, analysts are similar to PIs, deciding on which companies to cover and what the course of the franchise should be, while associates are similar to postdocs, executing most of the analytical work to support such recommendations. Alternatively, associates may go on to work for the so-called “buy side”, investment managers such as hedge funds, pension funds, or mutual funds. This type of due diligence work is highly similar to that done by research analysts working for the “sell side” (i.e. banks “selling” stocks and “buy side” investors “buying” them). In addition, the diligence, market research, and valuation skills are amenable to other positions in corporate/business development and strategy in biopharma, investor relations, and consulting.
And finally: In the event of a zombie apocalypse, what skills would an equity research analyst bring to the table?
Man, since we survive the pressure of having to do multiple things on a deadline – immediately, we can rapidly seize a situation and make a recommendation: Sell! Buy! Erm, I mean Run! Take cover! We may only be correct 50% of the time, but you can be darn sure that our attention to detail (honed from those endless days of Excel modeling) is so great that we’ll avoid those zombies lurking in the shadows.