Learn to invest in biotech like the professionals from a former biotech executive and investment banker. For education purposes only. Course on Thinkific
A reason to love
#biotech
is for the rare instances when a company approaching the end (low stock price; near "death") can generate >20x return in a few, or even 1 year!
Here are some examples:
Who will be next?
#learnbiotechinvesting
#investing
#BiotechPrometheus
Reminder: Drug development is hard. People think it's linear, but it's not
Here are schematics of what most people think, what it is in reality, & modifications for small or large molecules
Investors take note: all must work to MAKE a drug, but almost any step can BREAK a drug!
Drug development is hard. People think it's linear but it's not.
Here are schematics of what most people think, what it is in reality, and modifications for small large or molecules
Investors take note: all must work to MAKE a drug, but almost any step can BREAK a drug!
Investors must consider patient populations to assess revenue opportunity, which implies valuation
In general, higher response rates (ORR) are in smaller patient populations
The outsized opportunities are in the top right of the graph
#learnbiotechinvesting
#BiotechPrometheus
How much time do FDA expedited designations save?
Accelerated approval and Breakthrough status save a statistically significant amount of time. But Fast track does not
Investors should keep this in mind
#learnbiotechinvesting
#biotech
#investing
#BiotechPrometheus
Reminder: Drug development is hard. People think it's linear, but it's not
Here are schematics of what most people think, what it is in reality, & modifications for small or large molecules
Investors take note: all must work to MAKE a drug, but almost any step can BREAK a drug!
How to get from prevalence (# people with a disease) to annual revenue? Here's a simple example:
US pop -> est # with disease -> those that seek treatment -> severity -> those that get your drug
Then price x compliance x gross2net x
#PoS
#learnbiotechinvesting
#BiotechPrometheus
Incorporating Probability of Success (PoS) is one of the unique aspects of biotech valuation investors have to be aware of.
It tries to factor development risk into revenue and cost assumptions.
Here is a table of PoS values:
Reminder: Drug development is hard. People think it's linear, but it's not
Here are schematics of what most people think, what it is in reality, & modifications for small or large molecules
Investors take note: all must work to MAKE a drug, but almost any step can BREAK a drug!
Investors must consider patient populations to assess revenue opportunity, which implies valuation
In general, higher response rates (ORR) are in smaller patient populations
The outsized opportunities are in the top right of the graph
#learnbiotechinvesting
#BiotechPrometheus
Here's some data for investors when trying to benchmark the costs of pivotal clinical trials (2015-2017)
You can see it varies by Therapeutic Area
Remember, good clinical trials CANNOT be done on the cheap!
If anyone has updated numbers, please share!!!
#BiotechPrometheus
Here's some data for investors when trying to benchmark the costs of pivotal clinical trials (2015-2017)
You can see it varies by Therapeutic Area
Remember, good clinical trials CANNOT be done on the cheap!
If anyone has updated numbers, please share!!!
#BiotechPrometheus
Adding Gilead's $GILD acquisition of CymaBay $CBAY to the list
From the intraday low of $1.67 on 11 May 2022 to the proposed acquisition price of $32.50, investors got a 19.5x return
Note $GILD & $PFE appear twice
#learnbiotechinvesting
#biotech
#investing
#BiotechPrometheus
A successful Phase 2 drug may still fail in the all-important Phase 3
Investors: be aware of these reasons (not exhaustive):
- different trial design
- different patient population
- standard of care has changed
#learnbiotechinvesting
#biotech
#investing
#BiotechPrometheus
Investors should stay on top of new technologies in biotech. Though
#geneediting
is new, there are multiple methods in public companies to edit the genome at the DNA level:
#CrisprCas9
,
#BaseEditing
#PrimeEditing
Here is a quick description of each
1/7 For investors analyzing oncology clinical data, you will often come across various types of plots: waterfall, spider, swimmer, Kaplan-Meier, and Forest
Here's what they are along with the pros and cons of each 🧵
Another reason a P3 study can fail while a P2 was successful is that P2 placebo groups, with narrower eligibility criteria & fewer patients, often have more variable placebo-adjusted effects
Use Phase 3 data, often on drug labels, to make comparisons; They're more consistent
Here's some data for investors when trying to benchmark the costs of pivotal clinical trials (2015-2017)
You can see it varies by Therapeutic Area
Remember, good clinical trials CANNOT be done on the cheap!
If anyone has updated numbers, please share!!!
#BiotechPrometheus
When thinking about investing in a
#biotech
investors should think about not only the TOTAL revenue opportunity of the therapeutic area (TA), but also how QUICKLY that TA is expected to grow
Obesity & onc are growing fast
#learnbiotechinvesting
#investing
#BiotechPrometheus
A successful Phase 2 drug may still fail in the all-important Phase 3
Investors: be aware of these reasons (not exhaustive):
- different trial design
- different patient population
- standard of care has changed
#learnbiotechinvesting
#biotech
#investing
#BiotechPrometheus
A successful Phase 2 drug may still fail in the all-important Phase 3
Investors: be aware of these reasons (not exhaustive):
- different trial design
- different patient population
- standard of care has changed
#learnbiotechinvesting
#biotech
#investing
#BiotechPrometheus
Here's some data for investors when trying to benchmark the costs of pivotal clinical trials (2015-2017)
You can see it varies by Therapeutic Area
Remember, good clinical trials CANNOT be done on the cheap!
If anyone has updated numbers, please share!!!
#BiotechPrometheus
Investors should understand the
#FDA
regulatory process well. Here is a quick summary.
At each step investors should ask themselves if the company is developing things in a way that will satisfy the FDA.
Until a drug is approved the FDA is the most important decision maker
Incorporating Probability of Success (PoS) is a unique aspect of
#biotech
valuation investors must be aware of.
It tries to factor development risk into revenue and cost assumptions.
Here is a table of PoS values:
#learnbiotechinvesting
#investing
#BiotechPrometheus
Product differentiation is more important than classical drug models indicate. First-in-class will retain larger share if later entrants are not differentiated while a differentiated drug will gain outsized share even if a later entrant
h/t
@Prof_Oak_
#learnbiotechinvesting
Investors should know about the overall FDA approval process & note the nuances between Phase 3 data & approval
When reading PR updates, pay attention to language. For example, "submitted" is NOT the same as "FILED"
#learnbiotechinvesting
#biotech
#investing
#BiotechPrometheus
Investors must consider patient populations to assess revenue opportunity, which implies valuation
In general, higher response rates (ORR) are in smaller patient populations
The outsized opportunities are in the top right of the graph
#learnbiotechinvesting
#BiotechPrometheus
Investors must understand the patents which protect a drug. It's essential to determine the drug's revenue opportunity and therefore value
There are 3 main types, with composition of matter being the most important
#learnbiotechinvesting
#biotech
#investing
#BiotechPrometheus
Note
#biotech
investors: Average annual return of all biotech stocks from 1980-2015 over a 5-year period (14%) has beaten that for pharma (13%) and the overall market (11%)
Be smart, take the course, and keep the faith!
#learnbiotechinvesting
#BiotechPrometheus
Great post by
@yaireinhorn
on the troubles facing
#pharma
. One temporary fix is buying innovation from
#biotech
.
Pharma uses many of the same sources and techniques to assess biotechs as investors do
1/Another interesting article-in this week’s
@barronsonline
, provides an accurate description of the current problematic situation of the big Pharma companies & their lack of success in addressing the potential black swan Patent cliff scenario. $XBI $PFE $JNJ $BMY $SNY $LLY $NVS
Investors should stay on top of new technologies in biotech. Though
#geneediting
is new, there are multiple methods in public companies to edit the genome at the DNA level:
#CrisprCas9
,
#BaseEditing
#PrimeEditing
Here is a quick description of each
For a $100k list-price drug, a company would see $77k for oncology but only $24k for a diabetes drug!
Most onc drugs have a higher list price than diabetes drugs to begin with.
Investors need to consider this in their models
#learnbiotechinvesting
#biotech
#BiotechPrometheus
1/7 For investors analyzing oncology clinical data, you will often come across various types of plots: waterfall, spider, swimmer, Kaplan-Meier, and Forest Here's what they are along with the pros and cons of each 🧵
A successful Phase 2 drug may still fail in the all-important Phase 3
Investors: be aware of these reasons (not exhaustive):
- different trial design
- different patient population
- standard of care has changed
#learnbiotechinvesting
#biotech
#investing
#BiotechPrometheus
Investors should remember to look broadly at treatments that might be competitors
Here is a landscape of drugs that seek to reduce autoantibodies, constructs involved in many different diseases
Note the multiple mechanisms, approaches, modalities, etc.
#learnbiotechinvesting
Reminder: Drug development is hard. People think it's linear, but it's not
Here are schematics of what most people think, what it is in reality, & modifications for small or large molecules
Investors take note: all must work to MAKE a drug, but almost any step can BREAK a drug!
Investors should keep in mind that a drug on the market after an accelerated approval can later be withdrawn if the confirmatory study doesn't show favorable risk/benefit on an approvable endpoint
Here are recent oncology examples but it also happens in other TAs (women's health)
While most drugs are inhibitors/antagonists, investors should remember that enhancers/agonists can also be drugs, often with opposite effects
Here are PD-1 agonists drugs in development for autoimmune diseases
#learnbiotechinvesting
#biotech
#investing
#BiotechPrometheus
Seven new modalities have been approved in the past 10 years in the US
Innovation is happening quickly and regulators are responding
Investors need to stay on top of these fast moving events
h/t:
@a16z
Reposting with today's Vertex $VRTX acquisition of Alpine $ALPN
Bloomberg wrote about a deal this afternoon
Turns out if
@Bloomberg
names a specific buyer or "sale is near" there's 83% chance of sale in next 12 months
Their reporters are plugged in!
#learnbiotechinvesting
Reminder: Drug development is hard. People think it's linear, but it's not
Here are schematics of what most people think, what it is in reality, & modifications for small or large molecules
Investors take note: all must work to MAKE a drug, but almost any step can BREAK a drug!
With the IPO market coming back Pitchbook has highlighted 2 biotech companies that are "ones to watch" in 2024
Most of these companies have $B valuations. Will those valuation hold up in the public markets?
#learnbiotechinvesting
#biotech
#investing
#BiotechPrometheus
Investors should beware of drug revenue forecasts. They're often wildly off, either too high or too low
That will impact your analysis
This is from 2013. If there's more recent data, please add source below
#learnbiotechinvesting
#biotech
#investing
#BiotechPrometheus
It's important for investors to assess the clinical meaningfulness of a result
A "positive" result sometimes isn't enough if it doesn't significantly change the treatment landscape. This can be subjective
#learnbiotechinvesting
#biotech
#investing
#BiotechPrometheus
Biotech investors must keep patent life in mind when thinking about drugs
This dynamic will always be a major undercurrent in the industry
$145bn of revenue at risk in US alone from patent expiries over the next 5yrs
#learnbiotechinvesting
#biotech
#investing
#BiotechPrometheus
When talking
#valuation
,
#biotech
investors must clarify: market cap (MC) or enterprise value (TEV)?
Why? Here's a primer
What about a NEGATIVE TEV? It means the business is worth LESS THAN ZERO! Even with +MC!
Shut it down and return cash to
#investors
?
#learnbiotechinvesting
Another reason a P3 study can fail while a P2 was successful is that P2 placebo groups, with narrower eligibility criteria & fewer patients, often have more variable placebo-adjusted effects
Use Phase 3 data, often on drug labels, to make comparisons; They're more consistent
Investors should keep in mind that a drug on the market after an accelerated approval can later be withdrawn if the confirmatory study doesn't show favorable risk/benefit on an approvable endpoint
Here are recent oncology examples but it also happens in other TAs (women's health)
When looking at companies with novel modalities, like cell therapy, investors need to pay even more attention to manufacturing & CMC
There are not a lot of experts with these modalities & that matters to regulators
#learnbiotechinvesting
#biotech
#investing
#BiotechPrometheus
Investors should take an unbiased view of data and not only listen to management. Ask yourself: Is the drug doing what it's supposed to do?
Look for: target engagement, proof of mechanism, and proof of concept
#learnbiotechinvesting
#biotech
#investing
#BiotechPrometheus
For approved drugs there's lots of information on the
#label
(prescribing information)
Investors should learn what information is included & where to find it
I refer to indications (1) dosage (2) AEs (6) pharmacology (12) & clinical studies (14) often
#learnbiotechinvesting
Drug approvals are one of the most important events for
#biopharma
companies
Knowing when these events may happen is critical for investor success
Here is a list of the expected October approval dates, known as
#PDUFA
dates
How to get from prevalence (# people with a disease) to annual revenue? Here's a simple example:
US pop -> est # with disease -> those that seek treatment -> severity -> those that get your drug
Then price x compliance x gross2net x
#PoS
#learnbiotechinvesting
#BiotechPrometheus
Lots of recent approvals from large pharma are for drugs originally developed by biotechs.
Investors take note of which pharma companies owe their approvals to internal development or external innovation
#learnbiotechinvesting
#biotech
#investing
#BiotechPrometheus
Investors should beware of drug revenue forecasts. They're often wildly off, either too high or too low
That will impact your analysis
This is from 2013. If there's more recent data, please add source below
#learnbiotechinvesting
#biotech
#investing
#BiotechPrometheus
Incorporating Probability of Success (PoS) is a unique aspect of
#biotech
valuation investors must be aware of.
It tries to factor development risk into revenue and cost assumptions.
Here is a table of PoS values:
#learnbiotechinvesting
#investing
#BiotechPrometheus
An
#SOTP
(Sum of the Parts) analysis is an important way to value a company w/multiple opportunities at different stages of development. Investors can see what the estimated relative value is on a per share basis. Ex for $FGEN
#learnbiotechinvesting
#investing
#BiotechPrometheus
Here's some data for investors when trying to benchmark the costs of pivotal clinical trials (2015-2017)
You can see it varies by Therapeutic Area
Remember, good clinical trials CANNOT be done on the cheap!
If anyone has updated numbers, please share!!!
#BiotechPrometheus
Investors should understand the
#FDA
regulatory process well. Here is a quick summary.
At each step investors should ask themselves if the company is developing things in a way that will satisfy the FDA.
Until a drug is approved the FDA is the most important decision maker