How Would You Become An Expert Investor in Biotechnology Stocks?
Can anybody help me stop losing money investing in biotech stocks, please?
I agree with @harnessmoney - biotech stocks are a compelling value right now.
You just need to know which biotech companies will take off and which will drop like a track from Arcade Fire.
For example, I invested a big chunk of money in a biotech company, VBI Vaccines (NASDAQ: VBIV) a while ago. I liked the firm since it's developing vaccine drug candidates to treat diseases such as hep-B and brain cancer. The stock, however, missed its earnings estimates back in August of 2022, handing me an investment loss of over 20% in a matter of days!
I sold the stock back then and haven't looked back since.
Even with a loss like that, I still like the biotech space.
What I like most about biotech stocks is the asymmetric returns biotech companies offer investors.
My biggest problem is that I need to understand the science behind the clinical trial data that all biotech companies submit for FDA approval.
So, I'm reaching out to the NotePD community for help with the following question: what would you study to become an expert in evaluating biotech stocks when you have no scientific training or background, and how would you do it?
Here is a list of factors that I think are important to intelligent biotech investing:
- Understanding the nature of the biotech industry, including its growth drivers, key players, its regulatory environment;
- Familiarity with scientific and clinical research in the biotech space, including the drug development process, analyzing statistical data, clinical trial design; and
- Understanding the importance of intellectual property and patent laws affects how biotech drug candidates are developed and licensed.
Where should I start learning more about these topics? Are there online resources and classes one can take to better understand the biotech drug development landscape? Should I include anything I should learn about that should be noted above?
I'm looking for a detailed response to lay out a framework for how you would approach this problem as a complete novice.
Rather than go the route of ChatGPT, I thought I'd ask the collective wisdom of NotePD first to help me in this quest!
As an incentive to enter this challenge, I'm offering $100 USD to anyone who can come up with the best answer as determined by me.
I will leave this challenge open for one week until February 14th and see what responses I get.
I appreciate everyone who enters this challenge and submits a response.
I look forward to reading your entries.
Thanks for reading!
- the number of clinical trials required before approval
- the cost per patient per clinical trial
- the size of market potential
1. The Biotech Industry
The first is the industry itself. What are the growth drivers? How does this industry compare to other industries. What are the key players and how do they compete with each other. Are there regulatory hurdles that will affect the industry in general or specific companies. All these factors will affect whether a biotech company has success or not.
For example, if you look at VBI Vaccines (the stock I mentioned above), one of their competitors is Novavax (NASDAQ: NVAX). Novavax was developing an Ebola vaccine but cancelled their program in late 2022 due to lack of funding from investors and from the US government (who would have been a possible customer for their Ebola vaccine).
This was a big blow to Novavax, causing their stock price to drop by over 50% in one day. This also caused me to sell my shares of VBI Vaccines since I was worried about competition from Novavax.
2. Understanding scientific research and clinical trial design
A good example is the recent measles outbreak in California among members of a religious group that doesn't believe in vaccination. Many people lost faith in vaccines after this incident and sold off stocks like VBI Vaccines because they thought all vaccines were now considered unsafe by society as a whole (even though this particular incident had nothing to do with vaccines).
I wrote about it here:
How To Invest In Biotechnology Stocks When People Are Afraid Of Vaccines
3. Patent Law And Intellectual Property Rights (IPR)<br /><br />Intellectual property rights are very important when it comes to drug development since most new drugs are based on previous drugs that have already been approved by FDA
For example, Merck's new Hepatitis C drug Zepatier is based on patents owned by Pharmasset, which was acquired by Gilead Sciences back in 2013 for $11 billion dollars
Gilead Sciences owns several patents related to treatment of Hepatitis C including Sovaldi® which costs $84k per treatment but cures Hepatitis C with just 12 weeks of treatment
When Gilead bought Pharmasset it got its hands on Sovaldi®, which has generated over $60 billion dollars for Gilead so far
And VBI Vaccines' own hepatitis B vaccine candidate currently under development is based on technology licensed from GlaxoSmithKline
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