Learn Biotech Investing

Biotech investors take note: Blockbuster drugs drive #pharma.

From 2011-2020, all blockbuster were profitable but no low selling drugs were

No immunology blockbusters in the time frame but there are now

#learnbiotechinvesting #biotech #investing #BiotechPrometheus

Approved drugs can have a "black box" (aka boxed) warning, the highest safety-related warning that FDA can put on an approved drug

Usually applied to multiple drugs in the same class it can hamper revenue potential if alternatives exist

Investors should be aware

As we say here often: "A press release is a marketing document, an SEC filing is a legal document"

Read the SEC filings! They exist to help #investors! And they are freely available, often on the company website

#learnbiotechinvesting #biotech #investing #BiotechPrometheus

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

There was also the case of ARMO Biosciences and Eli Lilly

When thinking about valuing biotechs, especially those which are not yet profitable, a probability adjusted discounted cash flow model is perhaps the most important methodology

Though it too has drawbacks

#DCF #PoS #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

Historical investor return is 2.6x with a 15% annual rate of return for acquired companies (2005-2020 data set)

The ideal profile is an orphan, multi-indication, small-molecule, oncology asset

#learnbiotechinvesting #biotech #investing #BiotechPrometheus

When thinking about valuing biotechs, especially those which are not yet profitable, a probability adjusted discounted cash flow model is perhaps the most important methodology

Though it too has drawbacks

#DCF #PoS #learnbiotechinvesting #biotech #investing #BiotechPrometheus

Its important for investors in the #obesity space to understand how these drugs are being paid for. While commercial coverage is expanding, it varies by employer

Will this put a cap on the market opportunity?

#learnbiotechinvesting #biotech #investing #BiotechPrometheus

A reason to love #biotech: a company approaching the end (low stock price; near "death") can generate >20x return in a few, or even 1 year!

Though these deals are few & far between, here are some examples:

Who will be next?

#learnbiotechinvesting #investing #BiotechPrometheus

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

A key variable for investors is management reputation

A lot that happens inside a company that is critical for success is outside of public view

Investors must ask themselves if they believe management is giving an accurate assessment, both good & bad

#learnbiotechinvesting

Investors should be aware of "p-hacking" strategies used in data analysis: For biotech, I have come across #s 3, 6, 8-11 too often

Hard to know without raw data but be prepared to ask & investigate where possible!

#learnbiotechinvesting #biotech #investing #BiotechPrometheus

Investors should know that Mega blockbuster drugs are usually apparent in the first year

Avg time to key sales levels for top-20 drugs launched since 2014:
$1bn: 3yrs (n=20)
$5bn: 5.5yrs (n=15)
$10bn: 6.6yrs (n=5)

#learnbiotechinvesting #biotech #investing #BiotechPrometheus

The #obesity space is crowded. There are many drugs being developed by many companies using many MoAs

Here is a (non-exhaustive) landscape put together by @Stifel

Which MoAs will take a large share?

#learnbiotechinvesting #biotech #investing #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

Investors, remember that the FDA puts out a wealth of information about drug candidates ahead of a potential approval

A serious investor MUST read these!

They are the ultimate arbiter for approval in the US

#learnbiotechinvesting #biotech #investing #BiotechPrometheus

Approved drugs can have a "black box" (aka boxed) warning, the highest safety-related warning that FDA can put on an approved drug

Usually applied to multiple drugs in the same class it can hamper revenue potential if alternatives exist

Investors should be aware

As we say here often: "A press release is a marketing document, an SEC filing is a legal document"

Read the SEC filings! They exist to help #investors! And they are freely available, often on the company website

#learnbiotechinvesting #biotech #investing #BiotechPrometheus

While oncology still dominated #biopharma M&A by total deal value from Jan 2023-Dec 2024, in 2024 the TA with the largest average upfront was Autoimmune

Upfront cash equity by TA ($mm):
Autoimmune - $1,303
CNS - $840
Oncology - $768

Source:
@naturebiotech.bsky.social

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

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

Historical investor return is 2.6x with a 15% annual rate of return for acquired companies (2005-2020 data set)

The ideal profile is an orphan, multi-indication, small-molecule, oncology asset

#learnbiotechinvesting #biotech #investing #BiotechPrometheus

Biotech investors take note: Blockbuster drugs drive #pharma.

From 2011-2020, all blockbuster were profitable but no low selling drugs were

No immunology blockbusters in the time frame but there are now

#learnbiotechinvesting #biotech #investing #BiotechPrometheus

Investors should be aware of "p-hacking" strategies used in data analysis: For biotech, I have come across #s 3, 6, 8-11 too often

Hard to know without raw data but be prepared to ask & investigate where possible!

#learnbiotechinvesting #biotech #investing #BiotechPrometheus

I’ve seen some posts recently, about the value of basic research, in light of funding cuts and demands that research have immediate economic justification.

Let me collect some info here, in a thread, about why it’s a bad idea to attach those sorts of demands to funding. 🧵 🧪 ⚛️

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

#learnbiotechinvesting #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. But this can be subjective

#learnbiotechinvesting #biotech #investing #BiotechPrometheus

When investors evaluate a company developing AAV gene therapies, it's helpful to check that the organ that needs to be treated is targeted by the specific AAV serotype that is being used #genetherapy

#learnbiotechinvesting #biotech #investing #BiotechPrometheus