Hare or Tortoise?
Drug sales account for $750 billion/year out of a global $15 Trillion economy…about 5 %. That is the largest single sector and 10% of those drugs, $75 Billion will go off patent (become ‘generic’) this year with nothing scientifically new to replace them. New technologies take many, many years to come to fruition…but they accelerate with time. Casey’s Alex Daley sites pathway inhibitors for example, which can stop the ability of cancer to grow, as just one example. This buys more time to fight the disease. More novel techniques are onstage and beginning to be approved…and in 2012 more novel techniques for biotechnology therapy have been approved than the five preceding years combined….which means that the move from science to adaptable mass marketing is increasing…according to Daley.
So, as we cruise the bio sector and attempt to invest in the various biotechs that may be soonest to market ‘new technologies’, we are left with the daunting task of selection criteria…keeping in mind that even a tiny sliver of market potential can be worth hundreds of $millions. This requires a lot of time and research over multiple choices…not dissimilar to the junior precious metals markets…to make ‘the best guess’. Many ‘new’ technologies have up to 20 years of science and gobs of investment dollars behind them. I note that several here are keen on other biotechs that show real promise. Trying to time each and every one of them is a difficult task for short term investors/traders and flippers. Equally investing in say, 5 of them, may be the best way to go for some. Others want a quick return…so guesswork and betting elements come into play, with many private agendas motivating their posts either pro or con a particular stock on a particular BB…such as we see here and on other boards common to posters here. It is all quite an interesting comment on human nature. Trying to invest in one… and hoping it ‘doubles’ before the others…with the hope of investing the profits in another before it ‘doubles’, is seldom successful.
To sit down and study the potential of say, 3 promising biotechs, for an impatient investor can be a nightmare. What is their burn rate? How many shares out? How much further dilution will be needed over how long? What is the pedigree, integrity and credibility of management and research staff? Who are they aligned with/supported by in research ( Universities/health sciences sector) and in the corporate space (big pharma)? Where are they along the continuum from the lab to clinical trial progression to human trial sequels? If it works in mice will it work in humans? What is the market potential in dollars for the segment/s they are targeting? What are the percentages for fast tracking? What about potential toxicology, contraindications or serious side effects? How market visible is the bio now or in the near future? At what point will big money be interested (funds, partners, licensees) … with the next news release; the next study vindication; a breakthrough? What are the possibilities of a premature buyout? These are just a few questions that come to mind.
As for BTI, it is in the race and my bet is that it’s technology will come to market sooner than most because it, in itself, is not a new drug entity…simply a breakthrough human friendly carrier of market tested and already mass marketed drugs that will apparently make them much more efficient in the brain and for some, the body… for a variety of disease/genetic states…some of above said drugs which are part of the $75 billion segment that are soon to come off patent…others that are part of the global $750 billion markets.
Just a tiny sliver of all that, to say nothing of new market entry drug conjugate potential, gives one pause for serious deliberation. Will other small bios be successful? Yes. But which one doubles first or has the next best run up first … is best left to those who know more than most, like greater time risk, or are just too impatient…and by impatient, I mean stimulus junkies, attention deficit, or flippers who think one month is an eternity…let alone one year. It used to be that an investment adviser who could return 10% a year was on top of the heap…and no one today will even attempt to promise that. Capital preservation today is the ultimate goal. The bio sector is warp speed, high risk in comparison.
For me, BTI is a bio-turtle, that started the race long ago and is very close to the finish line. I will leave the bio-rabbits to others. Good luck too you all, hare or tortoise.