No. of Recommendations: 13
https://mailchi.mp/verdadcap/biotech-investing?e=5... "In the last 30 years, of the just over 1,000 biotechs that have reached at least $200 million of market cap, a whopping 67% have lost money.
Of these, roughly 50% were acquired at negative total returns,
10% delisted
and the remaining 40% are still public with a significant proportion trading below their cash balance representing “zombie biotechs”;
failed programs where cash remains stranded instead of being returned to shareholders.
Of the 33% that were successful,
55% were acquired
and the remaining 45% are still public.
Biotech stocks lose more often than any others. The median (50th percentile) biotech company has
delivered an annualized return of -15% in contrast to the median US company’s 1% annualized return.
Since 1996, 67% of US biotechs have had negative cumulative returns versus 48% for all other US
companies.
the higher the concentration of biotech specialist funds, the better that stock performs.
Conversely, if no biotech specialist funds own a stock (generally true for quintile 1), returns have
been poor. Because biotech specialist funds typically hold positions for nearly two years—and because the
strongest signals come when multiple specialists own the same stock—their activity shows up
consistently in 13-F filings.
In the smallest third of biotech stocks, the stocks with the highest concentration of specialist ownership have nearly 30%
returns in our historical data versus near-zero returns for stocks with no specialist concentration.
The least shorted quintile of biotechs is the place to buy, making 16% cagr 9/2013-10/2025.
Buying those whose peers (by type in the industry, then quintile among all biotechs) is profitable. MOMEMENTUM ONLY WORKS FOR THIS QUINTILE not in the biotech industry overall. Cheap relative to their peers is also the way to go but NOT cheap overall for a biotech company (the expensive ones overall do better than cheap ones).
Spending as the value metric works: those that spend do well.
