PicoBlog

I was at Harvard Law School and I had a problem: I didn’t want to be a lawyer.

I’d done a summer internship at a big New York law firm. I knew it wasn’t for me.

A friend had just launched a biotech investment firm in Boston. He gave me an opportunity to work there part-time during my last year of law school.

It was a small operation. Just 3 guys managing a small portfolio of biotech stocks. We worked out of a tiny office in downtown Boston.

Today, it’s one of the most successful healthcare investment firms globally. The firm manages billions of dollars in assets.

Here are the most important lessons I learned there:

Working in biomedical innovation can be exciting. You’re investing in companies that are developing cutting-edge technologies to create life-changing medical advances.

Covid may have been a tipping point for biotech innovation. The pandemic and the success of mRNA vaccines helped many of us realize how important life sciences has become.

A few big breakthroughs are enabling a revolution in biotechnology:

Biomedical innovation offers the promise that we could see the end of cancer in our lifetimes. It could save millions of lives.

Being a successful biotech investor is challenging. You need to confirm that a company has a sound scientific premise and compelling data. You want to see a good team, one that is both experienced enough to bring a new drug to market and flexible enough to adapt to any challenges.

It’s important to remember you’re investing in people. These are high-risk companies under heavy FDA scrutiny. There’s no room for fluff or BS.

Having a science background can give you a competitive edge in biotech investing. I had done molecular biology research at Yale Medical School. I’d published an article at Harvard on the FDA’s process for approving new drugs.

When I evaluated a biotech company, I’d start by reviewing the publicly available information: website, press releases, SEC filings. Then I’d set up phone interviews with the company’s management and lead clinical investigators.

It was a science-based investment approach. We delved into the nitty gritty of clinical study data to develop a viewpoint on:

These questions helped us determine which companies were best positioned to generate value, i.e. good returns for our investors.

Biotech investing is influenced by different catalysts. These may be actions by the company, the industry, or regulators that drive the stock price up or down.

In November 2020, Moderna’s stock went up 13% on the news that it would file with the FDA for emergency use approval for its Covid vaccine. On the flip side, a stock price can crater if the company reports poor clinical study results. You need to have a clear view of the milestones that are likely to influence stock price.

The biotech industry is highly regulated by the FDA. Every new biomedical treatment (aka drug) must go through a rigorous series of clinical trials:

• Preclinical, in which treatments are tested in a lab or with animal subjects

• Phase 1, where the safety of a drug is tested in humans

• Phase 2, which test dosage levels and how well the drug works

• Phase 3, which are large clinical studies that test the efficacy and safety of the drug

A drug must pass all of these clinical study phases before the the FDA considers it for approval. Only about 12 percent of drugs entering clinical trials are ultimately approved by the FDA.

It takes an estimated $2 billion to bring a new drug from research and development to the market. Why do biotech companies need so much money?

It’s because clinical trials are very expensive. These studies can involve dozens of medical centers and tens of thousands of patients. A biotech company can’t bring a new therapy to market until it’s developed the clinical evidence to support its claims.

Every biotech company must deal with a number of risks:

• Clinical failure: There is a possibility that the drug or treatment will not be effective or will prove to be too dangerous for consumption.

• Regulatory issues: Even if a drug makes it through clinical trials successfully, it must win approval by the FDA. A rejection typically means the drug will not be brought to market anytime soon.

• Developing the market: Once a drug is FDA approved, biotech companies still have to convince doctors to use it, and insurers and healthcare programs to pay for it. They also need to assemble marketing teams to promote the drug to doctors and consumers.

Government has an important role in biomedical innovation. Consider CRISPR. The breakthrough gene-editing technology began at an academic research lab. Government funding of basic science is critical for advancing health.

Unlike private companies, governments can think on a longer time scale: 10, 20, 30 years out. They can ask, what are the most exciting areas of biology that might lead to a life-saving breakthrough?

Biotech experts believe future biomedical innovation will be driven by foundational technologies like AI, gene editing (CRISPR) and CAR-T therapy.

• Personalized Medicine: As we get more fine-tuned control over biology, we may be able to develop more precise ways to treat disease. Instead of treating everyone with type 2 diabetes the same way, we’ll be able to diagnose and treat disease on an individual basis. We can sequence a patient’s genes and look at them across many different dimensions, to figure out what’s causing the diabetes and deliver personalized interventions.

• Cell Therapy: The biotech industry is moving from small molecule drugs like aspirin, to biologics (target-specific drugs like Humira), to cell therapy—the transplantation of human cells to treat disease. How do we engineer our immune system, the best disease-fighting system in the world, to give it stronger and better tools to do what it’s already doing, like recognize cancers and attack them?

CAR-T therapy research has shown the ability to cure cancer with programmed T cells. This therapy is very expensive today, but the hope is that it will become cheaper and more accessible in the coming years.

Want to learn more about biotech investing? Here are some resources:

Until next time,

Hi there! Thanks for reading. If you stumble on my newsletter, you will notice that I write about health and wellness trends, and strategies & tactics on how to optimize cognitive, physical and emotional health. For 10 years I’ve helped the world’s leading healthcare and life sciences companies develop innovative new solutions to improve health globally. I have worked as a biotech investor at RA Capital, a McKinsey consultant, and a tech entrepreneur. I was trained as a research scientist at Harvard College and Yale Medical School, and serve as a GLG council member advising global business leaders on healthcare innovation.

Check out my articles in Thrive Global here.

There are a few things to do:

Share Vitamin Z by Daniel Zahler 💊

ncG1vNJzZmiumamurrXNs2WsrZKowaKvymeaqKVfpXy4tMCtZKJlnJqus7rEnWSarF2ptaZ51qippZyjYsGwvA%3D%3D