Can anybody recommend any resources to help me learn about the biotech industry? I am specifically interested in learning information about the various stages of pipeline drugs such as what kind of testing is available at each stage and the hoops they have to jump through to get approval. Another important concept is the patenting process and what the various types of patents will ultimately protect. Finally, I am interested in learning about the valuation of both pipeline drugs and those with approval.
I have extensive experience with modeling and M&A, but I am outside of the biotech industry. Through advice from a long-term investor in Medivation (MDVN), I jumped into the stock back in February without really understanding fully what I was invested in. I want to have a better understanding of my investment next time around.
For a drug to go from initial development in the lab to being available at the pharmacy takes an average of 12 years of research and rigorous testing. And the majority of drugs will not make it that far. In fact, only about 0.01% of drugs in initial development become approved for commercial use. The U.S. Food and Drug Administration (FDA) maintains a highly regulated drug approval process. After the lab development, the drug is tested on various animal species for safety and efficacy. If the animal testing is shown safe and beneficial, the drug may proceed to Phase 1 of research. A Phase 1 study is conducted on a small sampling of human volunteers to determine any side effects and how the drug is processed in the body. Next, if approved by the FDA, Phase 2 and Phase 3 ensue. These Phases are likely what you may see advertised or learn about people participating in. They are geared towards larger groups of people and analyze the effectiveness of the drug, accurate dosing, and how it works in varying demographics. After Phase 3, the drug still only has an approximately 60% chance of becoming FDA approved, pending all the research gathered up until that point. There is also a Phase 4 in which the FDA keeps a close watch on the drug even after is becomes commercially available. I’m mainly involved in Phase 3 clinical research. There is a lot to learn about the different phases and it is much more complicated than I originally imagined. Also, the expenses for each patient during Phase 3 trials costs a staggering amount of money.
You can also look up clinical trials on the government website. You can see the phase and where they are testing and what the drug is supposed to accomplish. ie. this is one of my studies for a drug called Solanezumab funded by Eli LIlly
"If Lilly’s solanezumab proves effective, it would be the first so-called disease modifying treatment for Alzheimer’s. Such a finding could double the company’s stock price, Anderson said. Conversely, the shares could plunge 15 percent if the study fails to show a benefit, he said. He currently gives the drug a 30 percent to 40 percent chance of success, a self-acknowledged “best guess.”
Martin Shkreli dropped out of high school but then founded a multi million dollar pharmaceutical company. So, based on this, I think the trick is to short the stocks, then spread negative rumors on the internet. Also, know Jim Cramer. Also, lie to investors so they will give you money.
Go to the CFA website, log in and search for industry guide. I looked and they had one called “The Pharmaceutical Industry” and they also had a few other articles about biotech if you search.
they had one for my industry and it helped me picked up the lingo.
Very difficult industry to understand IMO. Unless you have a background in science you’d have to rely on experts within your network. Probably outside the circle of competence for most people and time is better off spent learning a different industry.
That being said, as the poster above mentioned, you need to get familiar with clinical studies because you are essentially betting on the outcomes. There is a lot of art that goes along with the science of these things. You can google.pdf a few books that can give you the basics.
The other thing is public companies give you no information on the data you actually need. Could be said for all industries but especially something as complex as pharma. It just makes it very difficult for the average investor. You can get data but it takes some searching.