Biotech Values

[Titan V]

NASH Is Todd Hagopian's Top Biotech Sub-Sector For 2017
http://www.forbes.com/sites/kenkam/2017/02/24/nash-is-todd-hagopians-top-biotech-sub-sector-for-2017/#dd275591f3d4

Ken Kam: Tell me why you find the NASH market so appealing at this point?

Todd Hagopian: Well Ken, this is a market that most analysts believe could grow from zero to $20B by 2025. Biotech companies will typically trade at 4x – 8x revenue, so you are talking about a market cap of $160B to $320B for NASH based revenue alone. On top of that, there are relatively few major players with strong drug candidates, so we can already start to make strong predictions of who might become the leaders within this sub-sector.

Kam: If that is true, then why aren’t other analysts and fund managers making the same predictions?

Hagopian: As we’ve discussed in other articles, analysts typically make their recommendations based on the next 18 months. Despite the opportunity for a $20B market by 2025, most analysts are expecting just $1.6 Billion by 2020, which means most of the growth is beyond the time frame that they are focusing on.

The very first NASH drugs are on track to get approved in 2019, which puts them just barely out of reach of when the analysts would really begin to get excited about these companies. That said, we already see some stocks like Intercept (ICPT), which is heavily invested in the future of NASH, with analyst estimates almost twice at where the stock is trading now. So, I would say analysts are beginning to take notice.

As far as fund managers, they will be more likely to be purchasing these stocks already, but less likely to purchase them in the volume that I am suggesting. My strategy, as laid out in the previous strategy article, will be to hold between 15% - 20% of my portfolio in NASH companies moving forward.