Biotech Values

[biomaven0]

>>Some oncology bios have gotten really cheap

So let me take this as an opportunity to talk about long term biotech investing strategy in general - I'll use TRIL as an example.

You have to think of stock in a company like TRIL as a lottery ticket. If the drug pans out well there will likely be a massive payout. If it does not, likely the stock goes to close to zero. (There are obviously some intermediate possible outcomes, but for a stock like this the extremes dominate). Further, this is not the sort of stock where you will have to go to a Phase III to know if it works - likely Phase IB (after the initial safety studies in lymphoma) will provide a lot of information. So this is not a stock which will have to raise a bunch of money prior to supportive data or a partnership.

So from my perspective, a stock like TRIL should be pretty much disconnected from the rest of the market from a fundamental viewpoint. Really what happens in China or with interest rates or oil prices (or even drug prices) is close to irrelevant to the company.

Now that is not to say the stock of a biotech like this will ever be divorced from the sector - all valuations are comparative, and all development-stage biotechs need to raise capital at regular intervals - thus they all share finance risk as a component of their valuation.

But certainly from my perspective TRIL should be one of the most "isolated" stocks from the rest of the world. So in general it's a good stock to buy when the whole market is down and nobody wants to hear about it, and a good stock to sell when everyone is talking about it. And as for the rest, the clinical results will eventually drive the stock price one way or the other.

Peter