Re: Pre-Revenue Biotechs: A Monty Hall Game
Short Answer: Share price is driven by time until a cash event, not the company’s intrinsic value.
Long Answer:
In free markets, price is usually a fair indicator of value. For example, in a typical Monty Hall game show, you pick Door #1 and find out the result immediately—there’s little time for others to influence your choice.
In biotech, however, the prize behind the door is a “cash event” (partnership, acquisition, or product revenue), which may be 5–10 years away. This long timeline creates an opportunity for other players (traders / manipulators) to exploit fear and hype.
As a result, the same company with a milestone tomorrow trades very differently from one a decade away from revenue. The farther the gap, the greater the uncertainty—and the more the share price diverges from fair value.
If you’re shooting for a 30x return, volatility is unavoidable. A low share price reflects uncertainty about when cash will materialize, not the quality of the underlying science. The key is to focus on the research and maintain a long-term perspective, tuning out short-term noise.
The share price, in most cases, is irrelevant until the company is closer to an actual cash event.
I’d point out that even the most bearish shorts on the board (assigning a 4% chance of success) are making a surprisingly bullish statement.
A 4% chance of success only requires a 25x multiple on investment to break even. Even the skeptics agree that a successful drug would result in $25B market cap.
Thus most "short" arguments are implicitly ceding that this is a bet with quite a positive expectation. (and that is the analysis of the BEARS!)
What more encouragement does a pre-revenue biotech investor need? 😉
Cheers
Mycroft Holmes
"The hardest thing to explain is the glaringly evident which everybody has decided not to see.” - Ayn Rand.
AI
Market Data 
Markets 
