Biotech Values

[poorgradstudent]

>How do you protect yourself from this kind of result, where the PII data looks good but turns out to be a stastical fluke?<

A new approach I've adopted is to remain skeptical of compounds that only have one phase II trial result.

Your chance of fluking out in one phase II is much higher than fluking out in two independent phase II trials run at different centers.

I think the other important concept to grasp is that the proverbial train almost never leaves the station. Many investors think that they need to be in a full position leading up to phase III results. I think most of the case examples in biotech will show that a relatively modest position ahead of phase III results (with put protection if you want) is the way to go. Stocks almost always revisit their pre-phase III prices.

The additional danger of having a large position ahead of phase III results is that it becomes very difficult to objectively assess an investment. The money that is at risk inevitably requires investors to rationalize away the uncertainties... I find that dangerous.