September 21st, 2010 by BiotechInvest
Why I started this website?
Several years ago when I was working as a scientist at a small pharmaceutical company I became interested in biotechnology sector as a potential money investment. Before I was working at the university and had never heard about “stock option award” and never was interested in the market performance. This sector has a high risk combined with a high reward. Funds and individuals invest in biotech/healthcare companies mostly based on the analyst’s opinions.
Everybody knows about their methods used to analyze securities and make investment decisions. These methods are fall into two very broad categories: the fundamental analysis and the technical analysis. The fundamental analysis involves analyzing the characteristics of a company in order to estimate its value. Technical analysis takes a completely different approach; it doesn't care one bit about the "value" of a company or a commodity. Technicians (sometimes called chartists) are only interested in the price movements in the market.
“Fundamental analysis serves to answer questions, such as:
• Is the company’s revenue growing?
• Is it actually making a profit?
• Is it in a strong-enough position to beat out its competitors in the future?
• Is it able to repay its debts?
• Is management trying to "cook the books"?
It all really boils down to one question: Is the company’s stock a good investment? Surprisingly, I didn’t found among these questions something about science basis of the company. But I’m sure that the question such as: " Is the company has a strong science basis?" must be literally main or even may be the first question when you are going to invest in a biotech company.
Reading their numerous analytical reports I concluded that most of them make mistakes very often. And possible reason of their mistakes is that they are using available public information about companies but don't analyze company's scientific basis. Question was: is it possibly to analyze a company technology by using the scientific publications, company website information and finally logic and common sense and then based on this complex analysis to do the right investment?
So, my credo: I will create the portfolio from biotech/health care companies based only on my complex analysis of company's technology platforms. Of course, I will also study all available information including analyst’s reports.
My main strategy will be: 1) to find the small/middle cap biotech companies before they move to large cap; 2) to perform the scientific analysis of company technology to predict a probability of the successful clinical trial results.
Since start in 3/9/2009 to the present time portfolio gained from $100,000 to $409,565 i.e. average +300%. 2010 gain is 75%. 2010-2011 portfolio dynamics is below:
Each point on the plot is transaction, there were 330 transactions from 01/04/10 to 12/29/10. Complete transaction history can be found at Files page.