Deciding when to invest in a biotechnology company

Often investors we meet are not sure when to invest in a biotechnology company. Companies that you might come across could be in any stage of development – ranging from discovery stage, preclinical, to phase 1, 2, or 3. While there are also Phase 4 clinical trials, we will not cover that stage. Phase 4 trials are post-approval studies once a product received market approval by the FDA.

All of these stages of development can offer different rewards and risk. We compiled a simple overview that could help you to decide when is the right time for you to invest.

Find companies that are about to enter Phase 1 or have an ongoing Phase 1 trial

The notion that investing in a preclinical company that is about to go into Phase 1 is riskier is not always correct, and there can be exciting investment opportunities that show a significant return on investment. First, find out if the company has enough capital to enter into Phase 1 or if they are looking to raise money for this trial.

This could be a good time for investors to get in to increase the value of your investment with limited risk because Phase 1 clinical trials typically involve the initial introduction of the product candidate into healthy human volunteers. In Phase 1 clinical trials, the product candidate is typically tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and pharmacodynamics. 

Phase 1 trials are usually small and can occur rather quickly. Phase 1 studies—which represented 37% of biotech IPOs through the third quarter of 2018 had an average market value of $535 million, according to the Wall Street Journal. That is up from 35% of biotech IPOs with an average market value of $471 million in 2015.

These investment opportunities could be hard to find, so it´s best to find and invest alongside investors that get access to or build biotech companies from the ground up.

Phase 2  Could be the best time to get involved

Phase 2 trials are done only if Phase 1 trials have shown that the drug is safe, but sometimes Phase 1 and Phase 2 trials are combined. Let’s consider you are looking at a company entering a Phase 2 clinical trial.

Phase 2 clinical trials are conducted in a limited patient population to gather evidence about the efficacy of the product candidate for specific, targeted indications; to determine dosage to tolerance and optimal dosage; and to identify possible adverse and safety risks. 

Often, after a public biotech company reports positive Phase 2 data, the value of the company goes up significantly. If a company is listed publicly, the stock price is likely to jump as this data will give investors the first real indication that the drug works.

According to Marc Lichtenfeld, Chief Income Strategist, The Oxford Club, “Phase 2 is often the most profitable time to be involved in a small-cap biotech stock. Many times, Phase 2 results are positive. Sometimes it’s because the drug works and other times it’s because the trial is rigged to provide positive results.

Generally, on positive Phase 2 data, a small biotech company will either seek to raise additional capital from a strong VC or look for a partner from a larger biopharma company to start Phase 3 clinical trials.

Phase 3: Big Rewards and Big Risks

Phase 3 trials are the final stage of the development journey; Phase 3 clinical trials are undertaken to evaluate clinical efficacy and to test for safety in an expanded patient population at geographically dispersed clinical trial sites. The size of Phase 3 clinical trials depends upon clinical statistical considerations for the product candidate and disease but sometimes can include several thousand patients. Phase 3 clinical trials are intended to establish the overall risk-benefit ratio of the product candidate and provide an adequate basis for product labelling. 

The FDA reviews the results from Phase 3 trials when considering a drug for approval. Like in Phase 2, a positive outcome in Phase 3 will frequently result in a massive increase in valuation. If the companies stock is publicly traded, there will be a surge in the stock price as investors anticipate FDA approval and sometimes a buyout from a larger biopharma company.

However, often, drugs fail in Phase 3 trials due to the drug not working or unexpected side effects. This results could mean a plummet in the value of your investment and almost all your investment lost.

Use extreme caution when holding a stake in a biotech company that is entering or waiting on Phase 3 data. Drugs entering Phase 3 have a 55% chance of failure. If you have held your investment since Phase 1 or Phase 2, it’s suggested to think about protecting your downside and taking some money off the table before Phase 3 data is released.

Hedge risk of failure: Focus on companies developing drugs in areas of lower risk

Try and find companies that are developing drugs for a market with significant unmet medical needs but also has a chance to show real results on the bedside. For example, its widely known that GBM (Glioblastoma), an aggressive form of brain cancer, is a ruthless disease and has no cure.

Roughly 17,000 new cases of glioblastoma are diagnosed every year, with average glioblastoma survival rates resting somewhere in the 11-to-15-month time frame. Senator John McCain died 13 months after his glioblastoma diagnosis.

Investing in a company working on a drug for a disease like GMB could be riskier because the chance of loss of life during the clinical trials is much higher.  Stick to investing in companies developing drugs for diseases where the risk of patient death is low during the drugs development life cycle.

Diversify your sources of information

Biotech companies are presenting their latest data results and enrollment at conferences around the world and also report updates at Clinicaltrials.gov. Also, monitor social media feeds from expert biotech journalist and reporters on Twitter and subscribe to platforms like Statnews, or Fierce Biotech for excellent industry news and insights.

Whether you are looking for an early-stage investment opportunity or would like to join an investment at a later stage, be sure to do your homework or team up with a group that works together to buy or build biotech opportunities.

Contact us today: https://theravestmanagement.com/contact/


Regards,

Braeden Lichti
Managing Partner

DISCLAIMER: All insights, suggestions, and advice provided herein are for educational purposes only. Nothing contained in this article or within this web site should be interpreted as a recommendation to buy or sell any securities, nor make an offer, solicitation or recommendation of another kind. All readers should always do further research before making a final investment decision.

The author is not a United States Securities Dealer nor Broker nor US Investment Adviser.

Big pharma admits data manipulation in FDA application for multi-million-dollar gene therapy

By: Braeden Lichti

Aug. 14, 2019 The Food and Drug Administration (FDA) said data manipulation took place during the approval of Novartis’ studies of Zolgensma, the world’s most expensive drug. The medicine, costing around $2.1 million for a one-time infusion, treats children with an especially devastating, sometimes fatal form of spinal muscular atrophy (SMA). Novartis knew of the data irregularities for two months before the gene therapy’s approval by the FDA in May 2019.

But Novartis did not inform regulators until June 2019, a delay that led the FDA to issue a very rare public warning of potential civil or criminal penalties for AveXis. Novartis bought the biotech startup in early 2018 for $8.7 billion mainly due to promising data for the then-experimental Zolgensma.

Phase 1 and Phase 3 data manipulation

As explained in our previous articles, FDA approved medicines go through long, expensive and gruelling clinical trials before being approved. AveXis manipulated results in Phase 1 clinical trials as well as those from some nonclinical studies included in Novartis’ approval application. Fifteen infants with the most severe form of SMA received Zolgensma, and all remained alive and off permanent ventilation at two years, a milestone seldom achieved in untreated patients.

According to Wilson Bryan, head of the FDA’s Office of Tissues and Advanced Therapies both the Phase 1 and Phase 3 versions of Zolgensma use the same vector and therapeutic gene, giving him confidence the clinical results from Phase 1 confirm the effectiveness of the Phase 3 product.

After learning of the data manipulation, the FDA inspected AveXis’ San Diego, CA facility from 24 July-2 August, handing the company an inspection report finding failings to thoroughly review unexplained data discrepancies, incomplete laboratory records and failure to follow laboratory test procedures. The FDA intends to continue its investigations and could require AveXis submit “one or more” supplemental applications, a process that could take several months. Novartis and the FDA have assured the public that the falsified data did not affect the safety, quality or efficacy of Zolgensma and will remain on the market

Impact on future gene therapy approvals

Zolgensma is only the second gene therapy for an inherited disease to win FDA approval, marking a significant milestone for the growing field. At $2.1 million per patient, Zolgensma is also the most expensive drug ever brought to market. The FDA investigations are relevant for the whole sector as gene therapy is a promising emerging field and many active, well-funded biotech companies are working to develop much-needed therapies.

Data fiddling is more common than you think

Manipulating data to make them more meaningful is a well know problem in statistics and is known as p-hacking. The probability value or p-value measures whether the data would be at least as extreme compared to no real difference between the groups or phenomena being compared. The term p-hacking describes the conscious or subconscious manipulation of data in a way that produces a desired p-value. Researchers collect or select data or statistical analyses until nonsignificant results become significant. A p-value of 0.05 or 95% probability is often the de-facto standard to get published in academic literature. You can check out the following visualization to find out how easy it is to manipulate data.

Should you trust the data shared by companies?

Whether you are reading scientific journals or the latest article in the Wall Street Journal, always seek additional guidance when picking a biopharma investment. Connect with an experienced team of biologists, investors, and statisticians to help you to spot troubling signs earlier in your investment journey.

Our views are based on experience and for educational purposes only. We encourage inquiries, suggestions, and comments.

Regards,

Braeden Lichti
Managing Partner

DISCLAIMER: All insights, suggestions, and advice provided herein are for educational purposes only. Nothing contained in this article or within this web site should be interpreted as a recommendation to buy or sell any securities, nor make an offer, solicitation or recommendation of another kind. All readers should always do further research before making a final investment decision.

The author is not a United States Securities Dealer nor Broker nor US Investment Adviser.

Five-basic biotech investing due-diligence principles

While big, unprofitable tech IPOs dominated headlines this year, it might be time for potential investors to turn their attention back to the early-stage biotech sector. Barrons magazine estimated that since 2012, early-stage biotech companies that have gone public have, on average, raised more money and performed better than biotech companies whose initial public offering came closer to when they brought their products to market. Between 2001 and 2017, only 6% of biotech companies were profitable at the time of their initial public offering, according to an analysis conducted by Jay Ritter, a finance professor at the Warrington College of Business at the University of Florida. During the same time frame, the average three-year buy-and-hold return for more than 350 biotech companies that went public was 36.3% — beating the market by 14%.

As with every investment, biotech investing is associated with inherent risks. Our five-basic due-diligence principles can help you evaluate an early-stage biotech investment and potentially uncover the rewarding investment opportunity you were searching for.

1. A pipeline of products, programs, and patents

Look for ​companies with a patented product and program pipeline consisting of more than one drug. Companies with 2 or more products in or entering clinical trials are more diversified and can cope with setbacks more easily. If one product fails, the company will have other assets in development to try and recoup any lost value. Clinical trials are organized into three phases, and the National Cancer Institute compiled a great introductory video that should be studied.

Make sure the company is past the discovery stage and is either filing an IND or is clinical ready. Don’t invest in mere science experiments!

Finally, check the patent status of the products and make sure it’s current. If the company has no signs of a patent then the product is not protected and has limited value.

2. Good Management

Experienced managers must lead the company and have a history of working in biopharma. Look for early-stage companies in which the founders are still a part of the management team, and that they have recruited diversified executives with in-depth experience in financing, successful drug development, and commercialization. Make sure that the chief medical officer has education from a credible university and an abundance of clinical experience and published work around the medical indication targeted.

3. Long-term finance commitments

It is advantageous to opt for companies that have just completed financing and have a reliable investment bank or venture partner committed to the development of the company.

Depending on the phase of the drug development, it can take years and many rounds of financing to bring a drug to market or for a company to establish a partnership with an established pharmaceutical company.

Without fresh financing or a committed strong investment group, it could be difficult for a company to continue securing capital for growth.


4. Research latest scientific breakthroughs

Be cautious of companies developing drugs and raising capital for therapeutics that are in vogue or are in an over-saturated market with competition. For example, areas such as CAR-T immunotherapy are overrun with companies racing to bring the next drug to market, so it’s best to avoid these companies. Look where the crowd is not and find companies developing next-generation products addressing high unmet medical needs. Areas such as pain management, addiction, age-related or anti-aging, gene therapy, and viral infections in which there is a high degree of incidence in the population. Positive clinical data in these areas could provide shareholders a ​faster return on their investment. We advise staying clear of companies focusing on homeopathy as its efficacy is unproven.


5. Scientific evidence in reputable journals

Always make sure that the science behind the product being developed is published in a peer-reviewed scientific journal. You can quickly find peer-reviewed journals via google scholar, a google service that indexes academic journals. Reliable measures in assessing the credibility of a scientific journal include the impact factors (i.e., citation frequency) compiled by Thompson Reuters and the SCImago Journal Rank (SJR). SCImago developed the SJR indicator from the widely known algorithm, Google PageRank™. This indicator displays the visibility of journals since 1996.

Stay away from companies that have no scientific publications. We also advise speaking to an expert with a background (e.g., Ph.D., Professor) in either biology, chemistry, or medicine to evaluate a drug and the claims by a company properly. If you don’t have anyone to consult with one of our industry specialists could be available.
Our principles are based on experience and for educational purposes only. We encourage inquiries, suggestions, and comments.

Contact us today: https://theravestmanagement.com/contact/

Regards,

Braeden Lichti
Managing Partner

DISCLAIMER: All insights, suggestions, and advice provided herein are for educational purposes only. Nothing contained in this article or within this web site should be interpreted as a recommendation to buy or sell any securities, nor make an offer, solicitation or recommendation of another kind. All readers should always do further research before making a final investment decision. 


The author is not a United States Securities Dealer nor Broker nor US Investment Adviser. This letter and the attached related documents are never to be considered a solicitation for any purpose in any form or content.

Video Friday: This Robot Refuses to Fall Down Even if You Hit, Shove It

Video Friday is your weekly selection of awesome robotics videos, collected by your Automaton bloggers. We’ll also be posting a weekly calendar of upcoming robotics events for the next few months; here’s what we have so far (send us your events!):

Robotic Arena – January 25, 2020 – Wrocław, Poland
DARPA SubT Urban Circuit – February 18-27, 2020 – Olympia, Wash., USA

Let us know if you have suggestions for next week, and enjoy today’s videos.


Simple experiment explains magnetic resonance

Physicists have designed an experiment to explain the concept of magnetic resonance. A versatile technique employed in chemistry, physics, and materials research, magnetic resonance describes a resonant excitation of electron or atomic nuclei spins residing in a magnetic field by means of electromagnetic waves.

Hopkins team invents non-viral system for getting gene therapy into cells

Noninfectious viruses used to deliver gene therapy can still sometimes touch off dangerous immune responses. A team from Johns Hopkins Medicine has developed an alternative method for transporting large therapies into cells—including genes and even the gene-editing system CRISPR. It’s a polymer nano-container that biodegrades inside of cells.

FDA hits Ipsen’s $1B drug with clinical hold over safety signal

The FDA has placed two trials of palovarotene on partial clinical hold eight months after Ipsen gained the drug in its $1 billion (€900 million) takeover of Clementia Pharmaceuticals. FDA staff took the action in response to cases of early growth plate closure in children on the retinoic acid receptor gamma agonist.

‘Junk DNA’ affects inherited cancer risk

A person’s risk of developing cancer is affected by genetic variations in regions of DNA that don’t code for proteins, previously dismissed as ‘junk DNA’, according to new research. This new study shows that inherited cancer risk is not only affected by mutations in key cancer genes – known as oncogenes and tumor suppressor genes – but that variations in the DNA that controls the expression of these genes can also drive the disease.