
Value Investing in Life Sciences - jmelkington
https://axial.substack.com/p/value-investing-in-life-sciences
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ascotan
Companies in biotech make money in 2 ways:

1\. Patents

2\. Selling to other biotech companies

Otherwise they're just R&D facilities funded by research grants. Patents are
hard to come by, take a long time and are therefore very expensive to obtain
(especially on anything related to humans). By default #2 ends up being the
most profitable for this type of investing. There's a weird self-sustaining
industry here which is ultimately feed by grant money.

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Protostome
That's slightly misleading.

The market structure as it is today confer a significant advantage
(especially, in the drug development market) to big companies with deep
pockets who can survive the regulatory approval process.

Therefore, selling to big biotech corporations is a completely viable business
model, if you have a technology that has proven itself in early studies and
the next step requires you either raising a lot of money and losing most of
the control of the company, or selling to a big corporation, cash in on years
of time and dedication.

Another pain point, is the involvement of VCs in the biotech market. Most VCs
don't like long term investments. long-term is riskier and other markets offer
faster ROI compared to biotech. Therefore, most VCs start pushing for an
acquisition in the early stage of the development.

There aren't many VCs willing to wait 15 years for a drug / diagnostic product
to be approved and reach the market.

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Gatsky
This seems a little low value. It needs to be shorter for one. I don't really
get their point about Color genomics. This company offers DTC a product which
genetics labs already do everywhere. There are a lot of available resources
for interpreting the results of BRCA1&2 testing. It seems silly to claim they
'have a moat'. They just started at the moment that Myriad Genetics lost its
monopoly on the gene. They are offering cheap testing which must be subsidised
by venture funding - I know this because Color charges less for the test than
not-for-profit companies.

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franctic
This is an interesting article but I feel like there’s a big disconnect
between the description of Axial’s focus and the companies used as case
studies. They all seem to rely on advantages companies developed well after
being “early stage” startups, and it’s not clear how you could ascertain those
advantages before the companies managed to pull off their various bets. I
would imagine most people would agree Merk & Regeneron are well beyond the
point where the idea of value investing is tough to do. Perhaps I just am
working with a different definition of early stage.

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lawrenceyan
Earlier detection and treatment of health issues is the holy grail in my
opinion. Anything you can do that directly targets this is a guaranteed gold
mine.

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valuearb
These are all good points, but glasses over the most important measure,
valuation.

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balls187
Offtopic: I read that as "Valve Investing in Life Sciences"

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denkmoon
Gabe talks about brain-computer interfaces in a recent interview. I bet he
watches the life sciences eagerly.

