Dan Rasmussen and the Verdad team cover the strangeness of the biotech sector, the recent tribulations that have led to massive underperformance of the broader market, the important role played by specialist biotech funds, the factors that drive performance, how to manage risk, and, ultimately, a strategy for how to invest quantitatively in the biotech sector. He shares this data on the sector:
In the last 30 years, of the just over 1,000 biotechs that have reached at least $200 million of market cap, a whopping 67% have lost money. Of these, roughly 50% were acquired at negative total returns, 10% delisted and the remaining 40% are still public with a significant proportion trading below their cash balance representing “zombie biotechs”; failed programs where cash remains stranded instead of being returned to shareholders. Of the 33% that were successful, 55% were acquired and the remaining 45% are still public.