The entire world was upended when COVID-19 began to take over and the Biotechnology sector was no different. However, unlike some business segments that floundered during the turmoil of the global pandemic, biotechnology firms arguably thrived. They channeled their focus and passion as well as the years of research and development that was in place to fast track viral disease cures in a way never before seen.
Brian Corday of BullBear Partners is no stranger to the extremes of the market, including collapses in years past. With 35 years of experience in the public sector, even Mr. Corday had not seen something like the global pandemic of 2020.
"I really couldn't believe it. From January to March, into April then May. The year kept going on and it seemed for so long that everything was getting worse and not better, but then there was a shift."
The shift Corday is referring to is the announcement of success in clinical trials of the COVID-19 vaccine.
"The vaccine development helped show the public just what the biotech sector is capable of. Lots of very smart people working behind the scenes on really miraculous things that so few people know about. I have worked with companies that have been in years of clinical trials and are largely unknown to even the patients they could most greatly serve."
Most venture capitalists seek an average 2-3x expected return but recently many biotech VC firms have outperformed this number in great excess. A STAT report showed that Flagship Pioneering generated a 9x return on more than 15 funds.
A recent Biopharma Div report listed 71 biotech companies that collectively raised over $16 Billion through initial public offerings (IPO) in 2020, setting a new record for the sector.
Brian Corday's Biotech Investing Tips
With a history in venture capital and private equity markets, Mr. Brian Corday has invested and maintained positions in companies where strategic plans and business development are wide ranging yet focus on potential for development to help cure or suppress various rare diseases. With an emphasis in the biotechnology and pharmaceutical spaces, his past positions at Wall Street firms have provided tremendous insight into what is needed to not only receive funding but to operate a successful business.
"Having a plan is critical, even when things go sideways," says Corday. A University of Georgia graduate, as Chairman and President of BullBear Partners, LLC. Brian leads the private equity firm with a dedicated focus on finding companies with successful management teams, potential to help people in dire need, to dominate markets and maximizing brand value. Finding potential blockbuster drug candidates while increasing shareholder value is why Mr. Corday loves what he has been doing for 35 years. Mr. Corday noted, "When I started investing in biotech, most people thought it was fantasyland. I remember in the early 1990's being told by my superiors at that time that I should stick to investing in Sears and GE and give up on Biotech. I'm very happy I didn't listen to many of the so called experts back then."
We asked Brian about what he considers as some of the top factors when selecting biotech investments.
Get in Early, But Not Too Early
"The company's trials and pipeline is critical," says Corday. The pipeline of a biotech company relates to how many potential drugs in current and future development while the timeline is how the company is moving the various drugs through their various FDA trials or drug development plans. Many investors like to focus on drugs in Phase 2 clinical trials rather than Phase 1 which may be too early and Phase 3 which may be later than desired. Drugs with successful Phase 3 clinical trials generally move on to potential FDA approval.
Mr. Corday also mentions the importance of diversification. "Multiple programs and platforms are really important and where a lot of efforts should focus. Even the best biotech companies have teams working on multiple projects right now and many have multiple Phase 2 or even Phase 3 clinical trials underway."
There are many biotech companies that have succeeded with single-products, however there are 10x the amount behind each of those with multi-product creation and distribution. However, single product companies with the potential for multiple applications or use of the drug to treat disease can be extremely rewarding.
There Are Different Levels to Biotech
COVID-19 for example has shown that not all viruses or diseases are equal. It was something our world did not expect and has not ever experienced at scale. Mr. Corday says that it is similar for other diseases too. "COVID had a tremendous influx of money to support research and development, but so do many other fields. Cancer is at the forefront because we have yet to truly find a cure unlocking the multi billion even trillion dollar potential that exists. The various stages of drug development can be incredibly hard on the companies, their management and investors. Until a company completes a favorable stage of development or receives FDA approval, there can be dramatic highs and lows. One of my portfolio companies just completed a 10 year Phase 3 trial, they are very optimistic but it has been an uphill battle to say the least." If the company is right in their assumptions and trial outcome is positive, we may very well finally see a way to alter the course of cancers in the body.
Another interesting area is focusing on less-common diseases where there has been fewer developments. Limited research has led teams to discover and create orphan drugs targeting diseases with less than 200,000 people. 200,000 individuals is small in terms of virality or disease, but tremendous in terms of market size for a startup.
Weigh Both Risk & Reward
Biotech is a graveyard littered with potential. it's not from the patients who couldn't be helped, it is from the mountains of companies that have tried and failed to develop a drug that cracked the code for a certain disease. Areas like cancer, sepsis, Alzheimer's and obesity remain just out of reach.
That means they just haven't been reached yet, but also that they could be prone to fail like those before them. "You really want to consider the risk and reward. You have to," says Mr. Corday. "While the upside may be tremendous, is the potential for bankruptcy there? Are you willing to lose everything if the company goes down too? These are things inventors need to consider."
Another thing Corday says is important to consider is the corporate philosophy and finance structure of the company.
"If the people behind the company have good morals and values and truly believe in what they are doing, it goes a long way. I have seen it first hand. It is also important to look at the finance structure. Are top employees shareholders? Is the cap table littered with toxic convertible debt? How are executives compensated in comparison to revenues?" These questions Mr. Corday mentions are small details but public information and easy to take a few moments to consider before investing.
Biotech investing can be lucrative financially and personally rewarding knowing you are supporting an initiative that will help the overall health of mankind. It also can be tremendously risky with a history of failures that outnumber the success stories. Doing your research is important and being patient, as the timeline for products and companies can be years.
We hope that Mr. Corday's tips can help you find success as a retail investor much like he has found success as a venture capitalist.