History of Bio5C
I've been a stock analyst since 1999. I've focused solely on biopharma names since 2003. I've seen a lot of success and a lot of failures. It's amazing to me how many biopharma companies continue to make the same mistakes, over, and over again. I've researched drugs with novel mechanisms of action that look outstanding in preclinical studies, only to see them fail once they hit the clinic. I've also witnessed repurposed agents that bafflingly succeed in new indications where the market wagered little hope. I've seen good drugs fail because of bad business models and terrible management and bad drugs succeed because of good business models and brilliant management. There is no true formula for success, but there are a number of roadblocks and red flags.
Cash | Catalysts | Charisma | Capital Structure | Credibility
Before my career as a stock analyst, I was a bench scientist. Do I know everything there is to know about science and drug development? Obviously, not; but, I do know enough to understand what I think will work, what I think may work, and what I think has a snowball's chance in hell. More importantly, after 20+ years of watching biopharma stocks rise and fall, I have a pretty good sense of what the market thinks will work or fail, and speculation is what tends to be what drives biopharma stock prices.
I also have a pretty good background in finance (MBA with a concentration in finance, former CFA Charterholder, etc...), although anyone can be taught to read a balance sheet. It's quite simply the easiest due diligence step for stock analysts to undertake, but one that I see far too many individual investors fail to perform.
I've also been around the block a few times. I've attended many presentations and sat in on more one-on-one meetings than I care to recall. I speak to CEOs, CFOs, CMOs, and business development executives on a regular basis. There are wiser souls - I admit I've been taken for a ride or two - but my sense of bullshit detection gets better every day and I know what sells and what does not.
A report based on my 5 C's of Biotech Investing™ will help you figure out if the science is real or pretend, it will alert you to pending catalysts and hopefully, keep you away from shyster management teams. It provides an analysis of the balance sheet and the ownership because if you're thinking about buying a stock, it's important to know who is with you and who is against you! Reports also contain a full valuation model so you know what to pay and when to take profits, and they map out a trading plan so that you have a clear path to making money on the name.
Does The Model Work?
The chart below was created on June 1, 2017. It shows the Bio5C score on March 1, 2017. Over the next three months, names that scored in the top 15% of my model increased an astonishing 36%, while names in the bottom 15% declined down 34% (the XBI is up 5% over the name period). See the graph below. In this sense, my 5 C's Model can be used as an excellent starting point for discovery and due diligence.
In 2018, the 5C Model beat the market handily (both the XBI & SPY) by returning nearly +45%. In 2018, my trades had a success rate of 82% rate.
In 2019, the 5C Model again beat both the XBI & SPY. The 5C Model returned +76% in 2019, beating both the XBI at +33% and the SPY at +29%. My trades had an 85% success rate.
In 2020, I created a new, more aggressive portfolio of Bio5C names called the Spec. Play Portfolio, and an 80/20 mix of the Model Portfolio and the Spec. Play Portfolio again beat both the XBI & SPY. The 5C Model returned +53% in 2020, beating the XBI at +48% and the SPY at +16%. In 2020, my trades had a 79% success rate.
In 2021, I merged these two portfolios into one, choosing to use position size to attempt to increase alpha with more speculative plays. And in what was by all accounts a difficult year, the 5C Model returned -10% in 2021, once again beating the XBI at -21%. In 2021, my trades had an 81% success rate.