Investing in small biotechs is more speculative in nature than investing in profitable companies. However, there are methods that can be used to make it less like gambling and more like actual investing. What exactly is biotech gambling, you say? It is investing in a drug program without a realistic consideration for the value the drug brings to the company or the risk of development, and then closing your eyes and hoping for the best. That is definitely not a strategy that I advocate. Instead, a more successful approach can come from thinking about biotechs in terms of the value of the products being developed, the likelihood of approval, and the current worth those products.This is the first in a series of articles outlining a systematic approach toward analyzing biotech companies as potential investments based upon the present value of their drug programs. The first step in this quantitative methodology is to identify the markets targeted by the company, and a range of possible sales that could be achieved if it’s successful in developing the drug.
