Mark Ahn Discusses Picking Biotech Winners

Mark Ahn Explains Why Some Biotech Startups Succeed, While Others Wither via PR Newswire

Mark Ahn has been a business investor on the biotech and pharmaceutical sectors for twenty years. His expertise has helped raise billions of dollars in investment capital and his work as an executive has shepherded revolutionary drugs to market.

His advice for would-be investors in biopharmaceuticals? Surprisingly, it's not much different from what Warren Buffett would give in investing in railroads or isurance companies.

The first piece of advice? Do your homework. Every biotech firm talks about innovative disruption, and paradigm changing medical breakthroughs. Get in contact with multiple research groups and, per Ahn, take minority stakes in a lot of competing firms. Pay attention to what treatments are being proposed for which conditions. Don't be afraid to back multiple bets when it comes to drug development.

The second piece of advice? Invest when the company is running Phase II trials and license the product then. The cost difference can be worth billions of dollars, and even a dozen missed investments will still cost less than buying a billion-dollar license.

What do you look for in a biotech firm as an investment opportunity? It's not the hype - the hype is often a trap. The trait you should seek out is resiliency. Drug development is a very long product development cycle. Biotech firms will need to seek out multiple rounds of finding at different development milestones to get a product to market, and companies that get swept up in the hype tend to not have the focus needed to follow through on a dedicated drug development program. In short, look for more than just brilliant researchers and a hot new product. Look for stable, forward-thinking management that knows how to solve problems and keep the program development moving forward.

In the end, Ahn's advice matches Buffett's: Divirsify, know the business particulars, and invest in good management.