Monday, October 05, 2015

Giving The People What They Want

We live in a golden age of near-exponential knowledge-growth and consolidation in general, and more particularly, as it relates to drug discovery. That said, while Moore's Law incessantly drives down the cost semiconductors and related electronic equipment, and algorithmic software innovations are on the cusp of driving down the cost of much previously-expensive financial intermediation, healthcare, medicine, and pharmaceuticals specifically appear to marching in the opposite direction. This is as true for the eye-popping costs of newly-discovered and recently-approved medicines that may be weakly palliative, new drugs novelly treating rare diseases, or improving upon existing treatments to, as carpet-bagging scums Martin Shkreli and Valeant have brought to the public's attention, gaming a system easily gamed in order to take the insured population by the ankles, hold them upside-down and vigorously shake them until each and every penny, nickel, dime and $100 notes is loosened and falls from their pockets. It stinks, and it is disappointing to have seen Wall Street's best and brightest enthusiastically jump on the bandwagon and bankroll (as they did with Bill Erbey), so odious an arbitrage.

As a result, gobs, and gobs, (and gobs!) of money have been thrown at nearly anyone mining the drug-discovery coalface. Many are ostensibly genius-caliber scientists with attendant leadership skills and huge personal ambition. Future generations may thank them. But any leisurely walk through the woods of (listed) industry cannot help but anecdotally marvel at the sheer number of endeavors funded and floated, most of which will, inevitably be worth nothing to their equity investors. VCs may have exited, managers will have collected meaningful salary and bonus (and sold shares), investment bankers will have extracted their dues, but the ordinary biotech miner-forty-niner, ever wishful of scoring a Celgene or Pharmacyclics, will, if history is the judge, be rather more disappointed.

Noticing that my skepticism is getting ahead of me, I will tell you that I believe there is much to admire here. It – the “can-do” attitude, the lack of fear of failure, the willingness to pursue dreams – is the stuff that got us to the moon, and will cure cancer. But it's also the stuff that gave us Ory Weihs (who's made a small fortune getting paid rounding up on-line punters and delivering them to on-line gambling sites), Bernie Ebbers, and Enron and a list of contrapreneurs too long for this post.

Back when I was a boy (camera pans and zooms on to grizzled redneck with long white whiskers in blue overalls, in a rocking chair on the porch of a rural cabin, dragonflies buzzin' and banjos pickin'), there were practical limitations on floating wild-eyed out-of-the-money longshots. Minimum revenue thresholds, an operating history, the presence of profits, were prerequisites on most of the main bourses. Some was regulatory, some was due to scars burnished on popular wisdom from the 20s and subsequent crash. This never stopped people losing money in stocks, but it seemed to help limit the most egregious opportunism outside the ever-present bucketshops. Importantly, this meant companies were funded and often stayed private for much longer, until they came good with some revenue, and some profitable trading history, or less fortunately, had their plugs pulled by their (former) sponsors. It also meant that "professionals" were in charge of the investment process (FWIW). Sure, there self-described polymaths who were out of their league and blinded by the science and a sweet tongue, but there were also many highly-informed specialists, separating wheat and chaff, who carefully chaperoned the growth and magnificent contributions of the flagships.

“Netscape” changed that forever. Netscape was the Klondike-find that transformed and fueled the lust for exponential growth stocks as lottery tickets in the national imagination. And what The People want, The People get (with a bit of help from investment bankers, stockbrokers, and all variety of charlatans). The wanted The Internet, they got the internet. They wanted fiberlightwaveoptics, they got it NT, AVNX, JDSU at 11-digit valuations. They wanted Merchant Energy, and so the trucks arrived. Solar? Errr ummm ignominiously, obtained. Black gold? Granted and presently vomitting all over the west, Bakken, and Marcellus. Nothing, it seems, cures high prices and the hunger that fuels it, like high prices.

And so, here we are, today, with Biotech, present for decades – both blue-chip investment grade and the speculative garden variety, but never in as full-bloom as witnessed in 2015. Every investor with a stock portfolio seemingly has some biotech spec in their portfolio. Some research rocket-fuel, some drug-discovery beta. How many times have you heard your friends' regret about dumping Incyte @$5 (now $125/shr) or "taking profits" in Regeneron in 2011 after it doubled to $40 (now $475). Even my brother-in-law, a conservative stock-broker with income-oriented clients has taken to sexing-up their dossiers portfolios with exotic galloping  biotech  I've never even heard of. This is a reliable tell-tale (his clients are still suffering indigestion on their  MLPs). Apparently, the only thing worse than buyer's regret, is seller's regret, or, as it happens, not buying at all.

Cynics may question my motives for writing this. They may accuse me of being sore “to have missed out”. But for the record, let me say that I've lost money with the best of them, falling prey to most behavioural flaws underpinning investors losses, and really I just wish I could contribute more to this great wave (and shorting stock hardly rates as a worthy societal contribution). So instead, I've decided to help future biotech scions (and their bankers) by helping them conjure names for their future empires. Some may scoff at this effort, but so numerous are the listed companies that finding a suitable name is always challenging and may soon become a major problem.

You see, Biotech naming is a Scrabble-players fantasy. There are Improbable combinations of X's, Y's, Z's, and V's creating a realm of high-scoring naming possibilities, only a portion of which will seduce investors, and demonstrate just how uncreative HF managers are in their own choice of names.

(1) To start, choose a place name, favorite latin description of a vital organ or disease, or just a mainstream biological or life-science chemical term you might remember from high-school. (Tip: If using a place name, try to coin one evocative of health (Portland?) and avoid the rust-belt (Buffalo BioScience or Detroit DermoGenetics just sounds wrong!). (Tip: If using initials, use no more than 3; avoid word-images,  use only consonants,and  try to evoke something vaguely familiar)

(Sample terms: ) Cell, Bio, Epi Pro
(Sample Places: Portland, Cascade, Ranier, Olympic, Redwood, Eureka)
(Sample initials: RTW; QBZ, STP)

(2) Insert dazzling cool-sounding but ultimately generic biological or laboratory term.
(Tip: Use at LEAST one, but stringing two or three together works well too. Parsimony is not your friend when trying to seduce the punters.
(Tip: Capitalize the second and third term as well for important and lasting effect)
(Tip: Keep your Latin  dictionary handy if you get stuck)

(Sample Dazzlers: Epi, Med, Bio, Cryo, Derma,Gen, Gene, Ogics, Pharma, Mune, Immune, Med, Sys, Exis,Oral, Tryx, Tech, Onco, Cardio, Viro, Fibro, Zyme

(3) Finish it off with an appropriate bookend to seal it. Pay close attention to the alliteration. It should roll off the tongue so when investors are bragging about their latest Biotech investment, they won't feel inferior to their friends.
(Common Closers: Labs, Therapeutics. Research, Pharmaceuticals, BioPharma, Science
(Tip: If economical in stage 1 and 2, do not hesitate to choose a double-barreled ending. Like the English upper-class, there is some benefit to conveying superiority in your name choice)

(4) Putting it all together: Just do it. It's fun! Try a few and see if you can create investors' next ten-bagger!  Here goes....

FibroZyme Therapies
CryoDerma Oncopharmaceutical
Epitryx BioLabs
Eureka ViroImmune Bioscience
Medexis OncoScience Labs
Dermologic Drug Discovery
Vespasian Gene Therapeutics
BioCryoSys Pharma
BioCardial Research

(enough for this this week....!)

Thursday, October 01, 2015

Finding Fault in Fault-Finding

My spouse is an expert fault-finder, never failing to expose, highlight, broadcast, lay bare, unshroud, feature, examine, emphasize, reiterate, assert, underscore and remind ME of MY faults, weaknesses, inadequacies, shortcomings, failings and defects.

And of course, my spouse is often "right" insofar as I am quite imperfect, and (one of) the first to admit this rather human condition. For I am, at times, inattentive, inconsiderate, insolent, indolent, unthankful, unhelpful, ungrateful, unwittingly stupid (ignorant and dumb), uncommunicative, uncompassionate, unsympathetic, unconcerned what other people think of me, selfish, self-centered in addition to the bevy of other failings I cannot immediately recall but almost certainly possess.

To my credit, I am predisposed towards open-mindedness, possess a reflective streak that, more often than not, allows me to recognize (and regret and remorse) when I do something jerky. I also have a strong desire to improve, and be better tomorrow than I was yesterday. I do not always succeed, but my intention is good, and I believe my life is one of making demonstrable efforts in this general direction - both big and small.

Nonetheless, incessant criticism can be wearying, even to a principled, thick-skinned critic such as myself. Often, what makes it particularly difficult for the partner on the receiving end, is when valid criticism leaps from 'the action' and becomes personal, i.e. a complaint or critique supersedes the transgression itself. This is highly-corrosive and ultimately self-defeating for the critic IF the purpose of the criticism were well and truly about solving the specific problem.

This latter facet of an erstwhile objective issue is revealing.  Psychological literature abounds with explanations and understanding, the majority which centers on projection and avoidance. These underlying motivations do not preclude the legitimacy of any offending faults or transgressions, nor grant blanket license to the offender to ignore what may very well be serious issues. Such behavior does, however, give cause to examine the situation, and one's parochial motives, more closely. In a perfect world, this would mean introspection and self-reflection to insure, as Elvis Costello aptly put it, "one's aim is true".

When I read the persistent outbound criticisms of "Europe" emanating (mainly) from the political and journalistic right in Britain, I cannot help but sympathize with the Continentals. In these circles, Europe stands accused of being the cause of so many of Britain's ills, and the focus of such vitriol, one would be forgiven for asking what precisely is at the root of their anger. Make no mistake: "Europe" is far from perfect. They rarely miss an opportunity to miss an opportunity;  possess diverse often-clashing national identities; frequently shoot themselves in the policy foot; suffer internal squabbles that are difficult to even caricature; err on the side of consumer protection and often over-burdensome regulation, and have shoe-horned themselves into a currency union before the requisite amount of fiscal union to insure long-term stability and confidence. Anthropomorphizing them, they are guilty of these and countless other faults.

But the British penchant for Continental fault-finding is, I believe, disproportionate to Europe's so-called transgressions, and the sport, as pursued by the most enthusiastic and prolific of British Eurobaitors is, I posit, driven by projection and avoidance, in addition to the more obviously-cynical domestic political expedience.

It is far-easier and more comfortable for one to highlight other's flaws and shortcomings than it is to confront one's own problems - particularly when these flaws are close to the core of one's being. Practical, perhaps, but far from enlightening. Rather, Britain's most vociferous and persistent EU critics might do well to focus upon Britain's poor and deteriorating public education, underinvestment in virtually every aspect of public infrastructure (pubic transport, healthcare, roads, housing, communications), galloping inequality, negligent regulation of privatized natural monopolies, pervasive racism and xenophobia, rampant NIMBYism, a crumbling increasingly fragmented internal union, erosion of and unwillingness to enshrine fundamental human rights, as well as a first-past-the-post political system increasingly incapable of aggregating and representative more fragmented interests. Europe, the EU, the Euro, have NOTHING to do with these problems. When Britain begins to truthfully and earnestly acknowledge and confront these profoundly important problems, she might find herself better-placed to offer practical substantive advice to others on their ills with an aim that is true.