The digital revolution has flooded the internet with a vast amount of information, but more data doesn’t guarantee investment success. The key is high-quality information. That’s why I turn to the timeless wisdom of iconic investors like John Templeton, Warren Buffett, and his mentors, Ben Graham and Phil Fisher, adapting their principles to biotech investing. In this newsletter blog, I blend the timeless investing wisdom of icons like Buffett and Fisher with the clinical expertise of physicians and healthcare professionals to give you a unique edge in biotech investing.
Warren Buffett famously said he’s 85% Graham and 15% Fisher. That 15% nods to Phil Fisher, the father of growth investing, whose book Common Stocks and Uncommon Profits remains a classic. His 15 Points for evaluating growth stocks are still relevant today. For this article, I’ll zero in on Point #4: Does the company have an above-average sales organization?
From your clinical experience, you’ve seen biotech companies send their sales reps to your office, clinic, or hospital. The more reps visit more clinics, the more doctors like you learn about new drugs, driving sales for these companies. After all, you’re more likely to prescribe a drug if a rep has pitched it to you—typically after at least three presentations.
Now, picture a young biotech company, let’s call it Company B, that just secured FDA approval for a novel drug but lacks an established sales or marketing team. Building one from scratch is time-consuming and capital-intensive. Relationships with physicians take time to develop, and without them, sales can lag.
Contrast that with Company A, which has a sales and marketing partnership with a major pharmaceutical company. This partner already employs a large, experienced team of reps who’ve visited your clinic multiple times and built trust with you and your staff. If these reps pitch a new drug, are you more likely to prescribe it compared to one presented by a stranger? Most likely, yes.
With your knowledge of drug reps, you’d lean toward a biotech with a strong sales and marketing partner. A drug backed by a robust partner has a far better shot at becoming a blockbuster—generating at least $1 billion in annual sales. When a company reports rising sales for a new drug, its stock price often surges. Conversely, as we’ve seen with antibiotic innovators, drugs that fail to gain sales traction can tank a company’s stock in the quarters and years ahead.
That said, some growth biotech companies launch drugs with an in-house team and still achieve blockbuster status, though sales ramp up more slowly. Other strengths can compensate, making the investment a potential home run.
Beyond leveraging a partner’s sales and marketing muscle, a young biotech also gains from upfront partnership payments—tens to hundreds of millions of dollars. This cash strengthens their balance sheet, providing immediate liquidity. Partnerships often include profit-sharing, milestones, and royalty payments, further sweetening the deal.
When evaluating a biotech stock, always check if their lead drug—what I call the “Crown Jewel”—has a sales and marketing partner. Ensure the partnership terms favor the young growth company for maximum upside.
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Source: https://melinta.com/our-products/
Disclaimer: This blog is for educational and informational purposes only. It is not a recommendation to buy, sell, or hold any stock. Always consult your investment advisor and conduct thorough due diligence before making investment decisions.
Disclosure: Neither I nor Evergrowth BioHealthcare Capital hold shares of the antibiotic innovator MLNTQ at the time of this publication. I have no plans to purchase MLNTQ within the next three days.
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