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Enterprise development path
biotech：A new type of pharmaceutical enterprise with innovative biotechnology as the core. They usually focus on cutting-edge technologies in a specific field, such as genes, cells, etc., and have the main task of developing innovative drugs. Biotech companies may be smaller, but they play an important role in pharmaceutical innovation, providing a steady stream of innovation for the development of the pharmaceutical industry.
Because walking in the no-man's land of scientific discovery, this kind of enterprise is more like a scientific research institution, usually founded by scientists for the pursuit of ideals or money, hoping to discover better drugs, diseases, and at the same time get returns, because the unknown nature of scientific research violates the need for immediate feedback from human nature, so the company that can really survive for a long time and advance, often the founder has a strong original intention of curing the disease and saving people, so it is possible to persist in the darkness where there is no edge, otherwise it is too easy to deviate in the process of only pursuing money, Eventual death.
The initial capital of such companies is often market capital, and at the same time, it takes at least 10 years and $1 billion for an innovative drug to be marketed, so there is no meaning to the valuation of such companies.
But the business opportunity was not ideal, with nearly 200 biotech companies popping up in the last 10 years, but only Genentech was profitable, and the margins were disappointing."
After 20 years of being on the market, Futai has achieved a blockbuster with annual sales of $1 billion, and it was delisted in only the third year because of the better effectiveness of competing products, which is the cruel behavior pattern of this industry.
Therefore, the main determinants of the fluctuation of stock prices of innovative drug companies in the biotech stage are:The phased unreasonable fluctuations verified by the capital preference cycle and pipeline milestone stage are commonly known as emotional games.
pharma：It usually refers to a traditional medicine enterprise integrating R&D, production and sales. They typically have a broad product line, including prescription and over-the-counter drugs, and may be involved in more than one area. Pharma companies are typically larger, have a strong sales network and marketing capabilities, and a deep base of medical and scientific knowledge.
At this time, the company already has the function of self-hematopoiesis, and the core product pipeline has entered the harvest period of a virtuous cycle in the medium term, but due to the characteristics of the patented drug that can be imitated after expiration, the research and development of the enterprise cannot be stopped, and it is also necessary to find a new drug to continue before the patent cliff, which is different from the 0 income of the biotech stage, at this time, the company's revenue and profits can already support the continued research and development, and return to shareholders.
To achieve this level, a new drug rocket with a large enough turnover, a high enough profit, and a sufficiently exclusive new drug rocket needs to be launched high enough, fast enough, and free of adversary interference during the market exclusivity period, so that it can reach the escape speed of entering space.
MNC is commonly known as a large factory(multi-national company), which has subsidiaries or sales networks in many countries or regions, is a global business enterprise. In the pharmaceutical industry, MNC usually has a wide range of product lines and market coverage, and also has strong strength in R&D, production, and sales. The strength of MNC lies in its global operational capabilities and resource integration capabilities, which allows it to conduct business on a global scale and meet various challenges.
Long-term continuous accumulation, created a global R & D, production, sales network, intricate layout of the product pipeline, relatively speaking, the company has become its own star, in the current human health of the medical field of unknown too much and unmet demand for the situation, will through their own capital strength, continue to siphon the surrounding asteroids, so as to ensure their own moat.
After all, MNC has the disadvantages of large enterprises, so the innovation ability is suppressed, but the capital strength also provides an exit channel for Biotech, that is, innovative enterprises develop new drugs, and MNC eventually acquires, a win-win situation, and this model also continuously strengthens the moat of MNC, so that other players can not get close.
Innovative drugs
From Shennong's taste of herbs to today's genetic modification and creation of molecules, it is a process of human exploration in unknown areas to alleviate suffering and prolong life.
I've seen Jichuan and Jiudian before, one is a strong sales channel, and the other is a powerful production and manufacturing of exclusive imitation varieties, both of which belong to the business in the commercial field, and there are traces to follow, and the product is relatively easy to understand, and the innovative drug is moving forward in chaos, which belongs to pure cutting-edge science, and there is no successful demonstration, and I don't know that it will lead to **, and the winning rate is extremely low.
So before looking at Akeso's financial report, I read two books to understand the behavior patterns of the industry.
Billion Dollar Molecules: The Quest for the Perfect Drug (From Lab to Wall Street Legend), and The Antidote: Into the New World of Manufacturing", tells the story of Futai's journey from a biotech to a biopharma, and concludes that the certainty of any biotech is almost zero, which is described in the book as if only one or two of the hundreds of millions of sperm cells occasionally reach the other side, and the molecule must always be allowed to "fly for a while" in the development of new drugs. So even though none of the Fortite scientists "have a new drug," it doesn't matter, and many people in the industry have never been able to create a new drug in their lifetimes.
Since 1990, only five of the hundreds of biotech companies in the United States have finally made it to Pharma. Not to mention those large factories MNC, almost all of them have hundreds of years of historical accumulation.
Even if these scientists have a 50% success rate to get the unknown right and get the results right at every step of exploring the unknown, then the success of the superimposed industry model needs to be done right dozens or hundreds of times in a row, and in the face of the ever-changing competitive landscape and capital market, the probability of success will be outrageously low, from the lock of lead compounds, the research and development of molecules, the drug of the product, hellish clinical trials, the rollout of sales channels, to the change of market structure, innovative drugs need too much luck.
The key to biotech's success
Due to the industry model, the conditions for success are summarized, and more precisely, the factors that increase the probability of success:
1.The founder has a real heart to make medicine and save mankind from suffering, and the best heart is a child's wish, such a strong nerve stimulation will help enterprises to overcome the most difficult darkness and innovate, which requires a clockmaker.
It was almost midnight after dinner, and the governor and I rode through the city in his Audi back to the hotel. He asked me what to say tomorrow at WuXi AppTec, the only life sciences company we had on our entire trip. When it comes to health care, he said he wants to be more emotional, focusing on human needs, emotions and well-being, rather than just "business." I laughed. "That's good," I said, "and you'll find that people at WuXi AppTec are like-minded with me." Most of the people who develop innovative drugs are idealists. Not many people would do this based on rational choice, and there are many easier ways to live. If you say that, they will be happy.
2.Always pay attention to the cash reserves of the enterprise, in the stage of zero income and high burning money, the core of the enterprise is cash support, so financing is the first priority of enterprises and R&D in parallel, the principle of financing is not lack of money, but as long as there is a time window, you have to take money, no one knows a few months later, whether the market is willing to give money. Only with enough cash on the books can there be a probability to ensure that the company is still present when the drug is successfully developed and marketed.
Warren Buffett bought the MNC
In 1993, when the first biotech bubble burst in the United States, Wall Street analysts suspected that more than 58% of biotech companies would soon go bankrupt.
However, things didn't go as bad as they could have been. After hitting a record low of 79 points on the New York Stock Exchange, the pharmaceutical industry index continued for five consecutive years, and by April 1999, it had reached 369 points, a low of 467 times.
At the Berkshire shareholders' meeting in 1999, Warren Buffett, the "god of stocks", was tortured by the soul of shareholders: did he not make a big mistake in the first crash of pharmaceutical stocks?
In this regard, Buffett bluntly said: "I didn't do that, it's just terrible." If such an opportunity arises again, I would react in a second and take a basket of large pharma stocks below the average P/E level in the market. ”
First of all, Warren Buffett did claim that he didn't understand pharmaceutical stocks before, but Lao Ba also regretted that he didn't do it during the 1994 pharmaceutical stock crisis. Second, pay attention to a few key words: "below market average P/E", "basket", "big pharma". Since Warren Buffett really didn't understand pharmaceutical stocks at that time, he thought that if he wanted to, it should be safer to meet the above conditions.
Warren Buffett later mentioned: "We don't know how to look at the drugs that pharmaceutical companies are developing, and even if we understand it now, in another five years, there will be another batch of new drugs in the research and development stage." We don't know which one has more potential, Pfizer or Merck, and we don't know which one can develop blockbuster new drugs. What we do know is that we are reasonable as a portfolio of companies, and they should perform well overall in the future. The R&D work of pharmaceutical companies is very meaningful, but I don't know how to judge the value of drugs in the R&D stage. The combination ** is more reasonable. ”
If there is a part of the reasoning above, then Munger said more directly: "The future of the pharmaceutical industry is easier." In the pharmaceutical industry, all companies have a good time, and some of them have a particularly nourishing life. What we do know is that we are reasonable as a portfolio of companies, and they should perform well overall in the future. ”
Munger nakedly endorsed the pharmaceutical industry: the industry is easy, all companies are having a good time, and some are particularly moisturized and the combination of ** companies is reasonable, and their overall performance in the future should be good.
In the third quarter of 2020, Warren Buffett bought a number of pharmaceutical stocks, including nearly 21 million shares of biopharmaceutical company AbbVie, 3.7 million shares of Pfizer and nearly 30 million shares of Bristol-Myers Squibb. In addition, the position in the innovative pharmaceutical company Merck KGaA amounted to 22.4 million shares. Correspondingly, Warren Buffett cut bank stocks** in the third quarter, including Wells Fargo, JPMorgan Chase and American Manufacturing Bank.
When the opportunity appeared in 2020, Lao Ba did not hesitate this time and spent a lot of money on 4 pharmaceutical companies. Interestingly, he said that he didn't know which one had more potential, Pfizer or Merck, so he bought both 21 years later. It shows that the company that Lao Ba was optimistic about 21 years ago can still be favored by him 21 years later, which is enough to prove that medicine, like consumption, can stand the test of time.
But there are two things to note here:
1.Warren Buffett bought the mnc portfolio when he was at a low point, which is different from Akeso's biotech, and from the perspective of large factories + portfolios, it doubles up the certainty.
2.This is the pharmaceutical market in the United States, although there are also medical insurance policy factors, but the model of first-class drug commercial insurance payment has created a closed loop of high input and high output. The pharmaceutical industry, the most lucrative industry in the United States over the past 40 years, doesn't necessarily work in other countries. (maybe a little worse than the tobacco industry).
If you break away from these two items, you probably won't be able to play.
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Risk Warning:The views mentioned in this article only represent personal views, and the subject matter involved is not recommended, and you buy and sell it at your own risk. Due to the lack of knowledge of financial management, accounting, and the behavioral patterns of supply and demand in the industry, it is important that you look at all my data analysis with a skeptical eye, and it would be appreciated if you could point out the loopholes and errors in the analysis.
Akeso Biopharma (HK|.HK).09926)$ Innovative drugs welcome favorable policies, investment opportunities are coming? #