07 May 2025 4 min read BiQ Journal

BiQ Journal: Morning Thoughts

Many of the companies discussed in the BiQ Journal are early-stage and/or may not meet the criteria for the BiQ Active Portfolio. The BiQ Journal is for information purposes only and does not constitute a complete analysis of any companies mentioned. For my full analyses of BiQ Active Portfolio companies, please refer to the Biotech iQ Cheat Sheets. Nothing presented herein should be considered investment advice. I may or may not have positions in the companies mentioned and may open or close positions at any time.

Good morning!

My recent work and travel schedule hasn't allowed me to write as many BiQ Journal entries as I'd like, but I thought today would be as good a day as any to try and get back into the swing of it. Today's entry isn't about a stock; rather, I thought I'd take this opportunity to share a few random (or maybe not so random) thoughts. By the way, have I mentioned how much I love 5AM earnings calls (I live in the Pacific time zone)?

As BiQ Premium members know, this is a big week for us, with many of our core positions reporting this week. First, I'd like to wish everyone good luck! Earnings season is an exciting time, but it can also require a lot of mental fortitude, especially during times of high market volatility. I'd also like to remind investors that investing, or at least the way I choose to do it, is a long-term game. If you've done your homework and developed a well-researched thesis, earnings season is a great time to check your progress and process any new information. Whether your stocks move for you or against you in the short term, the most important thing you can do is to carefully evaluate all the new information to determine whether or not your thesis is on track or needs a course correction. Price movements in the short term are usually based more on sentiment than on fundamentals, so it's important to carefully separate the signals from the noise.

I'd also like to share a few thoughts about the volatility we experienced yesterday. For those who have been following my Weekly Recaps, I've been saying the same thing for weeks. Basically:

I think volatility will continue until the core issues facing the market are resolved, primarily trade negotiations and disruption at the FDA.
In response, I am maintaining higher-than-normal levels of liquidity.
Despite the short-term headwinds, I think biotech remains a critical US industry and is well-positioned to outperform over the long term. However, complacency can be dangerous.

Yesterday's biotech sell-off appeared to be triggered by news of the nomination of Dr. Vinay Prasad to lead the Center for Biologics Evaluation and Research (CBER). I can understand why many market participants may be concerned, but I think yesterday was a definite overreaction.

Due to many years of mostly consistent leadership, biotech investors have become comfortable with what to expect from the FDA. There have been a few zigs and zags, but overall, the direction of the Agency has been fairly steady. What we have seen over the past month is a lot of news about big changes at the Agency. It's become obvious to everyone that the new leaders at the FDA have no interest in maintaining the status quo, and that can be scary for investors.

It's not my job at Biotech iQ to comment on whether I think the changes are good or bad. I can do that on my own time, but it won't help anyone for me to do it here. My job is to try to interpret the new information and help navigate through the turbulence. To that end, I think it's important to keep a sense of perspective. For those who follow my updates, you already know that I believe the FDA will remain committed to innovation and the health of the biotech industry. It's not in anyone's interest to change that. This is my North Star.

The big challenge I see in the current environment isn't that the FDA is suddenly going to stop approving drugs, but that investors haven't been provided clarity on the Agency's future direction and what to expect. The news flow seems arbitrary and unpredictable, often implying one thing one day, and the opposite the very next day. This is another example of why it's essential to separate the true signals from the noise, or in this case, to distinguish between rhetoric and reality. The challenge, again, is that investors have been subjected to a lot of rhetoric, but very little useful information.

However, that doesn't mean we don't have any guideposts or a roadmap. At BiQAP, my approach is to focus on companies with a high probability of success while minimizing risk. I know, that sounds like a great philosophy, but how can it be applied in practice? The answer is to focus on the basics. Here are just a few examples of the types of core questions I ask myself when selecting companies for the BiQAP:

Sustainability. Can the company survive, or hopefully even thrive, under adverse market conditions? What is their margin of safety?
Unmet need. Do the company's products fill a well-defined and unmet market need?
Clinical data. How strong is the clinical data? Is the company relying on outcomes or predictive biomarkers?
Business case. Does the business case make sense? If there are competitors, does the company have a significant and material edge? What is the path and timeline to commercialization? Does the company have the necessary resources to meet critical milestones?
Catalysts. What are the upcoming catalysts that can support the stock price? What are the odds of success?

There are never any guarantees when it comes to biotech investing, but that doesn't mean you can't stack the odds in your favor. By remembering why you came to biotech in the first place, and by focusing on key important principles during stock selection, turbulence can be turned into opportunity for investors who have the patience and fortitude to weather the storm.

I would love to hear your feedback! If you have any questions or comments (or corrections) to share regarding this article, please click the "Comments" icon below to go to the online version of this article, scroll to the bottom of the page, and enter your question or comment in the Member Discussion area.

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