How to start investing on Biopharma stocks | Quick Guide

[This is Part 1 of a series of posts about Investing in Biopharma]

You have already heard and read comments about it, however you don’t know exactly where to start … we all have had the same feeling.

Biopharma and Biotech companies are not very accessible stocks to follow-up, in comparison with other huge industries which are everyday on the newspapers, such as: Consumer Goods (Nike, Unilever, P&G), Technology (Facebook, Google, Oracle) and so on. On the contrary, these stocks seem to be ‘hidden’ and only available to medical experts or the wall street guys.


Since that’s not true, here are some advises to speed up your searches and leverage your decision-making in order to get the most of your future Biopharma/Biotech investments.

Decide your Approach

First of all, take a view from 20,000 feet and choose your approach based on: (1) Time you’ll dedicate (2) Effort you’re able to commit, and (3) Level of knowledge. Whichever approach you choose, you’ll want to monitor your portfolio to ensure it’s on track with your goals.

Where to get information

As much as data you gather, the fastest you will start visualizing the type of disease and the profile of the pharma where you think it will worth to start investing.

I suggest you to make your own analysis – this part it will take the majority of the time, but believe me that is better than trust on ‘gurus’ and biased Analysts – so, take all the information available in the IR (Investor Relations) website and focus on the key events; News, Official announcements, Board changes… and real numbers, Financial and Incomes statements and Balance sheet.

“Don’t boil the ocean, once you have an idea of the company targets and vision, check the Pipeline and ongoing Clinical Trials, this is gonna be strongly linked to the future Earning Potential”


The most self-explanatory and concise information about the drug development process that I’ve ever seen is available in the Roche Youtube channel: 

Roche drug development process

Last but not least, there are some excellent online-tools where all this info has been collected and you can take advantage of it. A good example is Finviz where the data is shown in a quick and tidy manner.

Detail of Innovate Biopharmaceuticals, Inc. on Finviz.com

Start before you feel ready

 If you’re working on something important, then you’ll never feel ready. A side effect of doing challenging work is that you’re pulled by excitement and pushed by confusion at the same time

James Clear “Atomic habits”

In order to demonstrate the theory above, start right now researching about the following interesting pharma list of Nasdaq Penny Stocks:

 Innovate Biopharmaceuticals, Inc. (INNT), Arrowhead Pharmaceuticals, Inc. (ARWR), ArQule, Inc. (ARQL), Xenon Pharmaceuticals Inc. (XENE), Endocyte, Inc. (ECYT), Madrigal Pharmaceuticals, Inc. (MDGL), InVivo Therapeutics Holdings Corp. (NVIV), OHR Pharmaceutical, Inc. (OHRP), Edge Therapeutics, Inc. (EDGE), Aytu BioScience, Inc. (AYTU), Auris Medical Holding AG (EARS)

Stay Safe Stay Informed

In conclusion, stay tune and try to learn from the experience, below a bunch of useful websites that you will probably need.

Enjoy!

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2018 CPhI worldwide at Madrid

About CPhI

CPhI is an international brand where UBM (PharmExec, LCGC)  organizes the largest Pharmaceutical performances in terms of manufacturers’ number and companies involved.

UBM is now a part of Informa, the leading B2B Information Services group. This is an important consideration that I could say, the potential of a company with such an immense intangible knowledge is tremendous … (2017 FY results).

The Event

As the world’s largest pharma event, with over 45,000 attendees and 150 countries represented, CPhI is an organization that you shouldn’t miss.

The allocation of the categories, six at the same time (CPhI, InnoPack, P-MEC, iCSE, FDF and bioLIVE) was smart and allowed to everyone the free movement around them, however if it is your first time at IFEMA Madrid (+10 buildings), the first challenge will be completing the tour without getting lost.

My first thought was: I don’t know any of these companies’ names …

CPhI worldwide focused its attention mostly on manufacturers and suppliers of API and excipients from all around the world. My first thought was: I don’t know any of this companies’ names – taking into account that I was surrounded by Chinese and Indian CMOs – nevertheless after walking around, I finally recognized some of them and even we got involved in very interesting conversations.

The most visually-attractive areas were InnoPack and P-MEC, where Manufacturers are proud of showing their best machines and latest technology trends. This territory was well dominated by European brands a few asian companies (Japanese, Korean or Chinese).

  

Experience

The bottom line is oriented to sell and maximize your connections in order to expand your strategic business alliances, so in case you are interested in educative-content, I strongly recommend you to join any of the Pharma Insights, which are presentations where an invited company and speaker briefly share a viewpoint or project with a particular industry interest: Emerging Markets, Biologic drug products, Consumer trends, Serialization, Biotech support, Supply Chain, etc.

 

Conclusions

Pharmaceutical Industry’s innovation is something that believe it or not, you can feel it coming as a Formula E speed car (electric Formula 1); quiet and in a Breakneck (fast) speed

In fact, there are now more products in development than at any other point in history!

Talented CDMOs, API manufacturers, formulation specialists, generics producers and most recently, Biomanufacturers (large molecules) are completely changing the rules of the game and forcing regulators to a complete update.

I’ve detected a trend on all kind of pharmaceutical companies to break with its internal barriers among departments, in order to ensure innovation and creating smoother and more transparent operations …

Finally, from the Supply Chain perspective, topics like Continuous Manufacturing, the growing Contract Manufacturing Industry, Biopharmaceutical operations and many others related, are just the cherry on the cake of creating a leanest and more efficient network across the industry.

 

Supply Chain is like PGA campaign ‘Live under par’. Always under pressure of delivering excellence every week

 

What Can A Newborn Teach You About Supply Chain?

After nine months of preparation, there you are, ready or not, she smiled at you and you smiled her back, then you know that everything is gonna be alright. Here is my compilation of learned lessons that my newborn has explained me about Babies Supply Chain.

Plan and Measure – Baby Dashboard

First of all, believe me that when you are in the middle of a crisis, the last thing you want to struggle with are spreadsheets or complex files. Therefore, it makes a lot of sense that any tool at Gemba (following Lean principles) should be clear and simple. In our case, my wife and I opted for using a whiteboard divided in two sections: Meals and Needs, so everyday we were writing down the hours and quantity of milk plus number of nappies used.

At the end of the week, it’s amazing the number of conclusions and decisions that you can make based on all the data collected

In conclusion, some of the first learnings were:
1. Forecast projection of number of nappies that we will need in the future months.
2. Correlation of sleep hours and regularity of naps against the quantity of feeds.
3. How external factors, such as: temperature (ºC), unwanted noise (dB) and unexpected events (relatives coming home); influenced in her cycles.

Balancing Supply & Demand – Nappies case

After doing a lot of research, the best approach for buying most of the Baby things is a economy of scale. In particular for nappies, there are several uncertainties that need to be taken into account. For example, Will X or Y brand irritate my baby’s butt? which size will she use? (weight of ultrasound is only an approximation), will X or Y brand be good enough? and so on and so on.

At the time of placing big orders, keep always in mind that you can mitigate potential damage in favor of potential gains

In principle, supermarkets and internet promotions are totally ‘unpredictable’ but don’t stress yourself, there is a certain pattern and seasonality (specially before summer) to get the best deals from each of them.

Maintaining a Safety Stock is crucial to cover the risks of Supply and Demand, and not as a level of inventory to be kept

Additionally, I excelled at the concept of Safety Stock, because maintaining a Nappy Safety Stock is crucial to cover the risks of Supply, i.e. your online order got late or promotions are not good enough to buy yet … and Demand risk, that happens when your forecast is inaccurate, which is very common when your baby suddenly starts pooping more often than before.

Just in time – Infant’s formula milk

In the case your baby needs infant’s milk, choosing the brand is a mission-critical decision. You are not going to change it unless there is a medical condition.

Here, your supplier sourcing selection should be very careful, in contrast than diapers, some formulas are not available in all the retailers and they are uniquely sold in specific drug stores.

As a result, you will have to identify very well the critical factors of your suppliers, some of the most important are as follows:

  • Capacity – Can I trust that online (Amazon) or local store (Carrefour) will have Stock enough?
  • Lead time – How long is going to take me to buy a new one since she/he finish the box?
  • Commitment to Quality – Very important when your baby starts eating solid food, then you will have to decide among Bio, Organic or Standard vegetables and fruits

As a rule, JIT strategy works very well with infant’s milk, essentially find out trusty Suppliers and do not keep big amounts of inventory – elimination of waste, because of the considerable costs and baby’s uncertainty

Last but not least, baby’s demand is a pull system and in many cases extremely difficult to predict, so if you don’t create any procedure to prevent you from getting out of formula (home-made Kanban) you will find yourself with no stock left to feed her – Is there any bigger pressure than that?

Conclusions

Having a baby is probably one of the biggest and hardest life’s experiences, so trying to stay positive is fundamental. Eventually I’ve been ironic in some of the experiences described before and most of the activities would have never been accomplished without my partner. Infinite thanks to my wife.

References:

  1. Lean systems: “The Machine that changed the world” James P Womack, Daniel T. Jones, Daniel Roos
  2. Dad university “What They Don’t Teach You In School”
  3. Economy of scale https://www.britannica.com/topic/economy-of-scale
  4. 10 Cs of Supplier Evaluation https://www.mindtools.com/pages/article/10-cs.htm
  5. JIT and Kanban systems https://www.toyota-global.com/company/vision_philosophy/toyota_production_system/just-in-time.html

Why is Supply Chain the Rockstar of Consumer Pharma?

The obsession of drug makers to re-evaluate and minimize Operational costs is the New Black. Nowadays Consumer Health (over-the-counter or GSL drugs) has a profit formula quite similar than the Retail business, but unfortunately delivering safety and quality are simply not enough.

The decrease trend on sales of the biggest US drug retailers (WBA, MCK, CVS) is due to the consumers shift from traditional to online shopping “the Amazon effect”.

As a consequence, because of discounts and pricing pressures, the profit strategy is getting lower. Moreover fighting against Amazon is not a solution, it’s just like a patient who tries to cure himself using a Placebo.

So what?

Industry really needs a Turn the ship around, which implicates radically changing Supply Chain Strategy from Deliberate to a more Emergent one.

Indeed, the future is getting harder to read and winning strategies that used to work in the past are not effective anymore … this is the point that differentiates you from the rest.

In particular, if we analyze the evolution journey of Retail and FMCG to an Agile Supply Chain Management, we will obtain a present-day version of the 3 pillars of Organizational Transformation: People, Processes and Technology.

  • Companies like Walmart Unilever and P&G are hiring the best talents where market skills and in-depth technical knowledge are the priorities to ensure creativity coming from top-rated professionals.
  • Their excellence in processes goes from the latest up-to-date Lean methods (TOC, 6Sigma …) to the most innovative Customer Segmentation, Supply Chain Resiliency and Circular models. 
  • They invest in technology. Advanced Analytics such as: machine-learning and AI enhances and even automate, decision making by reinventing operational models.

… and this is just the beginning.

Supply Chainers who are able to adapt its company value chain, make good products even better and at the same time improving Profit Margin, will ensure that the company model will not be disrupted in the future.

References:

  1. Bezos Starts the online drug war https://chiefexecutive.net/bezos-starts-the-online-drug-war/
  2. Gartner Top 25 Supply Chain list http://www.argentus.com/gartner-global-executive-partner-speaks-about-2017s-top-25-supply-chains-list/
  3. Deliberate versus emergent strategy https://hbswk.hbs.edu/item/the-business-of-life
  4. 2018 Trends to disrupt pharma supply chains https://www.pharmalogisticsiq.com/regulations/news/2018-trends-to-disrupt-pharma-supply-chains
  5. Beyond Supply Chains Empowering Responsible Value Chains http://www3.weforum.org/docs/WEFUSA_BeyondSupplyChains_Report2015.pdf

What role will Analytics and Artificial Intelligence play

The 2018 SAS Health and Life Sciences Executive Forum is an event in which global leaders across the health care ecosystem are coming to discuss key issues and opportunities around next-generation analytics.

The main target of 2018 session held at Madrid was to get a deeper understanding of new analytical technology applications in pharma and health care and their potential benefit to pharmaceutical companies, healthcare providers, and patients and communities worldwide.

For more information visit the SAS Executive forum agenda.
https://www.sas.com/sas/events/18/health-and-life-sciences-executive-forum.html

Tearing Up the Rulebook: How Millennials are Changing Concepts of Forecasting

… In the past, software was not powerful enough to provide a reliable forecast, but now we have tools and resources that provide insight like never before.

The question is, are you getting the most out of them?

Everyone knows that the present and future is changeable, so why then are we still using the same forecasting structures and assumptions? Why don’t we leverage technology to model different scenarios and build adaptive forecasts?

During my session, I stressed the importance of avoiding complacency when it comes to our forecasting capabilities, and how we should never regard our strategy as the “right” strategy.

We should never regard our strategy as the “right” strategy …

If you’re achieving forecast accuracy now, then you temporarily have a good strategy that must evolve with changing market conditions.

In my session at the Amsterdam IBF convention, I invited everyone to start thinking about how we can plan for all eventualities and base our analysis and conclusions on Forecast Accuracy Simulation, specifically in terms of what-if scenarios, hierarchy, and product segmentation.

What’s more, we discussed how to set up a separate business unit for Disruptive Innovation to develop the resources and processes needed to deliver improvements in forecast accuracy and greater operational efficiency.

Some of the Key Takeaways were:

  • The importance of leveraging software to build adaptive forecasts and develop a continually evolving approach
  • How to start adding real value to your forecast through demand driven models
  • How to organize for innovation and embrace different perspectives on forecasting

My deepest gratituted to all the IBF institute team.

The Institute of Business Forecasting & Planning (IBF) is a membership organization recognized worldwide as the premier full-service provider of demand planning, forecasting, business analytics and S&OP education. Having some of the world’s most well-known global companies as its members, the IBF is constantly finding and disseminating better ways to manage demand, improve organizational efficiency, and company performance. It has been said that no other organization on the globe has as much depth in its educational content for Demand Planning & Forecasting as the IBF. 

La Matriz Portfolio de Proyectos

 

¿Cómo mantener el orden de tus proyectos?

¿Tienes problemas a la hora de trabajar en varios proyectos a la vez? Es posible que te estés convirtiendo en un ‘slasher’ … del inglés ‘slash’ que significa barra alta. El termino fue acuñado por una famosa escritora del New York Times, el cual describe al creciente número de personas que somos incapaces (me incluyo…) de responder en una frase a la pregunta ¿Cómo te ganas la vida?

Imagina que eres un Ingeniero/Musico/Consultor/Escritor. Algo muy común hoy en día, pero ¿cómo coordinas todos esos trabajos durante tu día a día? Y aún más importante, ¿cómo controlas tus ingresos/gastos regulares durante el mes/año?

Lo fundamental es tener una vista de pájaro en la cual puedas clasificar todos tus proyectos, ya sea de trabajo o tu vida personal con la ayuda de una Matriz de Portfolio de Proyectos de acuerdo al Tiempo y el Coste invertido en ellos.

Para ello piensa en el coste no sólo como el dinero invertido también debes añadir todos los recursos implicados como amigos, tecnología, energía, nivel de stress, etc.
Ahora bien, Tiempo y Coste son sólo un par de ejemplos, pero puedes utilizar cualquier tipo de parámetros que consideres relevante a tu situación, además el número de cuadrantes también es optativo (2, 4, 6 …).

En los casos de debajo verás algunas de las matrices más conocidas y utilizadas en el mundo empresarial, las cuales son configuradas después de analizar millones de resultados en complejas bases de datos y que nos permiten de esta manera presentar de una forma sencilla y rápida nuestros principales proyectos.

Veamos algunos ejemplos:

Figura 1. La Matriz BCG (Boston Consulting) es la más famosa y ayuda a las empresas a manejar su Portfolio.

  1. Estrellas: Productos atractivos con alta popularidad en mercados en crecimiento.
  2. Incógnitas: Productos en mercados en crecimiento, pero sin una alta popularidad.
  3. Perros: Bajo crecimiento o baja popularidad.
  4. Vacas de Dinero: Productos muy populares, pero en mercados sin mucho crecimiento.

Figura 2. Matriz de Proyectos de Investigación y Desarrollo (R&D) que clasifica los proyectos en:

  1. Pan y Mantequilla: Excelente potencial de éxito y buen beneficio en caso de éxito (mejoras evolutivas).
  2. Perlas: Los mayores productores de éxito y beneficio. Idealmente querremos tener solamente Perlas.
  3. Ostras: Proyectos recientes con la habilidad de conseguir ventajas estratégicas para la compañía.
  4. Elefantes Blancos: Grandes consumidores de recursos y tiempo, pero no generan grandes beneficios.

Figura 3. Matriz GE (Análisis Multifactorial) de McKinsey para el análisis cualitativo de productos/proyectos.

La matriz se divide fundamentalmente en las siguientes cuatro secciones:

  1. Invest & Growth: Requieren enfocar la mayor inversión posible para alcanzar un rápido crecimiento.
  2. Selective growth: Se recomienda mantener la inversión aunque dependen de un crecimiento muy selectivo.
  3. Selectivity: Merece la pena invertir, aunque de manera muy selectiva.
  4. Harvest / divest: Débiles y en mercados menos rentables, se recomienda vender o desinversiones progresivas 

 Figura 4. Otra versión de la Matriz de Mckinsey (fuente: Wikipedia en español)

 

Nota: Originalmente las matrices representan el eje X de mayor a menor, en lugar de menor a mayor …  Esto se debe a la tendencia de Negocio de ver siempre lo más positivo en el primer cuadrante (Superior-Izquierdo), no obstante, siempre podremos encontrar una versión modificada donde el segundo cuadrante (Superior-Derecho) representa el óptimo.

Big Data and 21st century Supply Chains

Data is everywhere and manufacturing companies today are collecting increasingly massive amounts of data with the help of digital technologies.

New strategies, improved skills and more powerful tools are needed to make sense of that data and crunch the numbers, and find useful insights that are buried in the data. This situation is elevating the importance of Big Data analytics as a critical business capability.

To share few statistics about the amount of data:

  • More than 90% of data in the world today has been created in the last two years, with 80% of it being unstructured, such as images, audio, video, social media, web pages and emails.
  • 1.8 trillion gigabytes of new data were created in 2011.
  • Data is expanding at a rate that doubles every two years.
  • By 2020, the digital universe will be 40 trillion gigabytes.
  • Most U.S. companies have at least 100 terabytes stored.
All companies understand the importance of big data and acknowledge that data analytics of the huge digitized data can help their supply chain process, but the challenge is how to implement it. However, the increased understanding of big data analytics is leading to action, and is becoming a reality.

The trend to implement analytics is on its way and companies have serious plans to incorporate role of analytics in their supply chains.

Optimized supply chain– i.e. delivering the right amount of product to meet market demand while minimizing production, inventory and transportation costs–is a smoothly functioning, comprehensive proposition sought after by all companies. Advances in data analytics, combined with proliferation of data acquisition mechanisms and huge volume of data points, is generating a plethora of possibilities for improving efficiencies in this integrated view of the supply chain.

Earlier, most of the companies sought methods to centralize data to help run their businesses via ERP systems. Now, the concentration is shifting to analytics in to effective decisions with respect to predict customer demand, supplier availability, inventory management, delivery route, etc.

Big Data extends the ability to respond, to predict and, in some cases, even recommend subsequent action, based on insights retrieved from these sources. This takes companies a step ahead in increasing -efficiency in the supply chain. Consequently, the focus is evolving from “supply to replenish” through “supply to forecast” to “supply to prediction based on dynamic pattern analysis”.

Big Data analytics capabilities even have the capacity to reduce supply-side disruptions. For instance, process industries have plant control systems that capture thousands of data points a second. With Big Data techniques, it is possible to proactively adjust parameters in order to improve yield and reduce waste. By identifying potential bottlenecks ahead of time, planners now can account for alternative scenarios and maximize payoff. Moreover, this capability can be used to predict, prevent, or even adapt to equipment failures in transportation, logistics, and warehousing.

References: