They Call It a Lottery Ticket. The Data Says Otherwise | The Hidden Alpha of Biotech скачать в хорошем качестве

They Call It a Lottery Ticket. The Data Says Otherwise | The Hidden Alpha of Biotech

Biotech is one of the few areas in investing where specialized knowledge may still generate persistent alpha. In this episode of Excess Returns, D.A. Wallach, venture capitalist and co-founder of Time BioVentures, joins us to explain how biotech investing works, why development-stage drug companies behave like portfolios of options, and why specialist investors play such a large role in this market. We also explore the cycles that have driven biotech performance, the impact of interest rates and capital flows, and how AI and global competition may reshape the industry in the years ahead. D.A. Wallach – Twitter [https://x.com/DAWallach](https://x.com/DAWallach) Topics covered include • Why biotech may be one of the last areas where specialist investors can generate persistent alpha • The “bag of options” framework for valuing development-stage biotech companies • How probabilities of drug success and clinical base rates drive biotech valuations • Why rising interest rates hit biotech stocks harder than many other sectors • How capital flows and investor narratives create boom-and-bust cycles in biotech • What happened to biotech during the pandemic surge and the post-COVID downturn • Why AI and tech narratives compete with biotech for investor attention • The role of specialist biotech hedge funds in the public markets • How large pharmaceutical companies drive returns through biotech acquisitions • Differences between biotech venture capital and traditional tech venture investing • How venture investors evaluate drug development programs and scientific evidence • Portfolio construction and diversification when investing in highly uncertain biotech companies • The emerging role of China in clinical trials and global drug development • Whether AI can improve drug discovery, clinical trials, and pharmaceutical R&D productivity • Why investors should avoid rigid value vs growth ideologies and stay adaptable Timestamps 00:00 Why biotech investing requires specialized knowledge 01:40 Is biotech one of the last places for persistent active alpha? 02:45 The “bag of options” model for valuing biotech companies 05:00 Drug development phases and probabilities of success 07:00 Using base rates to estimate clinical trial success 09:20 Estimating total addressable markets for new drugs 11:10 Why rising interest rates hurt biotech valuations 13:00 Capital flows and why biotech underperformed in recent years 15:30 The biotech boom and bust around the COVID pandemic 18:00 How AI and tech compete with biotech for investor capital 22:20 The role of specialist biotech hedge funds 24:00 How pharmaceutical acquisitions drive biotech returns 25:20 How biotech venture capital differs from tech VC 30:50 Why biotech investors must evaluate complex scientific data 34:20 Where AI may improve drug discovery and R&D productivity 42:00 Portfolio construction and diversification in biotech venture investing 44:30 Volatility, valuation marks, and private market pricing 48:00 Managing risk across different drug technologies and disease areas 49:30 Why China is becoming important for clinical trials 53:00 Why biotech investing must be viewed as a global industry 54:30 The importance of flexibility between value and growth investing 58:50 Will investing become more systematic and quantitative over time