I think it is safe to say I have become an amateur biotech investor over the past 2 years, and it is also sound for me to make a periodic reflection on my learning experience and readjust my direction for the next training run, like an LLM.
My journey began with me watching Martin Shkreli’s stream as a recreational activity, or merely as a work companion on my second monitor when I was working from home. Apart from the entertainment value he presented, from time to time he would share gold nuggets that only experienced industry people could have. And I think this draws me to the first lesson:
Having a solid STEM science background is a treasure, but you must realize there is a massive gap between coming up with a great investment idea and actually executing upon one. Participating in the market is far from reading papers in the lab, although I would counterargue by saying quants love physics and math PhDs because there is value. But even for institutional investors, there is a separation of jobs.
For a starting biotech investor, the balance between scientific research and order execution can be tricky. The latter can be trained through education too, like getting up to speed on corporate finance and valuation and so on, but it is worth noting this requires extra time and patience. One can easily be very confident on an idea and trip over himself like I did because he did not study position sizing and did not realize Kelly’s Criterion existed until after the trade happened. There are dedicated majors and jobs called portfolio management for a reason.
Find a professional to keep you in check. Let finance bros be finance bros if you mainly want to do pure research. When to enter, at what price, and when to exit, on which instrument. These are tricky questions that even experienced people can have a hard time answering. I would suggest focusing on the methods that make sense to your own risk level the most. It is natural to trip over a few times to get a sense of the wave, but feeling a small wave is a lot better than getting crushed on the shore later. Be sensitive about money.
I’m using “the best” here as a restrictive term because I literally mean the best person in the field. Think Jobs for early tech, Buffett for investments, or Elon for entrepreneurship. If you are not learning from the greats, you are not orienting yourself as a newcomer fast enough, and you are also not absorbing the information to its maximal usefulness.
Now the caveat here is that “the best” has some flexibility in terms of what it means to you. Einstein is one of the brightest minds in physics, but without enough proper training as a physics major, it is quite hard for someone to directly apprehend the key takeaways from his thought, not to mention the formulas. In biotech, I think you need to develop your own sense of who the best person in this industry is to you.
I think Martin is my best mentor for a few reasons. He has connections on Wall Street from an early age. He studies Buffett’s philosophy, as I do. He has real experience buying other people’s drugs. He has real professional experience bringing a pharmaceutical company public. In short, he did what a “typical” well-seasoned professional would do, which makes him qualify as the bar. There is knowledge hidden in those kinds of individuals’ minds, and it is not extracted in a systematic textbook format. The only way is to follow and learn from them directly.
Martin is another great source of information because, at his level of notoriety, there are few people who are willing to share their knowing with the public. This is purely understandable for multiple reasons you can deduce yourself, but in our case, the ones who are willing to share are the ones we need to hang on to like a tight rope. Find all of their interviews on YouTube and know their career path. Analyze their personality and understand how they can succeed in this biotech field. You need to think like them to be like them, the classic fake it till you make it.
Now, not everything is this “sharing” type, and you need to dig deep. Use ChatGPT to find the best hedge fund managers who shy away from broadcasting themselves like Martin. I discovered a great biotech investor through a YouTube video that has less than a thousand views. CEOs love to do podcasts these days, so find those interviews and make time for them. If they recommend a book or a source, great, go dig deeper. Not all sources of information are created equal, and you need to distill them into the ones that give you the strongest signal.
I think a prerequisite for all great investing has to do with some level of research. In the case of biotech, I believe it is your solid foundation in biochemistry and biostatistics. For a typical investor, I’ve been seeing BME majors, doctors, and equity analysts with chemistry PhDs, and I firmly believe a college-level education in biochemistry or a related field is a must, plus the ability to read clinical trial results with statistical rigor.
One part is the knowledge itself, so that you are familiar with the terms before delving into clinical trials, or you can predict the exact synthesis route of how this new molecule is being made, or how exactly this drug is being delivered to which part of the human body. You need to learn about chemistry, biology, pharmacokinetics and pharmacodynamics, college-level probability and statistics, and industry regulations. You must develop a sense of the scientific process in a rigorous way, and how there can be loopholes within it, so that you can spot them if someone else is doing it. Keep Elon’s famous first principle thinking close to your heart when you read papers, and keep that curiosity alive while doing it. This is especially hard when you later have to deal with real money and more factors come into play.
Once you get yourself familiarized with the terminologies, now it’s time to practice in real life. Like Karpathy’s understanding of how to learn, the best way is not a bottom-up approach where you try to gather every course available online, but rather to learn from top down. Pick a topic that you are most interested in and keep asking why. In biotech, it means looking at a specific binary event (e.g., a PDUFA date for a specific ticker) and recursively learning only the science necessary to predict that specific outcome.
For example: Ok, I’m seeing a hot trend of people using Ozempic for weight loss. Questions: What is the claim, exactly, and in which population? How do GLP-1s work precisely, and what would make this drug meaningfully different from other options? What are the clinical trials that support the claim, are they valid, and do the endpoints and effect size match the real-world story people are telling? Are there side effects, discontinuation issues, or durability problems that could cap adoption? How does it compare to other drugs on efficacy, tolerability, and convenience? Who is manufacturing the drug, and is supply or scale-up a real bottleneck? How can I evaluate sales with real fundamentals (pricing, reimbursement, adherence) instead of headlines? How does the patent work, and is there a credible next-generation path that expands the market rather than just splitting it? What are others thinking, and if a biotech fund writes a report on it, what assumptions are they making and where could the logic fail?
You must bring this kind of relentless pursuit to the table to be able to scratch the surface and maybe start to think like a junior equity analyst. It means days and nights of going on PubMed and reading papers. Checking ClinicalTrials.gov for details. There is no limit to how much you can understand a drug, both in terms of the biology and in terms of how the clinical trial is designed and read out. You will also find that while researching one thing, it is related to another topic at another company. Then you can start drawing comparisons and form your own perspective gradually.
Don’t get daunted and try to bite the whole thing at once. Start small as a beginner. Try to get a feel first, perhaps by reading one of those New York top sellers on the pharmaceutical discovery process to learn the goods and bads. Sign up for some latest news from Financial Times for interesting scoops. Go on X and find the latest usage of AI in healthcare. I think it is important to keep the interest alive by engaging in real time activities and stories.
I also want to shed light on the fact that there will 100% be a time where you meet a bottleneck and you can’t find a path. This is completely natural, and now it’s time for you to ask others. You can also learn a lot from others with expertise: your peers, the doctor you know, KOLs. Make cold calls and ask for feedback. Now this is your social skill issue where you need to make them feel comfortable, and some people are kind and willing to share, but also expect turndowns like every other opportunity in life.