I invest a part of my portfolio in startup, micro-cap drug and medical
devices companies. These are the people who toil in obscurity, frequently in small labs in industrial parks, on breakthrough treatments. Sometimes they actually run the development and FDA gantlet and revolutionize some medical treatment and outcome. Then I win big. But many of my investments are busts.
I'm as careful as can be in my investment decisions.
First, I carefully evaluate the science behind their invention. Many are based on junk science. Some are plausible, but upon further study, the whole thing falls apart. Then there are a very few glittering diamonds among all the lumps of coal.
Second, once I find such a glittering diamond, I then take a hard look at the company, its officers and researchers. It takes a very special individual or team to shepherd the whatever through development, the FDA and successful commercialization. If a glittering diamond doesn't have such an individual or team behind it, then I figure it most likely will be a bust.
Third, I look hard at the company's current financing and prospects for future financing. It makes no
sense to sink money into a startup, only to have them run out of funds a year or so before they cross the finish line.
Fourth and finally, and this is the most critical factor, I evaluate the whatever to see if it has a chance of getting past the FDA.
In the previous administration, evaluating potential investment targets in light of the all-important factor four was fairly predictable. I could "read" which way the FDA would go thumbs down or thumbs up.
Not so with this administration's appointees to the FDA.
One proven effective new drug was bounced by the FDA solely because it would have been "too expensive" compared to current standard of care! Excuse me, but the expense of treatment is specifically
not the FDA's domain! There is a lawsuit wending its way up the chain, but the sole assets of that company now consist of the drug patents and the lawsuit. Everyone has been fired, except the CEO, who draws no salary from the nearly bankrupt company.
Another treatment was forced to go through
five FDA-mandated separate phase 1 trials spanning three years, despite the fact the treatment depended on approved technology that had been in use for something else for many years! The company, instead of moving directly to phase 2 trials, finally went broke during all those phase 1 trials.
Yet a third was forced to go through phase 3a and 3b trials, despite using a delivery system that has been in use for fifty years (FDA approved long ago) and a drug which has been in use for twenty years! They're now doing phase 3c and 3d trials, which will take at least another 18 months. Needless to say, that company's survival is in real doubt.
One Wall Street analyst took a look at just what the current FDA was approving. Approvals went almost entirely to billion-dollar-plus-cap companies who were in a position to donate to political campaigns. Now, it can be argued that the bigger companies are in a position to do more careful analyses, etc., but the fact remains that every step on the path to approval (phase 1, phase 2, phase 3, etc.) is approved beforehand by the FDA, and what constitutes a successful trial phase is also worked out beforehand with the FDA.
Draw your own conclusions, folks.
Go figure, really?? I would have never suspected....
