Biotech companies yet to release a product are worth far more than those that have, analysts have said.
Davis Smythe III at California based Investeromics, who specialises in biotech investments, had this to say:
“It makes sense when you think about it. When a biotech company has no product, there is a 100% possibility that they may produce something amazing. However, when they reveal their first product, and it is invariably a bit crappy, there’s a 100% certainty that they’re worth very little”.
Smythe pointed to the prenatal testing sector who “just do sequencing; anyone can do that these days”, and the numerous genome interpretation companies who “just run a few free software tools” as examples.
“When these companies first came out, it was really exciting; we were desperate to give them cash. Who knew that they basically had no new ideas? We’re investors, not scientists. We don’t want to know the truth. Give me a biotech with no product any day!”
The biotech sector has a long history of over-promising and delivering little. Many expect to see more unrealistic announcements at the 15th annual Advances in Genome Biology and Technology (AGBT) meeting next week. Traditionally, biotech companies use AGBT to announce things they can’t do yet, and probably never will.