These new generation of pharmaceutical companies are fascinating to watch. However, they have one more common characteristic. They often have no revenue. No revenue, no profit, and no free cash flow! How does one evaluate such companies? How does an intelligent investor pick an investment when there is no revenue to go by?
While these companies have no revenue, the good ones are smart enough not to pick any debt, and establish tight research or distribution partnerships with bigger industry players. This week I picked Editas Medicine Inc, CRISPR Therapeutics AG, and Alnylam Pharmaceuticals Inc for the Future of Health portfolio. All three are at the forefront of the surreal gene therapy and editing technology and have the cash and relationships required to commercialize their drugs. They are also well-advanced into their drug development process, which means there is a high likelihood that their drugs get the required approval and go into the market.
These are the types of investment that can bring big smiles to our faces in a few years from now. We are talking about 2X, 3X,... higher return than the overall market (Similar to 288% return that Juno Therapeutics generated for the Future of Health theme). However, they can break our hearts into pieces too. Knowing that there is no revenue should tell you how risky these investments are. Lack of revenue and dependency on the success of their clinical trials means extreme volatility in the short-term.
If you decided to invest in them alongside me, first read the following sentences loudly: "I'm okay with taking risks, as long as it is informed by unbiased facts. I understand I may lose all of the money I'm investing in these companies. If that happens, I am clear as to why!" If you nodded as you read the sentences loudly, you are my kinda crowd. Come along, and let's get to know these mighty companies better.
A Few Of Other Stocks On Our Radar:
Thanks, Jeffrey Leichenger, Mohammed Essakali, Bob Higgins, Ugach Sahaj, Mike Stringer, Kurt S., Zac Feltoon, Kris Touges, Alberto Castillo, Michael O'Boyle, Dharmin Shah, and many other members of our intelligent investors' community for this week's Stock Card requests. You can see the recently published Stock Cards by going to All Stock Cards tab, and look for "new" ribbons on the top-right corner of the Stock Cards.
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