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Bugs or drugs, tortoises or hares?

Nature Biotechnology volume 23, page 293 (2005)Cite this article

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In biotech, most investors have favored drugmakers over companies using advances to create better protein catalysts—enzymes—and microorganisms. After all, drugs are high-profile, high-margin products, offering patent-protected profits in markets that are theoretically unlimited. New enzymes and microorganisms are low-margin products that require huge volume (think supermarkets) in unproven markets. The choice appears easy.

It's not. With few exceptions, investing in a biotech drugmaker means waiting 10 years or more for a first drug and then, if the drug is approved and successful, enjoying some nice returns. But if you invest in a tortoise instead of waiting for the biotech hare to run its race, the steady annual return for ten years could add up to the same or much greater return with lower risk of loss. (If you e-mail me I'll send you a brief Excel spreadsheet showing this.) The biotech enzyme and microorganism world offers one such opportunity.

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  1. Tom Jacobs is cofounder of Complete Growth Investor (http://www.completegrowth.com). He welcomes your comments at tom@completegrowth.com. Tom owns no shares of companies mentioned in this article.

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Jacobs, T. Bugs or drugs, tortoises or hares?. Nat Biotechnol 23, 293 (2005). https://doi.org/10.1038/nbt0305-293

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