Samuel Isaly, co-founder of biotech investment giant OrbiMed Advisors, said biotech's recent dip in valuations will likely start to turn around as Big Pharma--"the guys with cash"--start to swoop in and buy up suddenly affordable assets.
Speaking at the BIO CEO and Investor Conference in New York, Isaly said the across-the-board decline in biotech stocks has created a disconnect between share prices and fundamental value. But it remains true that world's largest drugmakers need pipeline assets to appease their investors, and acquiring biotech companies is a tried-and-true means of picking up new drugs, he said.
OrbiMed, founded in 1989, bets on both public and private companies and bills itself as the world's largest healthcare-focused investment firm with about $15 billion under management.
The firm has weathered bull and bear biotech markets alike over that span, Isaly said, all the while trying to stay ahead of the curve by focusing on the needs of the powers that be in the industry. Picking portfolio companies is a matter of predicting what Big Pharma might want to buy down the road, he said, a process he likens to John Maynard Keynes' beauty contest analogy.
In 1936's The General Theory of Employment, Interest and Money, Keynes compared Wall Street to a newspaper contest in which players "have to pick out the 6 prettiest faces from a hundred photographs, the prize being awarded to the competitor whose choice most nearly corresponds to the average preferences of the competitors as a whole; so that each competitor has to pick not those faces which he himself finds prettiest, but those which he thinks likeliest to catch the fancy of the other competitors."
"That's anticipating the investors," Isaly said, as quoted by MedCity News. "When evaluating a company, you ask questions like: What's the outlook two years from now? What technologies will come out? In venture capital, how long will the value last, and when to an inflection point?"
- read Isaly's comments in MedCity News