Oct 30, 2020

Biotech Investing: How to Pick a Winner

The promise of biotechnology stocks to the average investor is the potential for blazing growth and incredible returns. But not every company pays dividends on that promise. Too many times, investors have been burned by biotech stocks that burn fast and bright before completely flaming out. What these investors are looking for is not just any biotech stock, but a share of a firm like ProtoKinetix that is uniquely positioned financially as well as scientifically.

Already a $400 billion industry, and predicted to nearly double by 2024, the biotech sector has drawn a wave of investors, eager to capitalize. And capitalize they have: a rally in biotech stocks that began in Q4 2019 (when it boosted collective prices, 32% for the quarter) is still surging. That’s because investors have seen, firsthand, the high reward that can accompany the high risk of investing in biotech stocks.

Treating and curing disease is a primary concern, one which biotechnology is well-equipped to address, but investors want to see proof that their money is backing the right company as well.

So, what’s the secret in picking the right investment in the biotech space? How can investors maximize their returns while minimizing their risks? The key to success in this field, as with any equity investment, is finding the company with the right combination of contributing factors to profitability. ProtoKinetix makes a great example.

Key considerations for biotech investing

When investing in nearly any industry or sector, an investor is typically going to look at valuations, probably using a couple of different methods. They’re going to want to see an ROI that encourages them to park their dollars with a company that’s going to continue to deliver or ideally improve on their offerings. Not to mention, an investment should add diversification to the portfolio and help hedge against other risks elsewhere in their holdings.

Biotech stocks, by their nature, operate just a little differently than your typical equity investment. The long lead-times, to develop the research to the point where products can be brought to market, are much different from your average firm. That means you can't just do some simple math and arrive at a foolproof valuation; you have to take a number of other factors into account:

• Market opportunity
• Scientific potential and products in pipeline
• Board of directors and management
• Financials

With ProtoKinetix, all these different components combine to provide a sturdy foundation for a company with strong market potential.

Biotech companies tend to have a 30- or 35-year life cycle from founding to closing the big returns on their first major product line – many flame-out within 5-years on hype, debt and prioritizing executive compensation over R&D. ProtoKinetix is 20 years in — with the last 10 years dedicated to a strict R&D first budget (>80% of cashflow), debt eliminated, diversification of application pipelines with a single new-entity molecule and partnering with global leaders. Sector experience is important, but so are the following factors.

Market opportunity

Any good stock, including biotech stock, should have proper market opportunity. ProtoKinetix’s development of its revolutionary AAGP© glycopeptide molecule has ample opportunity in a number of different markets, because the applications for this molecule are so varied. From ophthalmology to dermatology to regenerative medicine and more, market potential in each application is tens to hundreds of billions of dollars.

An aging population and globally increasing demand for treatments are some of the many drivers for growth in these markets, and AAGP© has the potential to be life changing in these areas. Just take a look at some of the recent studies showing incredibly wide-ranging applications: promising research that shows AAGP© increases cell survivability as well as cell functionality, with market potential in topical applications, as well as regenerative medicine.

Science: Potential and pipeline

For biotech stocks, the scientific potential must be strong, and the pipeline must be well-established. Because of the length of time of the development process, biotech companies normally operate revenue-negative for years, or even decades, until products are finally brought to market. ProtoKinetix, as an R&D based company, is perfectly poised to drive value relative to the cash flow curve, by coupling a new entity with side-car intellectual property, including unique cell products and novel formulations. As a result of the product diversification, potential the AAGP© product lines can continue to secure patent protection and create new upside. Patent security is already secure out to 2040 and projected to continue iterations for another 10-20 years of combinatorial applications, both as a stand-alone product formulation or as an adjuvant to cellular and biological therapies.

ProtoKinetix enables regenerative medicine solutions. Historically, stem cell based therapies have failed, due to the stress on the donor cells as well as inflammation in the recipient, but AAGP© has the potential to combat both those problems, opening up new possibilities in regenerative medicine, which we already see has huge potential in many fields, such as transplants and grafts.

ProtoKinetix is also partnered with global leaders in R&D. These strategic partnerships are an advantage not only for effects on outflow, but also down the line, during the approval process. Our pipeline includes several promising areas in discovery and pre-clinical research with Phase 1 accomplished in transplant support and set to expand into additional areas while Phase II are close at hand.

Company: Board and management

Strong companies need strong boards of directors and advisor to deftly steer the ship through the many obstacles that can plague a biotech firm. Too many times has a company faltered due to weak management or a board that isn’t united or critically reviewing decisions to provide focus on product to market in the interest of shareholders.

ProtoKinetix, on the other hand, has high insider ownership. The executive team is highly invested in the success of the company, and they’ve got skin in the game. They’re as invested as you are in seeing ProtoKinetix, through to the life-changing results that are going to make a difference in today’s world.

Financials

A huge factor in successful biotech investing is understanding the strength of the company’s financials. ProtoKinetix stands out in this arena due to their debt-free position, which means your investment dollars go to R&D on the actual products, not servicing the interest on someone else’s loan or executive compensation packages that bleed a company dry. So many biotech firms are loaded with debt, dragging down their efficiency and weakening the negotiation position to close big deals. But at ProtoKinetix, the CEO has a $1 per year salary with no benefits, while the company maintains a ratio of R&D to G&A expenses of 5 to 1, proving a lean and efficient operation, laser-focused on equity valuation.

ProtoKinetix trades over the counter for now, in an intentional move to preserve cash for R&D. This benefits investors by allowing them to enter ownership and increase stakes at lower per-share prices. However, listing on more costly exchanges, such as the Nasdaq, is inevitably in our near future, as we gain traction and achieve product delivery or milestone agreement partnerships with large, established partners. Investing in ProtoKinetix now is a limited-time opportunity to get ahead of the curve with a company that’s perfectly positioned to take advantage of its opportunities.

ProtoKinetix offers a strong company with big potential

In every indicator, ProtoKinetix performs strongly as a biotech firm. Lean, debt-free and stable, we are a partner to others, providing key solutions in regenerative medicine, and thanks to our recent R&D progress, can stand strong with independent products for the topicals market.

The ProtoKinetix standalone topical solutions, for dry eye and dermatological applications with AAGP©, are capitalizing on simple formulations and large market applications. This means we offer not one, but two paths to market: both collaborative and independent. Market-push in the form of topicals and market-pull in the form of regenerative medicine — Protokinetix offers the best of both worlds, and its most profitable years are still ahead.

Biotech stocks are long-term plays, as ProtoKinetix’s medical science advisor, Dr. Keith Brunt, will tell you. Investors who buy with the intent to hold, but get cold feet waiting for the payoff, inevitably miss out on truly remarkable returns. There is no undo button with investing when the price curve goes logarithmic – just regret for missing out. That’s why investors in the biotech space have to keep the sector’s long-range lifecycle in mind. Trading the percentages isn’t the goal for many, it’s the long game, trading in on the double-digit multiples. All that is needed is confidence that the company will steadily continue to market. Getting out before you see the return leaves considerable money on the table. Five, ten, even fifteen years, can be the standard operating procedure when it comes to realizing maximal gains in biotech, after the first pipeline to market is defined. Regulatory authorities have many questions and once safety is secure, efficacy studies pull the product forward at a fast pace to maximize returns in the market.

The potential for creating massive shareholder value lies before us, and we’re prepared to meet that responsibility as we work to change lives with the cell survivability functions, which we’re invested in.

When you’re looking for strong leadership, efficient operations, debt-free financials, and a long-term profitability outlook in a biotech firm, ProtoKinetix is one that actually checks all the boxes.

Contact us to learn more about how an investment in ProtoKinetix and our life changing AAGP© molecule can change your financial life, too.

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