BiQ: Quick BiQAP Review
The ongoing changes at HHS and the FDA have introduced a new element of risk for biotech investors and have likely been a significant factor in the nearly 20% pullback in the XBI, which began in November closely following the elections. However, as we all know, correlation is not the same as causation. Still, related or not, I have little doubt that the recent news of Dr. Peter Marks leaving the agency, as well as ongoing layoffs and leadership changes at the agencies, will continue to pressure biotech valuations.
As most biotech investors are probably aware, given a choice between resigning and being fired, Dr. Peter Marks chose to resign from his position as Director of the FDA's Center for Biologics Evaluation and Research.
As a long-time biotech investor, my personal view is that Dr. Marks, and others like him, are the reason the FDA is considered the gold standard around the world. Under such leadership, the FDA has played a pivotal role in shaping the US biotechnology industry into the vibrant, innovative, and science-based organization it is today. Dr. Marks was also a key force behind the Agency's push to accelerate the development of innovative gene and cell therapies.
This is just my opinion, but I think it becomes a very slippery slope if we allow loyalty to take precedence over competence. Obviously, it's too soon to draw any conclusions until we have more information. Regardless, I think the loss of Dr. Marks will be keenly felt.
Turning back to more immediate concerns, and in light of recent events, I thought it would be a good time to run through a quick review of the Biotech iQ Active Portfolio (BiQAP). While I usually do this on my own in private, I thought BiQ members might find some value in the exercise, so I decided to share my thoughts in this article.
There are two macro-level developments I am considering for this review: the changes at the FDA, and tensions between the US and its trading partners, more specifically Canada, the UK, the EU, and China. While I expect the effects of these events will be felt across the entire sector, we can still do our best to anticipate how they might impact specific names in the BiQAP.
Fortunately, the BiQAP is designed around key elements of safety & derisking, and is re-evaluated continuously as new risks emerge. Let's take a closer look at how the recent changes could specifically impact the risks associated with individual names in the BiQAP.