The hedge fund, Verdad Capital, just published their quantitative model for biotech investing. They showed that companies with the highest scores have the best returns, and those with the lowest scores have the worst returns.
Their model, which they describe in a white paper, has 5 domains:
Ownership by biotech specialist institutional investors
Stock purchases by C-suite insiders
Short interest
Peer momentum (trailing returns of scientifically similar companies)
Value factor (spending as a proportion of market cap)
Each of these predicts forward returns, and, because they are mostly independent, it’s the combination that really filters the good from the bad. The top fifth of companies returned 21% annually; the bottom fifth returned -17%.
What Verdad did not do is rank today’s companies, so we present it here: the full ranking of the 589 US-listed biotech companies.
This is research — not investing advice; for interest and information only!
According to our implementation of the model, the top 10 companies are as follows:
These companies tend to have a concentration of biotech specialist investors, recent insider buys, low short interest, strong peer momentum, and look cheap according to the value factor.
The model doesn’t directly assess the probability of clinical trial success, but most of these top companies have novel science, with programs based on solid biology. The lead programs of the top 10 are:
ImageneBio IMA 0.00%↑ — Non-depleting OX40 antagonist for autoimmune diseases.
Sutro Biopharma STRO 0.00%↑ — Tissue Factor-targeted antibody-drug conjugate.
Acrivon Therapeutics ACRV 0.00%↑ — CHK1/2 inhibition for gynecologic cancers.
MoonLake Immunotherapeutics MLTX 0.00%↑ — IL-17A/F-blocking nanobody for hidradenitis suppurativa and psoriatic arthritis.
Adicet Bio ACET 0.00%↑ — Off-the-shelf CD20-targeted gamma-delta CAR-T therapy for autoimmune diseases.
Zentalis Pharmaceuticals ZNTL 0.00%↑ — WEE1 inhibitor for Cyclin E1-positive, platinum-resistant ovarian cancer.
Odyssey Therapeutics ODTX 0.00%↑ — Oral RIPK2 scaffolding inhibitor for ulcerative colitis.
ALX Oncology ALXO 0.00%↑ — CD47 blocker combined with antibody therapies for HER2-positive breast and gastric cancers.
Alumis ALMS 0.00%↑ — Oral TYK2 inhibitor for plaque psoriasis and systemic lupus erythematosus
CNS Pharmaceuticals CNSP 0.00%↑ — Seeking new neurology and oncology assets; former lead for glioblastoma is now offered for out-licensing.
Here are the bottom 10, and the full ranking: