Evaluating Biotech Startups?

spacey girl asks: "A start-up company i worked for was recently shut down. I've been looking for a new company for quite some time now. i've been offered something at two new startup companies (established in 2000) and I can't find too many references on the web for them. These companies are not exactly computer related but more science related in biotech (pharmaceuticals and such). What kinds of tools are available for evaluating stability and potential of these two companies? I tried looking for the investors but that was a no-go. Also, I'm referring to international companies, not just companies in the US."

looking for the investors failed?

[Pyromage]

I don't know what you mean by that looking for the investors is a "no-go", but if you couldn't find them, isn't that a bad sign?

Business plan

[tunah]

You have to ask yourself, do they have a viable business plan? More specifically, do they have a patent on a major organ? (Appendix does NOT count, these can be removed). If you patent the leg, and charge royalties of $1 each, and get a 1% compliance rate, you make $1/leg x 1% x 10 legs x 6*10^9 people = $600m. (Don't be fooled into using the average number of legs, 99% of people have *more* than the average number). Fingers are better (8 per person) or toes (10). If they have cells, you hit the jackpot. Remember to ask for your contract to include stock options *and* immunity from the patent.

well....

[terpia]

are these companies public or privately held? If public and traded in the US, you can look at insider trading, and see what the execs are doing with their stock...

Also, since you sound unemployed at the moment, just take the position you have a better gut feeling about...whats gonna happen - are you going to be unemployed again after a few paychecks? Big deal, youre unemployed now. On the other hand, if you are receiving unemployment benefits, make damn sure you do a bit more research than it sounds like youve done already before you blindly leap, dont waste another 5 months of benefits on a job that might not even last that long.

Err... ask them?

[cperciva]

If anyone is going to know details about these companies, it is going to be the companies themselves. If you're considering working for them, surely they'd be willing to give you some idea of what they're doing?

If they don't want to tell a potential employee what business they're in, you probably don't want to work there.

Re:Err... ask them?

[dstone]

Since the question wasn't "how do I get info on a company", but rather "how do I evaluate a company", I'm not sure you've answered the poster's question.

Companies will not always gave you truthful, unbiased answers when asked what their weaknesses are, what their long term financial viability is, or how they stack up against competition. If they did this, analysts' jobs would be much easier and maybe we wouldn't have suffered through the dot-bomb experience.

Partnerships

[Anonymous Coward]

Look for investments or partnerships with a major pharmaceuticals or govt or private research organizations. This will tell you that scientists have evaluated the technical and business prospects of the biotech's aims and have some confidence in it's prospects.

Re:Partnerships

[whovian]

Generally I agree with this, but it doesn't necessarily mean the biotech company told those people the whole truth either. Just enough truth to sell the idea. Scientists, and even more so investors, can easily be duped if the company presents misleading claims. This calls for independent verification of findings that can be trusted, which is I believe your intended meaning. The question is, whom to trust?

product, market, management, technical staff

[guybarr]

in that order:

1) what is the product, is it pheasible ? is it too trivial ? does a prototype even exist ?

2) what is the market for the products ? how vital is the product (especially when custumers are under economic stress)

3) how do the managerial staff strike you ? are they too non-technical ? are they too technical ? if so, do they intend to bring outside management ? what are mistakes of other start-ups they learned from ?

4) technical staff: do they have people which impress you ? who had previous publications ? who you'll learn from ? who you can work with ? (last one is hard to tell in interview ... )

Ask for a copy of their business plan

[Anonymous Coward]

or at least a high level overview of it. Basically you want to know that the investor exit strategy is... 3 years in and 3->5x the ROI, or is it a long term investment?

No matter what, stay away from the groups that have the 3->5 year VC crap to worry about, such companies primary strategy is do find a buyer. Unless they have an amazingly cool product that does stuff that no one else's does, and have IP protection on it, then, well, they are sunk. Dont waste your time on such crap.

Find out if they have partnerships with current pharmas. See if they are developing their own discovery pipelines. Both are good things. See if they are building collaborations/contracts with others (Incyte, Celera, Lion, etc), see if they are providing a specific useful service (chemistry, xtallography, chemi-informatics, library design, probe/marker design/detection). If not, they are a dot-bomb

dont

[johnjones]

why not ?

what are they all putting money into ?
the wrong things

engineering drugs chemicaly is becomeing hard they are hitting the equivelent of 50million tranistors but without SPICE it does not work

invest in companies doing basic research into underwater opertunitys otherwise forget about it

oh and CAT's is dead

regards

john jones

Patents

[duffbeer703]

The only way that a small biotech will ever succeed is if it is awarded a patent or have a drug that will pass clinical trials.

You need to find out:

1. What patents do they hold on procedures, genomes or technology.

2. Are any drugs in trials yet? How many?

3. How many drugs are in the pipeline?

Find out about them...

[gordguide]

Okay, they're not in the US. If you can find info about them in the US press, that probably means they have managed to get on the US media's radar screen, which indicates at least something is going on (could be good or bad).

No US info? Consider that normal for a foreign firm. Find out where the head office is; (you are mostly interested in what country).

Do a search on a nation-specific website. For example if it is UK based, you should start at a UK search site (or a UK home page of your favorite search site). If you know that it's Canadian (for example) you should try "insert-your-favorite-search-site-here.ca" to see if it has a page. Just about every nation on earth has it's own dot-something so don't assume no dot-com means no web presence.

Is it public? Find out the stock symbol but don't waste your time searching Nasdaq or NYSE, work on the country's national stock market(s). The stock might be over-the-counter, etc.

Where do they get their money? If it's venture capital, go to the VC firm's site and read what they say (have your bullshit filter on).

Search for the head office's city, get into a local page and poke around. Check out the local paper, business links, the Chamber of Commerce, etc.

Search journals in the related field; if there is big news there will be something there and even if it is international in scope it could be months or years before the US media figures it out. Ever notice how often mainstream media gets a science story wrong? That's because they don't pay attention to the journals until some editor tells them to. And somebody's got to tell the editor first.

Are they associated with a University (most biotech should be, somewhere along the line). Check out the University's reputation in the field, find out if there is a link with research, money, alumni, etc.

That should get you going.