The Essential Biotech Investment Guide

The following sections are included:

• Preface

• Acknowledgements

• Contents

• Figures And Tables

The following sections are included:

• Biotechnological Innovation Benefits Society

• Biotech Sector Outperforms

• Strong Fundamentals and Product Pipelines

• Strong Growth of Revenue and Profits

• Biotechnology Differs from the Internet

• Stock is Essential for Wealth Growth

• Stock for Outpacing Inflation

• Why Biotech?
  • What Is Biotechnology?

• Positive Demography: Our Baby Boomer Population

• Positive Demographics Trend
  • An Aging Population, Social Security, a Better Quality of Life, and a Huge Demand for Drugs

• Positive Technology Trend

• Big Pharma and the Biotech Industry–Complementary to Each Other

• Supply Demand Imbalance?
  • Positive Consumer Trend: New Life Styles and Habits Lead to More Demand for Biotech Shares

The following sections are included:

• The Case for Equities

• The Rule of 72

• The Power of Compounding

• Opportunity Cost

• Relationship between Risk and Return

• Dollar-Cost Averaging

• Purchasing Power and Inflation—Is a CD Really Safe?

• Holding Period and Risk

• Understanding Risks
  • Types of Risk

• Diversification–Minimizing Your Investment Risk
  • By Risk Level
  • By Sector and Industry
  • By Geographic Region
  • By Market Capitalization

• Past Reasons for Not Investing

• Historic Return and How Much Return One Should Expect

• Technical Analysis

• Investment Vehicles Available to Achieve Your Goals

• Vehicle One: Stocks
  • If You Don't Own a Biotech Business, Here Is a Way to Own a Fraction of One
  • Understanding Biotech Initial Public Offerings (IPOs)
  • Buying and Selling in the Markets
  • Tracking the Stock: Be Sure to Compare Your Performance with Biotech or S&P 500 Benchmarks
  • Buy-and-Hold Investing vs. Tactical Stocks
    • Buy and hold stocks
    • Bought to be sold
  • Useful Definitions and Terms

• Vehicle Two: Bonds
  • High-Yield Bond Fund

• Vehicle Three: Cash

• Vehicle Four: Mutual Funds
  • Professionally Managed Investment Portfolios

• Vehicle Five: Unit Investment Trust

• Vehicle Six: Managed Accounts
  • You Select the Manager and They Manage Your Money

• Vehicle Seven: Alternative Investment

• Asset Allocation

• Managing Your Portfolio and Wealth
  • A Three-Step Process

What is a gene? A simple definition is that a gene is a sequence of nucleotides that specifies the sequence of an RNA or protein. A more complicated definition is that a gene is a physical and functional unit of heredity, which carries information from one generation to the next. In molecular terms, it is the entire DNA sequence–including exons, introns and noncoding transcription-control regions that are necessary for production of a functional protein or RNA. In essence, a gene is pure digital information–sequences based on a four-letter code (A, T, G, C)…

The following sections are included:

• Part I: Biotechnology Inventions and Patents
  • Benefits of Patents
  • Patentable Inventions
  • Three Criteria for Patentability
  • Three Parts of a Patent Application
    • Three Ways to Recognize Personal Contribution to an Invention

• Part II: The FDA Approval Process for Drugs

• Stages of the FDA Approval Process
  • Preclinical Testing
  • Investigational New Drug (IND) Application
  • Phase I Clinical Trials
  • Phase II Clinical Trials
  • Phase III Clinical Trials
  • Phase IV Clinical Trials
  • New Drug Application (NDA)
  • Accelerated Review
  • Approval
  • The Risk of Clinical Trials
  • Notes for Investors

• Drug Review Glossary

The following sections are included:

• Value Investing

• Growth Investing

• The Industry Life Cycle

• Characteristics of Investing in Biotech
  • Small Cap Investing
  • Public Venture Investing

• Value Investing
  • The Passive Value Investor
    • Ben Graham's Screens
    • Price/Book Value
    • Price/Earnings Ratio
    • Price/Sales Ratio
    • Success Factors at Value Screening
  • The Activist Value Investor
    • Spin-Offs, Split-Offs, Divestitures on Value
    • Leverage Increasing and Decreasing Transactions on Firm Value
    • Management Changes on Firm Value
    • Hostile Acquisitions on Target Firm
    • Success Factors at Active Investing
  • The Contrarian Value Investor: Buying the Losers
    • Evidence That Markets Overreact to News Announcements
    • Good Companies Are Not Necessarily Good Investments
    • Success Factors of Contrarian Investing

• Biotechnology Investment Trading Rules
  • Bet on the brains

• Winning Biotechnology Company Attribute List

The following sections are included:

• Step One: The Economic and Business Cycle

• Step Two: Industry Sector Analysis

• Biotech Industry Sector Analysis
  • The Biotech Industry Life Cycle
  • Biotech Stock Index Holds Its Value
  • Biotech Products–Labors Poised for Fruition
  • Biotech Industry–Ripe for Investment

• Step Three: Biotech Company Analysis
  • Biotech Industry–Mixture of Sciences

• Valuation: Should I Buy This Biotech Stock Now?
  • Intrinsic Value
  • Discounted Cash Flow (DCF) Analysis
  • Comparable Public Companies Analysis
  • Comparable Private Companies Analysis

• Method 1: Relative Valuation
  • Earnings Per Share and P/E Ratios
    • Why Is the P/E Ratio Used So Widely?
    • PE/G–Investment Strategies That Compare P/E to the Expected Growth Rate (G)
      • Problems with comparing P/E ratios to expected growth (G)
      • Problems with the relative comparison (PE/G)

• Comparisons of P/E Ratios
  • • Using Comparable Firms–Pros and Cons
    • A Regression Approach Using the Entire Cross-section
  • PEG and PEGY Ratios
    • Example–Estimating the PEG Ratio for Biogen
  • Price/Sales Ratios (P/S)
    • Advantages of Using Price/Sales Multiples
    • Price/Sales Ratios and Profit Margins
    • Using Price/Sales Ratios in Investment Strategies
  • Shareholder's Equity (Book Value)
    • Price/Book Value (P/B)
    • Advantages of Using Price/Book Value Ratios
    • Disadvantages of Using Price/Book Value Ratios
    • Price/Book Value Ratios and Excess Returns
  • Cash and Working Capital Per Share
  • EBITDA and Non-Cash Charges
  • Enterprise Value/EBITDA

• Method 2: Discounted Cash Flow (DCF) Analysis

• Method 3: Sum-of-the-Parts Valuations

• Method 4: Dividend Discount Model (DDM)

• Method 5: Subscriber–Based Valuations

• Method 6: Economic Value Added (EVA)

• Method 7: Yield-Based Valuations–Valuing Market as an Example

• Qualitative Component of the Valuation

• Risks of Biotech Companies

• Summary: Which Model Is Best for Valuing Biotech Companies?

• Part II: Investing in Undervalued Healthcare Biotech—Proactive Value Investing in Healthcare™

The following sections are included:

• Don't Put All Your Eggs in One Basket

• Purchasing Power

• Professional Management

• Asset Allocation

• Liquidity

• Discipline

• Dollar-Cost Averaging

• The Case for Index Funds
  • Why Index Funds?
  • When Should You Use Index Funds?

• Why Stock or Stock Mutual Funds?
  • Long-term Investing in the Stock Market Has Historically Paid Off
  • Investment Goals Need to Reach Beyond the Rate of Inflation in Order to Maintain Long-Term Purchasing Power
  • Time in the Market vs. Timing the Market

• The Cost of Delaying

• The Benefits of Investing in Biotech Mutual Funds

The following sections are included:

• The Case for Index Funds
  • Why Index Funds?
  • When Should You Use Index Funds?

• Exchange-Traded Funds (ETFs)
  • Core and Satellite Strategy
  • Sector Rotation and Instant Access to Thematic Groups
  • Capitalize on Market Volatility
  • Risk Management
  • International Exposure

• Advantages of ETFs

• Options Strategies for Suitable Clients

• Index-Linked ETFs
  • Close-End ETFs
  • Advantages of Close-End ETFs

• Index Investing
  • Introducing the iShares–Nasdaq Biotechnology Index Fund
  • Advantages of iShares

• Strategies Using Biotech and Pharmaceutical BOXES
  • New Financial Engineered Products

The following sections are included:

• Alternative 1: Retention of the Position and Associated Risks

• Alternative 2: Liquidation of the Position and Reinvestment of Net Proceeds

• Alternative 3: Hedging, Monetizing, and Diversification Strategies
  • Protective Put Option
  • Zero Cost (Cashless) Collars
  • Exchange Fund
  • Charitable Remainder Trust
  • Borrowing on Margin

• Conclusion

• Glossary

The following sections are included:

• Glossary

• Four Types of Common Vesting

• Non-Qualified Biotech Options

• Incentive Biotech Options

• Your Biotech Option Plan
  • Caveats
  • Exercise: Biotech Option Fitness
  • Purchase and Hold
  • Sell to Cover
  • Alternative Minimum Tax (AMT)

• Alternative Biotech Stock Acquisition Programs
  • Managing Tax Implications: Who Wants to Be a Millionaire?

• 83(b) Election
  • The Case for Election
  • Election Risks
  • Net Unrealized Appreciation (NUA)
  • Making Uncle Sam's Tax Rules Work for You

The following sections are included:

• Hedge Fund Investment Styles
  • Characteristics of Hedge Fund Managers Compared with Traditional Money Managers

• Three Ways to Participate Healthcare–Biotech Hedge Funds
  • Invest Directly
  • Use a Consultant
  • Invest Through a Third-Party Firm

• Conduct Necessary Due Diligence Prior to Investing in Healthcare Hedge Fund

• Conclusion

• Summary–Hedge Fund Strategies
  • Long/Short equity
  • Relative value/market neutral
  • Macro
  • Distressed securities
  • Merger arbitrage/event-driven
  • Short selling
  • Emerging markets
  • Sector

The following sections are included:

• Healthcare Venture Capital

• Four Investment Stages of Health Care–Biotech Venture Capital Funding
  • Early/Seed Stage
  • Second Stage
  • Third Stage
  • Late Stage

• Healthcare Buyout Funds

• Special Situations in Healthcare

• Key Considerations

• How to Participate in Private Equity Investing
  • Reasons Why the Track Records Are Important?

• Five Basic Ways To Participate in Healthcare Private Equity Investing
  • Invest Directly
  • Invest in Private Equity Funds
  • Invest Through a Feeder Fund
  • Invest Through a Fund-of-Funds
  • Invest Through a "Gatekeeper" Consultant

• Measuring Performance of Healthcare Biotech Private Equity Funds

• Conclusion

The following sections are included:

• Changing Careers: Affecting Your Retirement Savings

• Direct And Indirect Rollovers: Spinning Your IRA

• The Tax-Deferred Rollover

• Retirement: Strategy

The following sections are included:

• Private Foundations

• Charitable Remainder Trusts
  • Charitable Remainder Annuity Trust (CRAT)
  • Charitable Remainder Unitrust (CRUT)

• Conclusion

• Alternative Charitable Gift Program Through National Philanthropic Trust (NPT)

The following sections are included:

• Alternatives Available
  • Do Nothing
  • Joint-Tenancy
  • Will
  • Revocable Living Trust

• Below Are Some of the Advantages Resulting From the Creation of a RLT

• Some Disadvantages Resulting from the Creation of a RLT

• Other Trust Strategies to Minimize Estate Taxes
  • Credit Shelter Trust (CST) (Also Called a "Bypass Trust")
  • Two-Trust Estate Plan (A-B Trust)
  • Qualified Terminable Interest Property Trust (QTIP)
  • The Irrevocable Life Insurance Trust
  • The Charitable Remainder Trust (CRT)
  • Gift Giving
    • Gifts in Trust to Minors
    • Use of a Corporate Trustee When Creating a Trust
    • Trust Administrative Services
    • When to Check the Estate Plan

• Conclusion

The following sections are included:

• Epilogue

• Appendix A What Is Technical Analysis?
  • The Dow Theory
  • Four Groups of Technical Indicators
    • Secular Indicators (20 to 30 years or two or more stock market cycles)
    • Cyclical Indicators (4 to 5 years or one stock market cycle)
    • Medium-Term Indicators (three to six months)
  • Top-Down Technical Analysis
  • Reading Chart Patterns
    • Six Items to Look for on a Stock Price Chart
  • Patterns Indicating a Reversal in a Stock Price Trend
  • Patterns Indicating a Consolidation in a Stock Price Trend

• Appendix B Biotech and Life Science Glossary
  • Glossary—Finance

• Appendix C Resources and Further Readings
  • Books
  • Web Sites
  • Newsletters
  • Newspapers and Magazines

• Appendix D Speaking Engagement Request

• Index