Standard factor models (value, quality, momentum) are counterproductive for biotech stocks. Dan Rasmussen's research found that value must be redefined as market cap relative to R&D spend, where more spending is "cheaper," completely flipping the traditional logic used in other sectors.

It's a fool's errand to predict specific trial results. A robust quantitative approach to biotech focuses on underlying drivers and base rates. It positions a portfolio so the random, unpredictable nature of trial events plays out favorably over time, guided by factors like valuation and specialist ownership.

When a competitor (Beijing) presented similar positive data for its BTK degrader, the CEO of Neurix viewed it as a positive reinforcement for the entire drug class. In a novel field, parallel success from independent companies de-risks the underlying biological mechanism for investors, partners, and clinicians.

Luba Greenwood reframes competition in biotech as a positive force. When multiple companies pursue the same biological target, it validates the target's importance and accelerates discovery. This collaborative mindset benefits the entire field and, ultimately, patients, as the best and safest drug will prevail.

Instead of hiring dozens of PhDs to analyze clinical trials, a quantitative firm can use the 13F filings of top specialist biotech hedge funds as a proxy for deep domain expertise. This "approved list" from experts can be modeled as a quantitative factor that has been shown to outperform.

In biotech investing, the collective wisdom of specialists is more valuable than any single expert's contrarian bet. Stocks owned by multiple specialists perform better, suggesting that an individual specialist's unique, high-alpha idea is more likely to be wrong than right.

Unlike the 2021-2022 froth where all stocks rose together, the current market is highly discerning. Investors are rewarding strong data while heavily punishing mediocre results. This selective environment indicates a more sustainable and fundamentally driven rally.

The fundamental purpose of any biotech company is to leverage a novel technology or insight that increases the probability of clinical trial success. This reframes the mission away from just "cool science" to having a core thesis for beating the industry's dismal odds of getting a drug to market.

The current biotech bull market is more resilient than past cycles. Previously, enthusiasm often centered on a single theme, like Hepatitis C (HCV), making the rally fragile. Today's strength is distributed across many disease areas and dozens of companies, creating a more robust and sustainable foundation for growth that isn't dependent on a single success story.