Are Longevity Companies A Good Investment?
A Deeper Dive Into Longevity Public Markets Performance
Disclaimer: Not investment advice. The views expressed are solely the opinion of the author and not representative of any entity they are affiliated with.
Despite trying to build something that humanity (secretly) desires the most, longevity biotech hasn’t been particularly successful in attracting funding. Some time ago I wrote an article outlining my thoughts on the main reasons behind this, and while my number one reason remains the public perception, the most interesting (and damning) observation of that article was the propensity of longevity biotech companies to seemingly not do so well on the public markets. The initial analysis has been pretty raw (and somewhat flawed, which you will see) - I have looked exclusively at the change in stock price between the company going public and the latest price. Thus, I wanted to investigate this in more - actually, MUCH more - detail.
To do this more or less objectively, without personal bias on what and what is not longevity, I’ve pooled together companies from three main resources cataloging longevity companies - AgingBiotech.info, LongevityList, and the Spannr database. This yielded 86 companies that are (or were) trading on the public markets. Out of those 86 companies, 65 are still trading, 10 have been delisted/shut down, 4 have undergone a reverse merger (essentially being taken over for their public status, with programs discontinued = shut down) and 7 have been acquired. Thus, most are still alive, which is a success just in itself. Still, what does the data tell us?
The Data
First, let’s recreate the visualization from the previous article, albeit in a more palatable fashion:
NOTE: top 3 companies are actually way above 500%
The situation in the expanded analysis is similar, with most companies going down between the time they first went public and now. There are two new notable outliers, Alnylam and United Therapeutics (both of which are hardly longevity companies anyway), and only 12 companies total, out of the original 86, have been profitable for investors to date. The median percent change for longevity companies between their first day of trading and (roughly) today is -82.3%, ouch. The average is a lofty 336% propped up by Alnylam and United, but it’s actually -30% without them.
* Eidos has been acquired by BridgeBio in 2020
So longevity companies are not worth investing in unless you are trying to lose your money, right? Wrong. Most companies fail in the long run, and truth is, using ‘today’ as an endpoint for company success is short-sighted at best, especially considering the degree of hype bestowed to biotech when COVID hit 4 years ago, and the subsequent global market meltdown that followed in 2022. Taking thirty random biotech companies (excluding the ones originally in the list) and computing the same metric yields a whopping -97% median change (and -39.5% average change) between public offering and now, which seems pretty significantly different, but we’ll get to that later. The point is, we are at local minima in terms of biotech stocks - maybe it’s not the end of the dip, but it’s definitely not the greatest proxy to understand whether longevity companies are doing well or not.
A much better proxy, especially if we want to understand institutional investor vibes, would be looking at the change between market entry (IPO, SPAC, reverse merger or uplisting from OTC) and the all-time-high (which allows understanding the absolute magnitude of return possible to date) and market entry vs. six months after (when the insider lock-in period is usually over).
First, looking at the change between market entry and the all-time high, we can see a pretty attractive median return of 78%, with the average shooting up to 228% (excl. Alnylam and United). Considering the average time from public market entry to ATH (All-Time High) has been just 2.06 years, and considering insiders typically come in at lower valuations than at market entry, there has been ample opportunity to make money from these investments. Note however that the most lucrative returns come with holding for a long time, Alnylam and United got to their ATH after 20 and 25 years on the market, respectively. Among the top ten companies by the change from market entry to ATH, eight took more than 4 years to get to that stage. So, as the wise have said, HODL.
If you are on the precipice of closing this article and opening Robinhood, DON’T, because (a) DYOR and (b) the devil is in the details - let’s see the distribution of those all-time-highs by year:
So unless you work at a BSL-4 lab and are feeling frisky, I would refrain from using historical data from such an unprecedented time in our lives to guide your investment decisions. Another thing to consider here is the average time to ATH highlighted above, which is 2.06 years - the median time to ATH is actually 0 years, meaning that most companies go up somewhat after IPO, to then plummet like meme coins. Thus, to even better gauge the feels of the insiders about investing in the space, we can look at the return after the lock-in period is over (6 months generally) - and it’s not as great, the median standing at -21.5%. Considering that 47.6% of companies in this dataset experience their ATH before the lock-in period is over, the situation is suddenly not as rosy for institutional investors, which affects funding decisions and ultimately can be one of the culprits behind the lack of funding in the space…right?
A common Slavic proverb says “everything is known in comparison”, and compare we will - is there actually a difference between investing in longevity-oriented biotech and traditional biotech? To do so, as was briefly mentioned above, let’s take thirty (lower bound for many statistical significance tests) companies from a list of public biotech companies randomly, gather all the data for those too, and then statistically compare the distributions. To make it more stringent, only companies that are currently trading (so no delisted, acquired or reverse merged companies) from the longevity-oriented list are taken, and no Big Pharma or companies that went public before 1990 are included. Extreme outliers are taken out too (sorry Alnylam and United, no win for you here).
Quite an interesting observation emerges. It seems that even though all biotech has crashed between the public market entry and now, longevity companies crashed less, with a somewhat significant p-value. There are also trends for longevity companies jumping a little higher at ATH and crashing a little lower at 6 months post market entry, albeit not significantly. Does this suggest that investing in longevity-leaning companies will actually make investors more money? As an investor in the space, I really hope so, but to me, this at least suggests that there may be no difference between investing in longevity and general biotech. If you think about it, it really makes sense since the ultimate goal of biotechnology is to extend life in some form or another, so it shouldn’t matter that much what identity a biotech company takes. There are of course a couple of important caveats to note:
I took the first 30 random biotech companies that the randomizer gave me - ideally one would run a couple of simulations for a more robust result, but considering the time it took to manually fill data for those 30, I’d rather not 🙂
The actual stock trajectory of each company is different, some are bimodal, some are multimodal. The reality is much more complex, so again, don’t use a single internet analysis for your investing decisions
LongevityList, AgingBiotech and Spannr may unintentionally cherry-pick companies, especially ones that are borderline longevity
IMO, a lot of the companies in the list are not ‘true longevity’ companies. I wanted to be somewhat objective in what companies are selected for this analysis, but by my own classification of ‘true longevity’ companies (companies that have longevity, aging or at least rejuvenation/regenmed in their stated thesis), the median percent change between market entry and now is much closer to TradBio (-91.73%, p=0.71), and the median percent change between market entry and ATH is lower than TradBio (53.7%, p=0.79). However, looking at the p-values reiterates my own conclusion, and I personally agree with including companies that are not ‘true longevity’ in this roster, since investing in any frontier biotech that aims to tackle age-associated disease and/or uncover complexities of biology to make treatments better IS an investment into the promise of longevity biotech, albeit not direct
Conclusion
Investing is hard and full of uncertainties, especially when investing in biotech. As I was starting this analysis I had a hunch that I would see a huge discrepancy between longevity-oriented and TradBio companies on the public market, so the statistical results (or lack thereof) shown in this analysis are actually a pretty pleasant surprise for me. While the point from my previous article - perhaps some true longevity companies that have gone public shouldn’t have done so - stands, there seems to be no statistical difference between investing in regular biotech and the longevity-oriented one. Let’s now hope the public markets will hold this insight, and trade by trade, longevity biotech investment will come to the spotlight, especially considering the upside potential of the space. Now, there is more that can be said about longevity public market dynamics, and acquisitions are a whole different beast altogether, and we shall explore them in the next article(s), so stand by.
 | A guest post by
|