Ann: Race releases video of 2019 AGM presentation, page-31

I only hold one other biotech other than RAC - as I mentioned in the AGM video I mostly invest in mining companies. It is probably best if I keep my personal HC handle seperate from my official RAC one. One of the great things about HC is we can be free to say things we might not say if our handles were linked to our own names.

A “lifestyle" company is one run for the benefit of management and the board, not the shareholders. The management of lifestyle companies don’t care about dilution, they are just focused on their salaries and making sure they can pump up the SP before a raise. While no means confined to biotech (there are plenty of “lifestyle" mining companies too), it does seem to be a particular problem in biotech. This may just be because it is easier for me to spot them, but I suspect that the ability to “baffle the shareholders with science” is also a factor.

This brings us to the really important question of how can a retail shareholder who doesn’t happen to have a PhD in science work out which are the lifestyle biotech companies? The problem is even harder because in biotech you also need to avoid investing in companies where the management are earnest and honest, but where the underlying tech is worthless. Unfortunately, I don’t have a good answer to this. The best I can offer is the following questions you might ask yourself before investing.

1. Is management honest and competent and do they have the background to make the company a success? Look deeply into the background of the board and key management. Have they achieved anything significant or has their career been one long series of disasters.

2. Does the board and management hold a significant share of the company and have they put their own money in? This doesn’t just apply to biotech, but one of the best ways of knowing what a company’s management will do in the future is look at what they have done in the past.

3. Are the risks and rewards measurable? It is very easy to paint an amazing blue sky picture in biotech, but understanding all the risks is very hard. The major risk in biotech is in the clinic. A drug that works in mice has a very low probability of making it all the way through to FDA approval - the chance is on the order of a couple of percent.

4. Does the company report the full details of their clinical trials? This is one I personally find most useful in evaluating a biotech company. If they “spin”, or leave out important details from the trial results, then get suspicious. Clinical trials are complex and often difficult to understand, but if a company leaves out the important details needed for an expert to evaluate the results then be worried. There are guidelines biotech companies are supposed to follow and if they don’t it is a massive warning sign.