It’s pretty hard to beat the Brits when it comes to situational comedy. As a dual-Australian/Canadian national educated in the UK, I suppose I have an intrinsic affinity for that dry, offhand style of humour. A few years ago, I stumbled across a brilliant comedy skit that visually captures precisely the fundamental reason why ASX biopharma is so average. Everyone has their hand on each other’s nether regions, and the whole sector is effortlessly incestuous.
Worth a minute of your life and a good belly laugh.
Let me illustrate this in a less comedic and more semantic fashion. Below is an image of most of the companies I have discussed since the inception of this site. Many of these companies feature as “picks” in both the Biotech Daily and Bioshares. I don’t know if they are picks because people think they are good in “absolute” terms or they are just relatively good compared to the flotsam out there (i.e. “less bad”), but most of these are companies that I wouldn’t personally put my money into as a “passive” investor because I don’t simply don’t consider them to be investments. They are speculations at best. Punts*. Certainly not – on the whole – based on science or technology that is going to impact human health.I note that this graphic has been visualised to optimise the clarity of the connections between individuals and companies. The few green companies are firms that I think are possibly interesting (that is not a “buy” recommendation or a financial endorsement), the orange companies mean I am somewhat indifferent about them (i.e. I don’t have a strong viewpoint that they are good or bad, they may have some merit) and the red colour means I think that the company is very poor quality / not investment-worthy. A lot of red there…
I considered adding a “deep red” category for firms that I consider to be living dead, but it was too inflammatory and even I have limits to my willingness to urinate in my own bathtub.
In terms of the executives themselves, I am not – in any way – implying a poor quality or a “peer” group of mediocre people. There are some individuals in that network that I truly respect and appreciate, a few really good entrepreneurs, investors and scientists. Not very many, but a few. The point is to show the level of cross-connectivity between companies, between boards and essentially the fact that the ASX “long tail” culture that I fundamentally despise is driven by a relatively small number of individuals. There is also ZERO diversity in this group. Sure Tracie Ramsdale and Cherrell Hirst sit on a couple of boards and we have a handful of female CEOs, but overall this is basically a white, middle-aged boys club that has been doing this together for the thick-end of a couple of decades. Obviously the list of companies that have been touched by these gentleman (and I mostly don’t mean “touched” in a nice way) is not exhaustively represented here either.
Although I have thrown in a few names to show the level of information and cultural cross-talk between companies, a handful of these individuals are pretty much incidental. Sure, they serve to illustrate that the gene pool is pretty shallow, and that everyone is a bunch of “mates”. But when you really look at who is driving the bus here by segmenting by degree of connectivity you start to get a very different picture of who is really behind the wheel of the sector.What this graph shows you, is that less than 10 guys (the reddy/orange colour) have impacted 100% of these companies at some stage. Obviously this company list is not exhaustive either – so let’s say a “bakers dozen”. And this is fundamentally why the ASX life sciences / healthtech sector sucks. It’s just the same bunch of chums, doing the same old (mostly) scammy deals, refreshing assets in the same public shells. Some of these guys have never actually produced a company of any credible value and there are precious few products that have actually attained commercial success, represented by this group. In fact, I would argue that virtually all of Australia’s successful biomedical exports have been achieved by people NOT part of this group.
To conclude, this is the reason why I do not passively invest in this sector. I get a lot of abuse on trading forums that I am obviously “missing out on all the fun”. Yeah, I am, because I fundamentally don’t know how to make a buck out of this (mostly) shitbag landscape of companies and the people who run them. What I can tell you is that shareholders are not getting rich (except a few early ones that are in on the deal) and patients are not – on the whole – benefiting either. Day traders are probably doing ok, because they intrinsically understand this network and the culture that it represents, and many of them even collaboratively exacerbate it. They see the predictable patterns of behaviour and know that they can take a little money off the table for playing along.
Time for a shakeup.
If anyone wants the PowerPoint file I used to make these diagrams, you can download it here.
*In the Anglo vernacular, not the American English vernacular.