HENRY 0:02 

Well, welcome to another episode of On the Couch with myself Henry Jennings from Marcus Today. And today, as always, I'm delighted to be joined by Jason Siegel, also known as the Armchair Analyst. And Jason has a newsletter service that concentrates on the life sciences sector of the ASX, which, as many members and listeners will know, is a sector that I do tend to gravitate to as well, as well as well as the resource sector and the tech sector, but I do have a little bit of a fondness for the biotech and small caps in this sector. Now, Jason's uh his dad, I'm not sure who his dad is, but he worked for a stock broker for 30 years. And Jason got interested in this sector uh after university and has been running this business for the last uh 10 months, he told me, just before we came on air. So it's it's a relatively new business, and Jason, I have to say, is prolific at putting out content on the internet and various other places, and uh is is really good. I saw Jason present at uh the Jane Morgan Management event that I went to uh a couple of weeks ago and uh was impressed. So here we are. Jason, thank you so much for coming on. 

JASON 1:11 

Thanks, Henry, appreciate it. 

HENRY 1:14 

And of course, as always with these podcasts, it is general advice only. So please do your own research, contact your own financial advisor regarding any of the thoughts, ideas, or insights in this podcast. So, dad got you interested in stocks and shares, I guess. So, so why the biotech sector? Why did you gravitate to this? 

JASON 1:34 

Well, it was interesting. I was so so dad was a broker for for for a long time, for basic for effectively my whole life. Um he worked at Shaw's and he actually started his own brokerage firm called Trent Securities. And until I was, you know, like when I when I got my first job out of uni, I did not trade a single stock. And it was only until I got my first job out of uni to work at a company called Next Investors or Stocks Digital. Um that was uh that was, you know, when I when I bought my first share, which is pretty, pretty interesting. It took me it took me a while, but now I'm I'm I'm very much into it and very involved. So my sort of background, I wrote about stocks for for seven years for for next investors, and then I went out on my own to start my own newsletter covering healthcare stocks. And reason why I liked healthcare is I saw the opportunity to like I I I tend to like, I'm I'm a curious person, and I think that the understanding biotech companies really does scratch that curiosity itch. And I think that there's a lot of different things that that and what I found is is that the the commentators in the industry is relatively unsophisticated in Australia, and I I thought that there would be an opportunity for me to help bridge the gap between the companies and and the challenges that the companies go through versus the retail investors who might take an interest in in healthcare stocks, but don't necessarily have that edge that um that that it takes to actually understand what it is, the science, the the people behind it, the value proposition. And um, yeah, that's that's that's really what I what I wanted to do with the Archer Analyst. 

HENRY 3:11 

Now, it's fair to say, Jason, that a lot of people look at the healthcare sector and biotechs and emerging healthcare stocks and they think, oh my god, these are binary outcomes. You know, if the trial doesn't work, you know, if something happens or they always need more money. Um is and it and it puts them off so much. So it's fantastic to see someone like yourself uh in this space. Um, there are, I think in your blurb, there's 165 ASX biotechs. That that's a big slug of the market, isn't it? So I I guess it's a good place to start. So so tell us about the armchair analysts. 

The Armchair Analyst Approach

HENRY 3:46 

Well, I why the armchair analysts? Well, it's because I that that's basically who I am. 

JASON 3:50 

Like I don't have a science background, I don't have a medical doctor, you know, I'm not a doctor, I'm not a you know, I never worked in a hospital. Um, but I what I do know is I know how to tell the story to retail investors and make them understand and make them appreciate what it is that people are people are actually investing in. And the way that I like, as you said, there's a lot of these binary outcomes. And the way that I like to think about every single investment that I go into and in my process is to understand what am I actually betting on. If if the bet is that I believe that this thing, this, this thing is going to um you know have a really good phase two clinical trial outcome, and then there'll be a share price re-rating on the back of that, then that's really what I'm betting on. And or maybe I'm betting on that the um a medical device is gonna go and take off and and it's gonna be sold into lots of doctors and and surgeons, and and people are gonna buy it by the by the company and by the device, and and the company's gonna make lots of sales, and then the share price is gonna re-rate off that. But I think that that that's something that uh in this sector that the retail investor struggles to understand. Um, specifically, like I'll I'll use this as an example, the difference between a medical device and a um drug development company. 

Drugs Versus Devices Risk Points

JASON 5:06 

So when you get approval as a drug development company and FDA approval and actually get that product into market, it doesn't take too much to actually start selling that product. So Meso Blast is a really good example. Uh they got um approval for their um stem cell therapy, I think it was like, let's call it 12, 12, 18 months ago, and immediately they were able to make sales and sort of probably do about hundreds of US 120 million dollars in sales this year. But if you take a medical device company, let's say um Authorcell, for example, that sells a medical device for uh nerve repair, it takes them a little bit of time to actually start to pitch their stock to pitch their product to surgeons to start getting them to use it. The surgeon has to take a little bit of time, they have to understand all the research behind it. But the uh risk points in terms of actually getting a drug to market versus getting a medical device to market, it's a lot easier to get a medical device to market, particularly if you go through what's called the 510k approval. You just have to prove that your device is substantially equivalent to something else out there in the market. Whereas a drug, you have to go through all the phase three, uh phase uh clinical trials, uh getting that drug approved, prove that it's safe, prove that it's efficacious and costs a lot, a lot of money. So the risk points I think that the retail investors don't understand as much is that for a drug development company, a lot of the risk is in the actual development of the drug, not in the sales. And then for a medical device company, a lot of the risk is actually happens after the approval, once you get the 510K approval. And I think that that's something that the Australian market's probably taking a little bit of time to understand rather than, yeah, and these these are the sorts of things and that that I like to point to and help out the um the retail investors. 

HENRY 6:47 

I gotta say, I've been doing this a fair time, Jason, and I had never thought of it like that. So um you're obviously onto something in terms of uh you know medical devices as opposed to drug companies because you know it it is um two separate things, I guess. So when you look at the 165 stocks out there, how how do you pick the winners in the the med tech or the biotech space? 

JASON 7:11 

Well, I think that the there's this there's this phrase that people like to use called you know, they say that time in the market's better than timing the market. But I think with biotech companies, the reality is that timing the market is pretty important in the sense that I what I look for is is value in the sense that let's take 4D Medical. So 4D Medical was the best performing company of the of the um last 12 months. Yeah the company grew from let's say $120 million valuation to $2.3 billion valuation within the space of four months after they managed to get 510K approval and investment from ProP Medicus and started to commercialize their product. Now, I don't believe that the company actually grew $2 billion worth of value in four months, but I think that the market recognized the potential for $2 billion worth of value in four months. And I think that that's what can happen with a lot of healthcare stocks is that the value is built over a long time, but only recognized in a short period of time. And I think that if you can find those opportunities where you can get in just before you recognize the before the value is recognized, then um that's that's where I like to play. So for example, you'll find that if a company starts a clinical trial, people get really excited, they'll go and invest and finance the trial, and then they'll get bored because they want to chase chase other opportunities. They um, you know, the way that the broking industry works is that they need a that brokers don't, you know, they don't do one deal every 18 months or every two years in, you know, in the same way that that's how long it takes for a clinical trial that um to run. Brokers do deals every two weeks or every four weeks. So they're looking to find ways to finance that. So they'll call you up and say, hey, you know that thing I made you 20% off, let's go roll that into the next thing. So you find that these companies that are in the middle and running these clinical trials, 

Timing Catalysts And Market Mood

JASON 9:04 

they actually the the shares tend to sell off. And then if you can recognize those those companies that are mid-trial or late trial that are sort of three to four months out before um the key inflection point when it starts to get exciting again, then you can actually pick things up pretty cheaply. So I I tend to like to find the time timing the market and finding the opportunities that are undervalued that are relative to where they are in terms of like the real true key inflection points, which is the data readouts and the um and you know the potential for approvals and stuff like that. 

HENRY 9:40 

They often say that uh, you know, this this stock or that stock or whatever was an overnight success, but the the reality is they've probably been 10 years in the making of that overnight success. And and you cited Mesoblast as one example of that. I mean, they've been trying uh for so long and have raised so much money uh along the way. Uh I guess you know it's uh validation that um patience is being rewarded for those people that stuck with the story. And the same with 4DX. I mean, that was uh a classic there from that um 40 cent level where they were when they did that deal with uh Pro Medica. So interesting. So um is it you know, when when we see these catalysts, when they see these kind of pivot points, is that the point to to jump on board, or is it you have to try and anticipate these these points before the announcement and just cross your fingers that uh it's going to be positive? 

JASON 10:35 

I think it really depends on the sentiment of the market at the time. So in the Australian market, there's been a couple of high profile failures for binary outcomes in um clinical trials. So the last three that happened was Sonata, uh, imutep and opthia. And what that means is that generally, like I have this saying that winners create winners. So if investors have been off the back of three big wins, then the natural next step is that the next, you know, the next clinical readout, people are going to go and try and speculate and buy up, buy up the stock beforehand to bet on whether or not there'll be a fourth big win. But because there's been three high profile losses, I think that what you might find is that that run-up that you get in in anticipation of the clinical trial might be a little bit more muted. And um, you know, like Paradigm's got their got their you know, phase three interim trial results coming out pretty soon and they're still trading around the the 17 cents that they did the capital raise on. And I think that what you'll find is that people will probably pay a little bit more for results, and so um, which I think's probably not not a bad thing. And then once uh people start paying for results, then you'll see that people start speculating earlier. I think a good example of that's probably um avecko without a pretty good readout. And you know, that there was a bit of a run-up, but it's still you people the way that I the way that I like to think about like movements and share prices, like playing game of tennis, you really need like a good ball toss and uh to hit a good serve. And the clinical data readout is the serve. But people want to see you get back to the baseline and and and and hit the next serve. So so this is this is the challenge that that ASX listed healthcare companies have is that like you always need to be constantly feeding the market with the story. Someone, someone said something really interesting to me uh the other day, which I really liked, which was the only drug that works is news flow. And um and I really like that because I think that that's the reality with a lot of these companies is that investors do, you know, they are patient, but they want to see the companies delivering and talking to the market and news flow. So the only drug that works is news flow. 

HENRY 12:48 

I like that. The only drug that works is news flow. That's good. I'm gonna I'm gonna use that. That's that's very good. And do you think that it's important to, you know, there's a there's a lot of people that will back the jockey as opposed to the the horse in some respects, they will back the management and they will back the CEO and the leadership team and the scientists behind it. Do you think that's very important in in terms of uh these biotechs? 

JASON 13:12 

I think it's probably the most important thing in the sense that you can have a you can have an amazing technology, but if the people that are running the company and uh haven't got the share register right, aren't talking to the market properly, aren't able to to properly deliver value from that technology, it becomes incredibly hard. And I think that people are very, very important. Now, a good person with a crap asset might struggle a little bit, but I would back a good person to find a 

Backing Management And Avoiding Heart Trades

JASON 13:48 

new good asset to put back into it. And I think that like at this stage, the people, like the particularly your sub-50 mil market cap companies, the people is all that matter. And I've seen it before where and and and the number one thing that I look for in people is probably humility, in the sense that I think that that some of the most brilliant, brilliant company managers out there are the most humble. And I think that if you're humble enough to understand what you don't know and you're able to gather advice and gather counsel from as many smart people around you, and then make your own decisions and drive the company forward with your own vision. I think that that's tends to be the the the leaders that I I like to follow into stocks. 

HENRY 14:30 

Because there is, I think it's fair to say, there's a lot of emotion surrounding uh biotechs, and sometimes I know that I'm guilty of this, is that you tend to invest with your heart, not your head. And you look at someone that's doing uh doing some amazing work for, for instance, in a in a space or a or a disease that is close to your heart that's you know as you know someone that has died or been massively affected by this, and you pile in because of that. Do you think investors are guilty of that too much sometimes? That we should be looking more um, I guess more clinically. Oh that's a bit of a pun, but but um you know, more disparatively in terms of uh emotion with uh biotechs? 

JASON 15:12 

I don't think that I I think that I think that it's a part of investing in biotechs, that right, that there's this almost philanthropic um uh ethos or or something within people that they want to actually give back and help and support. You know, if they've had someone in their family with cancer, they want to go and support cancer research. But it's a way that they can do it and make money. And I think that that's super important. One of the things that I find not frustrating, but I think is as short-sighted is when one of the um one of the large not-for-profits goes and gives a grant to one of these companies and they take it without equity. And I find that I would I'd rather them take the equity because it means that if the thing works, then they can go and reinvest it in more early stage research for either that same condition or for a different condition. So I think that it's it's in it it's the reason why people invest in the healthcare space is to actually like from a first principles perspective. I remember speaking to the one of the companies that I'm invested in, um, control bionics, and I remember speaking to the number one shareholder of that company, and he's been in the stock for 20 years and he's never sold the share, and he's always continued to continue to back and support the company. And he said to me, he's like, Jace, I remember when I started this this stock, it's it was that when I first invested in this company, it was for humanitarian reasons. I wanted to help the most disabled people possible give them a voice. And and the first customer that he had that that he helped build the product with was actually Stephen Hawking. And now they've obviously gone on to build a business around it, and he's he's you know accepted that they're now they're at a stage where they can start to commercialize and build a proper business around this amazing technology that they've built. But at the first point, the reason why that technology existed in the first place was genuinely to help people, and the business came second. I thought that that was really, really interesting from his perspective, and and I think that it's reflective of a lot of people who invest in the healthcare space. But I I think that why not make money too, in the sense that if you can make money from a healthcare investment, then it gives you the opportunity to go help more people and go roll it back into earlier earlier stage research and other investments too. 

HENRY 17:27 

Now, Jason, I I'm I'm no um I'm no biologist, I'm no chemist, I'm no doctor like yourself. Um, so do you think you can be successful in this space without being any of those things? Because you know, sometimes I look at the science and look at the presentations and my eyes just glaze over and I think, what should I be looking at? What should I be focusing on as a complete amateur in this space? What what what are the things that you focus on? 

JASON 17:52 

It's a good point, and I think that I like you kind of have to know your limitations of what you do and don't know. So, for example, like Henry, do you do you invest in like oil and gas or mining stocks as well? 

HENRY 18:04 

Yeah. 

JASON 18:04 

How's your sort of like geological understanding of of you know oil and gas uh 3D, you know it's um it's it's probably up there, Jason, with uh my biotech knowledge as well. Yeah, so I think that the reality is is that you we don't know the specifics of these of these businesses or of these technologies, and and and I think that but but what we do know is like the value of the the value of um uh the punt and how people actually go and and and value these businesses. One one thing that I think that retail investors do do a lot of is that they point to what I call external validation. So external validation is the easiest way for any non-sophisticated person 

Validation Signals And Dilution Reality

JASON 18:52 

to actually be able to benchmark the value of a of a company in the sense that if let's say a company signs a deal with CSL or Eli Lilly or one of the big pharma companies, you know that they've you trust that their scientists have done the work to validate the technology. Or if a company signs a licensing deal and and or if one of their competitors gets acquired, then you're able to say, okay, well, this is similar technology to that competitor, but with these sort of slight differences. So I can, you know, discount or add whatever value it is to whatever that acquisition was done. So I think that there are definitely ways in which you can benchmark the value of the company based on where it's at in the in terms of like what they've been able to validate and also what external validation exists. And I think that the number one external validation that the retail investors look for is probably in the market itself. So if you see a 4D medical running, everyone's asking themselves, okay, what's the next AI imaging company? Because the market's given 4D medical a $2.3 billion valuation. And then surprise, surprise, two months, three months later, EIQ goes from a 20-mil market cap company or 50 mil market cap company to a billion dollar market cap company. And Pro Medicus then goes and invests in them because you know they're they they see that you know the the market is rewarding this subsector of the healthcare industry, which happens to be AI medical imaging. So I think that it does you don't have to be too sophisticated about it in terms of your ability to win, but just look at where the external validation is, and then you can make a pretty educated guess on what um you know what what the value of that company is at the time. 

HENRY 20:33 

Now, I guess you know, biotechs generally and the sector generally uh does tend to have a reputation of um consuming money. I I guess you know, doing drug trials and doing medical technology trials is expensive. Uh, you know, we've seen that with uh you know data center companies and AI companies raising huge amounts of money, and and we do get this dilution along the way with uh biotechs. Is that something that you just have to accept as part and parcel of being in this in the space? Or um, you know, are there is there a difference between a good raise and a bad raise, if you like? 

JASON 21:06 

I I think that it's one of the biggest challenges for the industry, and I think that the the chat the biggest challenge on that front is that the most amount of capital comes is is required at the final stages and the final hurdle when the largest potential value inflection occurs, which is your phase three clinical trial. But also it means that the like like it costs let's say $100 million to go and run a phase three clinical trial. But the company that's running that you know that's at the phase three might be only might only have a market cap of $150 million. So and and it might and they might have put in $60 to $70 million to already get there. So what tends to happen is that is that what we do in the Australian market is we it's it's called we we we play a bit scrappy, right? Like we don't have the capital. Levels that the big US companies do to do things in a linear order. I'll give you a really good example of that. So in Australia, you can run a phase two trial just by getting human ethics approval to put it into humans. But in the US, you need to get an IND, which is a um, which means that you need to do toxicology, you need to get your manufacturing right in order to get your drug into humans. So what the Australian market tends to do is that they'll run the phase two trial in Australia, get the efficacy data that can re-rate the stock and you can raise some money off, and then go back and do the IND, so uh the toxicology work that that um that you can then go and run in the so that you can you can deliver it into patients into the US. So we don't have the luxury of unlimited amounts of capital to go do things in a linear manner. We have to do we have to be able to prove the efficacy points in different points in time such that we keep the market interested so that you can raise the capital. It is a little bit of an art form, and I think that um you know there's a lot of wily Australian um you know corporates out there that that understand that that understand the game, and I think that that's a really important part of it. But you're 100% right. Biotechs are big cash-hungry machines, but like the the reward on the other side is pretty awesome. So Meso Blast, $120 million US this year, almost like 93, 94% margin, right? So so you can just basically self-fund clinical trials. I think Nurin that's that's had their drug approved, they've had about $550 million cash back to them. So that um since that since they're they've had their phase three drug approved. And that's just all gravy in terms of being able to go and develop um new new drugs that they've got in their pipeline. But getting that drug approved is really, really hard, but the upside is very, very big, and I think that that's the reward that everyone sort of chases. 

HENRY 23:53 

It's uh interesting you say neuron because we've been um fans of that one for a long time, and I've uh interviewed John Pilcher on a number of occasions and have stuck by the story even when it was eight bucks and uh been very positive on that story with Deboo and their uh their drug there. Um as far as let's get a little bit stock specific. Now, obviously, this is not uh personal advice, the general advice. Are there any stocks out there at the moment you think, wow, you know, this one's being overlooked by the market, this has got good potential, this could be another 40x. There are any stocks out there you think that um investors should be looking at and that aren't looking at at the moment? 

JASON 24:28 

Well, I'll talk I'll talk my book here 

Psychedelic Clinics And The Emiria Thesis

JASON 24:30 

because Okay, talk. This is my my my my favorite my favorite company at the moment, it's probably stock called, it's called the Muriar EMD. So they run psychedelic clinics um around Australia. So I'll I'll I'll take a step back. So in 2023, the Australian government did something really interesting. They downscheduled psilocybin and MDMA to from Schedule 9 to Schedule 8, which allowed people to run their own uh mental health uh therapies using psychedelic medicines for PTSD and treatment resistant depression. And MERIA was one of the first companies to look at that opportunity and say, we're gonna build a really big business around this. So 12 months ago, probably a little bit under 12 months ago, they had one clinic in Perth and a handful of trained therapists, and they had a um, and then they signed a deal with Medibank. So Medibank is the largest private health insurer in Australia, and they said, Amiria, we are going to fund all of these therapies for all of our members, uh, as long as they're eligible, so that you can go and scale up this business because we are spending so much money on mental health services for people that we need a solution. And right now, SSRIs and and and um like Prozac and all that is just not working. So Emiria's gone from like one clinic in Perth to they've got five clinics now. They've probably got uh about 130 trained therapists and about 18 authorized prescribers. And I think that they did four and a half million bucks in in revenue last year, and I think that the market's gonna be pretty surprised in terms of how quickly that's gonna ramp up over the next you know two years, three years. And in the US, um, in the next six months, we'll probably see the first psychedelic medicine get approved. Um, we had Eli Lilly, which is the largest um largest pharmaceutical company go and enter space with a US $3.8 billion acquisition of a Type Beckley for their psychedelic um DMT product. And the biggest challenge that the US companies have is that they actually have no means to deliver it. And so we saw this with um Johnson ⁇ Johnson seven years ago, they got a uh a nasal spray ketamine product approved for um depression. And for the first four years, they basically made no revenue. And it was only until they realized how to actually get it into the hands of patients where they have um sort of like five seats in a row, they're very specific clinics, they roll out people to every two hours, they sort of like rotate people through. Now that's a they'll probably do US $2.3 billion uh this year, that product. So there's a lot of money to be had, but the key unlock is the care delivery model. And now Amiria's had sort of a three-year jump on the rest of the world and probably has the most experience out of anyone in terms of being able to scale this up. And that's gonna be the number one problem that all these big US pharma companies that are about to get their drug approved for psychedelic medicine is gonna have once they once they actually get it approved. They're gonna go through exactly what Johnson ⁇ Johnson did and have all the challenges of actually being able to, you know, hire therapists, train them up, scale it up, manage, manage the the onboarding process, manage all the all all the processes. And I think that Mir is just so well placed to support on that front. Um, that I think, yeah, uh capped at 35 million, 7 million bucks in the bank. They've got some options which are marginally in the it's sort of just trading around the money that are exercisable in six months that will bring in another big chunk of cash. So they're they're well cashed up and and I just think that they're they're pretty it it it's my favorite favorite event. I could man, I could talk about it, Miri all day. 

HENRY 28:12 

Um Jason, there's another one, isn't there, in the in the psychedelic sector as well. The trip was yeah, EMP, entropy, yeah. 

JASON 28:18 

So there I also really like them as well. Jason Carroll, who's on um who's also that's it, he's also involved in island pharmaceuticals. I really like entropy. What I like about them, so they're they're they've had some really good results for um for IBS. So I I can't remember the exact results, but it was a phase one study, and I was really impressed with the numbers. But their drug is they're a little bit different to Amiria. So Amiria are a clinical scale-up play. So like think about it like I don't know, let's call it like owning a bunch of bunch of dentistries, but instead of dentists, they're they're delivering psychedelic therapies. Um entropy is actually building a drug technology to to reduce the time frame that the trip um happens. So normally these are like six, seven-hour sessions. Uh uh Entropy is trying to get that down to two hours and being able to turn it on on and off with our IV solution. Now, what I really liked about them is they recently put out a uh announcement where they're running a phase one clinical trial. I think it's in Australia, not don't quote me on that, but it's um it's for eight different conditions. So one thing that I wanted to see from them was to see them cover treatment-resistant depression, PTSD. I wanted to see them cover the gamut, and they've just been able to put together a pretty nifty and different type of clinical trial where they'll run them all at the same time and be able to see what efficacy data they can get from lots of different conditions so that they can sort of pick which which um one to chase. 

HENRY 29:49 

It's um it's interesting. I I've seen them present a number of times, and it it always strikes me how long, as you say, how how long the kind of you need to monitor the patient. Yeah, um, it's not sort of set and forget, you've got to monitor the patient in case things go wrong, and that that time obviously is um, I guess a bit of a deterrent from from medical practitioners because it's um it's expensive if your time is valuable to do that. 

JASON 30:14 

Well, one thing that I think is really interesting on that front is that they've had really amazing durable effects. So imagine if you have PTSD and you have to come in for a full day session and you go and do that for three days over a three-month period, and then you effectively got your PTSD cured or as good as, you know, like or like PTSD for free for two, three years. It's pretty amazing the durability of the results. So I think that that's what the insurance companies are looking at and saying, wow, like this isn't this isn't like a this isn't something that, you know, this not the fly in fly out. We're not gonna have to continue to keep on paying for this person over and over again. It's sort of you do the treatment and you're and you're better. And and that's that's what's happened, that's sort of the data that Amiria showed. And they had um, they had 10 10 people come in for work-related PTSD, sort of like first responded police officers, and all 10 of them back at work, which is pretty amazing. Like you can imagine the sort of how interesting a company like work cover would be for that sort of stuff. So yeah, the I I think it's it's a it's something the insurance company is really interested in, and there's no there's no shortage of of demand for the product, it's all it's all a supply challenge. Can they get enough people trained up and enough clinics and enough rooms and enough beds to deliver all the all the therapy that's needed? 

HENRY 31:33 

Now, um we've talked about stocks that excite you. Um, I was going to ask you stocks that don't excite you, 

Red Flags Cash Burn And Clear Bets

HENRY 31:40 

but let's make it broader, I guess, rather than uh single out any specific stock. What are the red flags for you? If you if you're looking at a drug trial report or you're looking at any updates from any of these medical companies, medical device companies, what are the red flags? What do you look at and go, oh yeah, no, I don't like the look of that. That looks pretty rubbish to me. Are the the red flags? 

JASON 32:01 

Yeah, I think my biggest red flag is cash burn. And I think that cash burn relative to market cap and relative to what the company's recently done a capital raise from. So if you're if you're an early stage company and you're you're I like companies that burn the amount of cash that sort of matches up to their market cap. Like I had a look at you know, Adhereum's a great example. They just raised six million bucks, and then I saw at a six million dollar market cap, so they've raised almost a hundred percent of their market cap, and then they spent four million dollars in a quarter, so they're gonna have to raise their whole market cap every six every four months. Like it's not a you can't build a sustainable business around that. So I think that that's like, and I get the whole idea of sort of like sprinting towards the end of the cliff and hopefully that are an acquisition or cash flow break-even will be able to go and save you. But I think that companies that aren't realistic about you know where their market caps at and what their cash brand levels are at is is that's a huge red flag for me. Like I know that I get the idea that people will like, you know, like you can keep on dilating down and cheaper and cheaper money, but just you know, if people if if people show you, if companies show you who they are the f trust them the first time, right? So like if they're if they're just raised 15 million bucks and they did 10 million dollars in the quarter, then you know they're gonna be coming back for your money in in three, four months' time, which is just unsustainable. So I think that that like out of all the red flags that I have, the companies that I think are the the worst, the not the worst, but the companies that I think are the biggest challenge, the big the hardest ones to get right, are the ones that just spend way too much money relative to their market cap? 

HENRY 33:52 

I I was just thinking of sprinting towards the edge of a wiley coyote and he doesn't realise he's gone over the edge until he looks down and then he realizes that he's in a whole heap of trouble. Yep, yep. So your dad was a broker. , what's the best piece of advice uh he gave you or anyone else has given you in terms of investing? 

JASON 34:15 

In terms of investing, I think it was probably what I said earlier about defining the bet. That's that's probably like my big nber one thing. Like, understand why you make an investment. Sometimes what happens is like, so my worst investments are the ones where I'm out with mates at the pub and someone gets excited and they're like, Oh, this like I have this gold stock, this is awesome. Uh going to the moon, you get excited, you you tip some cash in, and you wake up the next morning and you have a look, and and it's sitting there in your portfolio, and like, why the hell did I invest in this thing? And then usually the ones that you lose money on and you just sell the next couple of days. So, like, I I find that like with each new investment I have, I want to like kind of know personally why I made that investment, and that helps me to frame that helps me to frame decisions around when to buy and when to sell. And I think that like that that reduces the emotional FOMO as well as the emotional, like if the stock's down, like you can understand why you invested in it, and then you can you can you can stomach some of the some of the volatility and fluctuations of the market a little bit better. Whereas if it's a stock that you don't know why you bought and the stock's down 20%, well, that's definitely not a stock you're probably going to be holding, right? So that's that's that's sort of been the the the best way that that I that I  sort of best piece of advice someone gave me. 

HENRY 35:37 

Well, we we all do db things when we're in the pub with our mates. Yeah, we we've all we've all been there, I'm afraid. So  it's good to know that  you realize that you've done a db thing, I guess, when you're in the pub with your mates.  how just one final thing. I mean, these are companies, these some of them are early stage, some of them mid-stage, some of them are late stage. How do you value them? This this is, you know, how how do you put a a nber on what the 

Valuation Benchmarks And Where To Subscribe

HENRY 36:06 

market cap, what the valuation of a company should be? Because they all do the you know, the total addressable market is $400 billion because everybody's got this disease and we're gonna cure it. How do you value a company on on those kind of  metrics? 

JASON 36:23 

It's a really it's a really tricky question because I think there's a value which is the share price, and then there's the value which is the market cap of the company. And what I find is that the the institutional investors and the and your and your top shareholders, they sort of underpin your company's value, but it's the retail investors that set the share price. So you know, if you've got a thinly traded stock, you could swing five, ten, you know, five, ten percent or thirty percent value day in, day out, just based on some thin, thin trade. So it's not real and true valuation, but I think that like it takes time, it takes time to sort of like feel the stock and like see what's happening and what you know what what you think is undervalued or overvalued if you think things are oversold or undersold. But the easiest way to do it is just to benchmark on other you it's all a relative game. As I said, 4D medicals they're valued at this, so EIQ could be valued at that. , dimerics is at this stage of phase three clinical trials, so that means that you know there's uh relative to other phase three clinical trials. Maybe you look over in the US, they're uh you know potentially undervalued, or in Miriam, they've got you know, I think that can't because the challenge is a lot of these companies are years, potentially even decades, away of actually making money. And that's why it's really hard to put a value on these things, but it's really just what someone's willing to pay in terms of the share price, but also you can always do a relative valuation based on  you know other other companies in the sector and and and what what they're looking at, and and then you can just say I like this one more than that one, and that one's valued at this, and so I like this one's undervalued. Yeah. 

HENRY 38:07 

Well, Jason, thank you so much for your time. I I think it's fair to say it's it's a big sector, and you cover it beautifully with your newsletter every morning, uh, pretty much, uh, with the armchair analyst. And uh, for listeners that uh are interested in that, where can where can they go to sign up on uh on an email there to get those uh insights every day? 

JASON 38:28 

Yeah, thank thanks Henry.  just go to uh thearmchairanalyst.com. So thearmchairanalyst.com and there should be a sign up  sign up uh form on the on the on the home page. 

HENRY 38:41 

Fantastic. Jason, thank you so much for your time today.  I've learnt a lot, and uh I I have to say I signed up a little while ago, and it's certainly a fantastic service. And if anyone is interested in the space,  there are I think few and far between people that are really concentrated 100% on the space, and you are certainly one of those. So uh well done, congratulations, great product, and uh thank you very much for speaking to us today. Thank you, thanks, Henry.