BridgeBio Pharma, Inc. (Nasdaq: BBIO), an innovative biopharmaceutical company focused on treating genetic diseases, has announced the publication of a case study, “Applications of Portfolio Theory to Accelerating Biomedical Innovation,” in The Journal of Portfolio Management. This study, which highlights the application of portfolio theory within the biopharmaceutical industry, is featured in the Journal’s 50th-anniversary edition, celebrating foundational concepts in modern finance like Dr. Harry Markowitz’s pioneering work and exploring potential future directions for finance.
The roots of this research trace back to 2012 when Andrew Lo, Ph.D., co-founder and director of BridgeBio and professor at MIT’s Sloan School of Management, began investigating how portfolio theory could transform the biotech industry. Shortly after, he collaborated with BridgeBio co-founders Neil Kumar, Ph.D., the CEO, and Brian Stephenson, Ph.D., the CFO, to explore practical applications of portfolio theory in biopharma. This approach, considered novel in the industry, ultimately helped shape BridgeBio’s foundation in 2015.
“Portfolio theory had been proven in various industries, but its application in biopharma is relatively new, and BridgeBio has been pioneering this approach since its inception,” stated Dr. Lo. “Our strategy is designed to speed up treatment development by diversifying risk with multiple programs, thus appealing to a broader investment base. I’m thrilled that our work has been recognized by The Journal of Portfolio Management and look forward to sharing our experiences to inspire others in the field.”
Founded on the principles of portfolio theory by economist Harry Markowitz, BridgeBio’s approach focuses on risk diversification by investing across multiple drug development programs, rather than relying on a single lead candidate. This strategy aims to boost the likelihood of success across a range of programs, thereby appealing to a wider range of investors. The approach enables the pursuit of early-stage research, often seen as riskier, but with a potentially higher impact on patient outcomes.
Dr. Kumar noted, “BridgeBio emerged from a blend of portfolio theory and a commitment to developing genetic medicines for patients with unmet needs. This theory, with insights from Dr. Lo, has enabled us to pursue multiple programs that may have otherwise been overlooked. We’re excited to share more about our decision-making framework, which incorporates principles like ROIC, g, WACC, POTS, and diversification. Our hope is that this case study serves as a guide for others in the biopharma space.”
Dr. Stephenson added, “Amidst a challenging financial landscape for life sciences, our diversified portfolio model has enabled BridgeBio to manage market and development process fluctuations. Our unique financing structure allows investors and philanthropists to support genetic disease research, enabling us to target multiple indications simultaneously.”
The article was co-authored by Dr. Lo and senior management at BridgeBio, including Dr. Kumar, Dr. Stephenson, and Dr. Chinmay Shukla, Vice President of Strategic Finance.
