My goal here is to start learning about the biotech industry by considering individual stock purchases.

BTK inhibitors are a drug that targets B cell malignancies. Most are covalent, meaning that they permanently disable the receptor they target, which is not ideal for a drug. Non-covalent BTK inhibitors are in clinical trials. Some have been prematurely terminated. Others are proceeding. In addition, there are covalent reversible inhibitors, but I don't know anything about that class of drugs.

One is CG-806, from Aptose, a $200M company. This is one of its two products, both of which are in early clinical trials. The study is projected to be complete in June 2023.

Another is LOXO-305, now under the brand name pirtobrutinib, which was developed by Loxo Oncology. Loxo was acquired by Eli Lilly for $8 billion in 2019, and has one other investigational drug in the pipeline. Pritobrutinib is in the middle of a number of early clinical trials.

A third is nemtabrutinib. This drug was developed by ArQule, which was then purchased in 2019 by Merck for $2.7B. Merck is a $200B company, so its purchase of ArQule represented about 1% of its market cap. The study is projected to be complete on Sept. 1, 2022. Note that this study started back in 2017, while Aptose's only started in 2020.

Fenebrutinib is another non-covalent BTK inhibitor, developed by Genentech (now a subsidiary of Roche), which also goes by GDC-0853 and RG7845. It's being tested on MS, as well as B cell malignancies.

How to think about this bet? One way to think about it is that you're buying exposure to a drug and drug target. Another is that you're buying exposure to a company. With Eli Lilly or Merck, you're buying miniscule bits of companies that each individually comprise about 15% of the worldwide pharmaceutical industry. An equal spend buying stock in Aptose gives you 1000x the exposure to the company, and perhaps 10-100x the exposure to this particular drug/target concept.

All these drugs were developed by relatively small independent companies, with a couple of investigational drugs in the pipeline and no proven successes. The big dogs decided they wanted a piece of the non-covalent BTK inhibitor action, and got in on the game by buying Loxo, ArQule, and Genentech.

This makes me wonder why Aptose hasn't found a buyer (yet?). How often do small biotech companies make it all the way through phase 3 trials without getting bought out by a bigger company?

Although non-covalent drugs are generally more attractive than irreversible inhibitors, one academic abstract claims that "Contrary to expectations, reversible BTK inhibitors have not yielded a significant breakthrough so far. The development of covalent, irreversible BTK inhibitors has progressed more rapidly. Many candidates entered different stages of clinical trials; tolebrutinib and evobrutinib are undergoing phase 3 clinical evaluation."

In a few hour's research today, I've identified a few good questions/things to be aware of, at least, in the biotech industry.

1. There are lots of endpoints for a small company developing a new biomedical product. They could fail, they could commit fraud, they could get bought out, they could succeed, they could flatline for years on end as their clinical trials grind on. Never take promoters or critics of companies at their word. They're trying to convince you of something, not provide a dispassionate broad view of the context of that drug or company, which is what you really need to build your understanding. Nevertheless, their articles might contain lots of concrete bits of factual information which you can harvest to spur further investigation.
2. Buying stock in a small company is giving you much more concentrated exposure to risks and rewards. If that company's one or two drugs fail, then you'll lose nearly all your money. If they succeed, you could see a rapid giant increase in the value of your stock. By contrast, the fortunes of a very large biotech company don't hinge overmuch on the outcomes of any particular trial.
3. Think of big pharma companies like a hybrid between a hedge fund and vertical integration. When they buy a smaller company, they bring regulatory relationships, brand name recognition, manufacturing, and an army of salespeople to making a drug profitable. If you are considering investing in a small pharma company, ask yourself why those big pharma companies, who certainly have a bunch of focused experts considering whether to buy out the small company, have passed on it so far. If the small company was going to get bought out, who would be the likely buyer?
4. The broad context for a particular drug is often going to be quite complex. There will be several drugs in clinical trials at the same time, all of the same drug class (i.e. non-covalent BTK inhibitors), and often also other drugs that have the same target but work via a slightly different mechanism (i.e. covalent BTK inhibitors). The road may be littered with skulls, previous attempts at the same drug class that just didn't work out.
5. Consider that there's lots of churn in biotech. People move between companies, from industry to academia and back, from small companies to big ones, and from big ones to small ones. When you buy stock in a company, to what extent are you buying a piece of a corporate society and policy and brand,  things transcends the individual; and to what extent are you investing in their people?
6. Everything hinges on regulation.

I don't think you can take a giant infodump and turn it into a model for stock-picking. Doing case studies like this are ways to come to grips with how complex, dynamic, and detailed the industry is. It seems important to gain an appreciation for what sorts of constraints might be relevant before we simplify.