Be careful investing in net-net biotechs

Please keep in mind these three things:

1) Large margin of safety. Make sure it's trading 50% discount to book, not 10%. 

2) There has to be a catalyst, otherwise it will never rerate. 

3) Be mindful of quarterly EBITDA cash burn rate. You don't want it to not be a net-net anymore before it rerates. 

A net-net that is cash flow negative is very dangerous. Before the company can rerate and the market realizes its value, they can lose so much cash that it's not a net-net anymore. That's why it is pertinent that there must be catalyst. Catalyst is share buyback, special dividend, or if they become cash flow positive. 

It is very encouraging to see management buy shares. It shows the stock is undervalued? (usually.)

A net-net that I invested in is Minco Capital Corp. ($MMM.V). My write up. I am exiting the position now for a 30% gain. Money is better spent elsewhere. 

Biotech companies burn cash. When you buy a net-net biotech make sure there is 1) large margin of safety and 2) catalyst. Without either of these things, you will not make money. They will burn cash to the point where it's not a net-net anymore. Be mindful of the quarterly EBITDA burn rate and any SEC filings that can gauge future burn rate like $ODT therapeutics. My write up.

That's why I don't like biotech net nets (or any cash flow negative net-nets for that matter,) UNLESS THERE IS A CLEAR CATALYST AND LARGE MARGIN OF SAFETY. 

Cash flow positive net-nets are gold. You don't even need a catalyst. It's probably just because of liquidity problems why it's trading so low (forced selling.)