Two interesting articles related to Bloomberg this week.
On January 8, 2025, Rao et al. discuss the job cuts for equities analysts that are occurring on Wall Street. Professional analysts are pared back, forced to cover more industries or companies more thinly, or dropping coverage. Here. The Bloomberg authors link to a SSRN public article by Nathan Dong of Boston College, "Can AI Replace Stock Analysts?" SSRN here.
- Some analyst functions may be replaced by AI;
- While freelance deep-dive analysts are filling in with self-employment via personal subscriptions (eg Substack).
- Cutbacks in analysts could result in "undervaluations" or other effects, say Rao et al.
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Both traditional biotechnology (drugs) and genomics are highly volatile markets. However, biotech volatility often stems from tangible, random events, such as unexpectedly positive or negative phase 2 trial results. In contrast, genomic volatility can be more perplexing. Take the Covid-era equity and VC bubble (2021–2022) as an example. In a couple years, Invitae's stock soared from $15 to $50, only to crash to near zero, even as the company’s revenue and growth remained relatively stable.
The genomics sector includes a diverse range of public companies like Natera, Guardant, Veracyte, Castle, Exact, GeneDx, and others. If the thesis of Rao et al. holds true—that public market coverage is becoming increasingly thin and less granular—then genomics might present new and unique opportunities for informed investors. Those with deep expertise and a nuanced understanding of these markets (including factors like LCDs, NCDs, coding policies, and Medicare Advantage behaviors) may find underappreciated opportunities for both buying and selling.
The last two paragraphs are an AI rewrite that is clearer than the text I typed myself.
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As for the weirdo corners of genomics policy, see a nerdy blog this morning on a new cancer LCD. Or odd MAC non coverage of PLA Codes.
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AI Corner 2
Chat GPT reads my blog, above, and gives me feedback, below.
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Your blog piece highlights an important intersection of finance and genomics, framing it within a broader industry trend of reduced equity analyst coverage and the implications for highly specialized fields like genomics. Here's how your insights could be further refined and emphasized:
Key Points to Emphasize
Distinction Between Biotech and Genomics Volatility:
- You effectively differentiate biotech's event-driven volatility from genomics' complexity-driven volatility. This insight is a cornerstone of your argument, as it underlines why genomics requires deeper expertise that AI or generalized analysts cannot yet provide. Expanding on real-world examples, like the Invitae case, strengthens this point.
AI’s Limitations in Genomics:
- While AI is gaining ground in financial analysis, genomics operates in a regulatory and scientific labyrinth where human expertise remains irreplaceable. Medicare policies, coding nuances, and payer behaviors are not just complex—they're dynamic and require on-the-ground expertise to interpret their implications on market valuations.
Opportunities Amid Reduced Analyst Coverage:
- The thinning of equity analyst ranks creates gaps that can be exploited by those with specialized knowledge. This scenario could lead to undervaluations or missed signals, which represent opportunities for investors attuned to the idiosyncrasies of the genomics sector.
Suggestions for Refinement
Strengthen the Call to Action: Conclude with a direct appeal to investors or companies, emphasizing how specialized expertise, like yours, can bridge the growing analytical gaps in the genomics industry.
Expand on AI's Role: Discuss the types of tasks AI is adept at in financial analysis (e.g., pattern recognition, earnings prediction) versus its struggles in interpreting Medicare LCDs/NCDs or payer-specific nuances, which require deep domain expertise.
Connect Freelance Analysts to Genomics:
- Highlight how the rise of freelance analysts or Substack-style publications could benefit the genomics sector, given its need for detailed, expert-driven insights. Position yourself as an exemplar of this emerging model.
Expanded Conclusion Example
"In an era where Wall Street thins its analytical ranks, the genomics sector represents both a challenge and an opportunity. Its complexity defies automation, requiring not only technical acumen but also a mastery of its arcane regulatory and reimbursement frameworks. For those willing to engage deeply, this landscape offers unique possibilities for identifying both undervaluations and hidden risks. As we navigate this evolving terrain, one thing is clear: in genomics, the value of true human expertise has never been greater."
Would you like to refine any particular section further or add more examples?
