You know that drugs can be risky. So can drug stocks.
How do you make $10M in biotech? You start with $50M.
Investing in biotech stocks can be risky business. Here are some sobering facts:
- Only 11% of drugs make it from pre-clinical work to approval by the FDA
- 45% of drugs fail Phase II trials
- The FDA approved 26 new drugs in 2009
As a practitioner, you might have better insights into the science and markets for a new drug or device. In the final analysis, however, the market will punish or reward a stock based on clinical trial results that can make or break the company. Other things to keep an eye on are:
Important announcements or developments
Check the EDGAR database of SEC filings at http://www.sec.gov/edgar.shtml Every public compnay is required to file reports on a quarterly and annual basis. These are a goldmine of information.
Stay connected to websites, newsletters and reports online
Subscribe to free online resources from investment firms, research houses and industry organizations that track the industry like http://www.bio.org
Personal clinical experience
Be careful. There is a difference between buying and selling stocks based on your clinical observations and insider trading. Just ask Martha Stewart and Sam Waksal of Imclone fame.
Forget it and just buy a few to round out your portfolio
Do you really think you can outsmart the pros and consistently pick the winners? If not, then just buy some higher quality rated biotech stocks as part of your asset management strategy
Ernst and Young calls biotech the most difficult relay race in human history. Don't get caught dropping the baton.