What do you call a stock that’s soared by over 500% in one year?
Answer: the jackpot!
That’s precisely why investors like biotech stocks. An unknown, unloved stock can become a darling in a heartbeat.
That number I just used isn’t a fabrication, either. It’s exactly how the stock below has performed over the past year.
I’ve been following the company for almost a decade now. And after some fits and starts, it’s finally surpassed cult status and hit the big time.
It’s no fluke, though. I’m going to give you a few quick tips for successful investing in biotechnology – and reveal the company I’m talking about…
From “Lab to Fab”: Matching Strategy With Science
Let’s start with a fundamental principle: Picking biotech winners is not a trader’s game; it takes investing chops and a long-term horizon.
After all, changing the face of medicine doesn’t take a quarter or two. You need time, patience, and plenty of research.
In the biotech world, getting products from “lab to fab” – i.e., into commercial production – requires two key things…
- Good science.
- Good management.
Many biotech firms are highly specialized in terms of their drug research, but if there’s no business vision to complement the scientific vision, it will be hard for a company to cross the proverbial “valley of death.”
This is particularly important, given the time and huge expenses involved with FDA testing. How companies finance their research and clinical trials is critical.
In addition, small biotechs need proof of concept before a Big Pharma company will look to license a technology/drug, or buy the company. In other words, they don’t have to pay for expensive drug trials to see it.
Keep in mind that for every biotech that succeeds, many more will fail. That’s why it’s vital to have a long-term outlook and play the field. For example, look at companies developing cancer drugs, heart medication, drug delivery systems, new vaccines, etc.
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Don’t just buy one “cool” idea. Diversify your holdings, so you can keep the truly promising firms and dump the stragglers.
It’s like going to the race track. You don’t expect to win every race, but when you hit, it feels good and the payoff can be very big. And as medical science achieves more breakthroughs through new technologies, biotech opportunities will increase.
Like this one…
After years of struggling to get some serious recognition for its cutting-edge vaccine work, microcap biotech firm, Inovio Pharmaceuticals Inc. (NYSE: INO), is finally getting some attention.
Shares are up nearly 1,000% over the past five years. And half of that has come in the past year!
What’s more, the upside has just begun because the company is now getting priced to the point where institutions can take positions and big drug firms are seeing proof of concept.
Last year, Inovio revealed successful results of its Phase I trials (HVTN 070 and HVTN 080) for its PENNVAX-B preventive HIV DNA vaccine.
In addition, the company said its universal H7N9 bird flu DNA vaccine protected 100% of vaccinated animals in a challenge study.
These are important breakthroughs. And with innovative, DNA-based vaccines for a variety of conditions – like HPV and cervical cancer – this is just the tip of a big iceberg.
But it took many years of trials, millions spent on research, and a smart front office to get to this point.
Bottom line: When a biotech firm hits on a breakthrough drug or vaccine, it can sell for many millions of dollars very quickly. So make sure biotech stocks are part of your portfolio. But given the costs, time and potential hazards, only use risk capital and diversify.