Biotechnology stocks have delivered massive returns over the last few years. Apart from improving the lives of patients, newly developed drugs have made big profits for investors in the process. A quick look at some of the top performing names in the sector clearly illustrates this fact.
For instance, Axsome Therapeutics (NASDAQ: AXSM) currently developing novel therapies for the management of central nervous system (CNS) disorders is already up by more than 1,000 percent over the last six months while Arrowhead Pharmaceuticals (NASDAQ: ARWR) which is developing an RNAi platform that enables targeting and shutting down specific genes that cause disease, has gained an impressive 150 percent over the same period.
Perhaps what is interesting to note is that neither Axsome nor Arrowhead have a commercialized product. Both of their lead product candidates are still in clinical trials, implying that investors have plenty of confidence in the companies’ potential and are willing to stake a small fortune on them.
Of course these two examples only represent one far end of the spectrum. The reality is that investing in biotechs is a “risky” affair due to the numerous regulatory requirements new drugs have to satisfy and the enormous amount of capital needed to bring the drugs to market, which studies estimate to be in the range of $648 million to $2.6 billion each. Failure is a much more common occurrence as shown by this study which reveals that only 14 percent all drugs in clinical trials eventually win FDA approval.
In order to limit the risk when picking late stage biotechs, there is one niche that we believe investors can hardly go wrong investing in. Companies developing treatments for diseases that lack an existing standard of care have proven to offer far better investment prospects due to a number of reasons, like the possibility of fast track designation, strong IP protection and limited competition.
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One stock in particular that fits this theme perfectly is
MS Money Move and its Chief Operating Officer who is a scientist and individual investor, as well as its affiliates are not registered financial advisors. Our posts should serve as educational material to help you conduct due diligence research. Posts and articles are not directives or recommendations to invest in any security. We reserve the right to buy or sell any security for ourselves without any notification except when required by law. We are not responsible for the action of our affiliates. Investment theses may change due to the variable nature of the securities market. Because of this there is great risk when investing in stocks and options which can result is capital loss. Additionally, past performance by MS Money Moves or any security is not a predictor of future performance. Everyone should conduct their own research and due diligence before making an investment decision. We recommend you consult a financial advisor regarding any investment action.
The biotech sector is especially volatile. Stock prices may fluctuate substantially based on material or nonmaterial developments. We encourage everyone to familiarize themselves with clinical trial processes, relevant terminology, FDA/SEC rules and regulations, and the general processes of drug & therapy development/approval. Always do independent research in a security prior to investing.