8 Expert Tips and Strategies for Successful Biotech Investors

Investing in Biotech: Pros and Cons

If you’re looking for a great investment opportunity, consider investing in a biotech company. If one of these companies comes up with a medical breakthrough or life-saving drug, your investment could literally double overnight. Moreover, with new medical products and technologies emerging all the time, biotech is a very relevant and dynamic sector with the potential for strong returns on your capital.

If any of this information seems confusing, consider checking out the ultimate reference on bioteck stocks,The Biotech Investor’s Bible.

However, the biotech industry does much more than treat illnesses and manufacture drugs. Today’s biotech companies are also occupied with producing bio-fuels, biodegradable plastics, genetically engineered seeds for agriculture, and more. Better yet, there are government-enforced restrictions on the competition.

But there is a downside and risk in investing in biotech stocks as well. First off, the failure rate of biotech companies, including both startups and  older pharmaceutical companies, is estimated at 85%-95%. The federal regulatory body enforces standards which can be both strict and arbitrary, there is a steady stream of competitors, and there are often large upfront development expenses involved.

Moreover, you could see the bulk of your investment disappear in less than a day if you choose the wrong company.

Investing in Biotech Stocks: The Bottom Line

So what’s the bottom line? While there are no sure-fire guarantees when it comes to investing in biotech stocks, if you do your homework carefully and know how to best avail yourself of the massive opportunities in this vibrant sector, you will be well equipped to make a better investment decision.

What You Need to Know for a Successful Biotech Investment

If you take a methodical approach to assessing and researching biotech stocks, you’ll find that it’s not as complicated as it looks. It may take some time and effort to familiarize yourself with the companies involved and to get a grasp on certain medical terminology, but in this way it’s no different than any other industry and investing in anything worthwhile.

Here are Eight expert tips and strategies for a successful biotech investment:

1) Innovation and Changing the World: Look for a company that is dedicated to innovation and new technologies; original products typically drive market share, command a premium price, and offer enhanced outcome performance.

2) Research is Key: To assess a company and determine its focus, examine the company’s R&D efforts, as well as their product pipeline. You should be suspicious of any firm spending less than 10% of its revenue on research and development.

3) Medical Jargon: While you don’t need to understand all the medical terminology of a given therapy, you should definitely read up on what medical conditions/diseases the company is treating to get a sense of the driving factors involved and whether its efforts constitute a feasible market opportunity.

4) Startup Life Cycle: As an investor in the biotech sector, it’s critical that you understand the life cycle start-up companies go through and the ramifications of each stage. For example, after possibly years of clinical trials leading to new products, FDA approval must be obtained to make it onto the market. Next, the company must launch an effective marketing and sales campaign, necessitating a solid marketing team and possibly partnerships. Initial strong sales do not guarantee profit, however if and when a company does achieves profitability, you are in the game.

5) Attend Conferences on Medical Equipment: To stay current with the most promising biotech startups and established firms, check out the IATA-Biomed Israel 2013Conference, featuring  exhibitors from all over the world.

6) Government Approval is Everything: Unlike other industries, the government has a heavy hand in the success of healthcare and biotech companies. FDA approval determines whether or not a company can do business, and extensive (usually expensive) clinical trials (ensuring efficacy and safety) are necessary before a device can legally be sold. After that, ongoing reporting and monitoring are required by the FDA, who can order drugs/devices off the market at any time if dangers are revealed.

7) Established vs. Startups: Do your homework on the pros and cons of investing in a biotech company with approved products already on the market versus a company with products under development.

8) FAST ACT: Good new for biotech watchers: The recent passage of the FAST Act (Faster Access to Specialized Treatment) has sped up the process by which drugs for diseases without a cure can come to market. Not only does the legislation provide incentive for biotech firms to invest in R&D (knowing they can recoup their investment at a faster pace), but it may well speed up the development of treatments for patients suffering from serious and life-threatening diseases.

To invest or not to invest in biotech stocks: That is the question. While investing in this sector can be a long waiting game, with due diligence and an understanding of how the industry works, it can definitely pay off big in the long run.

Zack Fisher helps people understand and leverage biotechnology and its impact on society. He is a freelance writer for the IATA-Biomed Israel 2013Conference and is currently a research fellow in biomedical sciences at the West Virginia University School of Medicine. 

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