Buying stocks in the biotech industry can be very complicated. Following are some basic tips to help you get started.
Look for companies that are making acquisitions. An organization that is making a purchase should ideally have some solid foundation, as well. Acquisitions do happen quite a lot, but when a company is looking to buy another one, and there is substantial money involved, you can bet those making the purchase believe it’s going to be lucrative to them. The higher the cost they pay to acquire another company, the more likely it is that their stock is going to rise after the acquisition. It may not rise directly after it, but should the acquisition prove fruitful, that company is going to increase in affluence and value. Recently, Actelion Ltd. (ALIOF) went into plans for the purchase of ZS Pharma. The proposed purchase price was $2.5 billion. That was all the away back in September, and here it is January and no purchase has been made. So the back half of this coin is that acquisitions don’t always go through, and purchasing stock in a biotech company that is only in negotiations likely isn’t the best investment. ALIOF stock is worth watching, but until the acquisition takes place, their stock value may continue following the trends it has been.
The Third Phase
Biotech companies that have successfully developed a medication have already created around themselves a market. The more successful medications they’ve developed, the more likely it is new medications that are in development will find FDA approval. While this can’t always be guaranteed, when a Biotech company’s clinical trials have passed the first and second phase, odds are they’ll pass phase three and get approval. So if you see any biotech companies with a treatment or therapy in its third phase of trials, know that such an organization is very close to a breakthrough which will very likely yield positive results to savvy investors. If that company has previous positive breakthroughs under their belt, that only makes the likelihood of their new medication being a blockbuster more realistic.
Exploring New Territory
Another good rule of thumb is to get involved with a biotech company that is branching out into new territory, like Regeneron (REGN). While their efforts may not always yield a successful result for said company, oftentimes a new treatment is accompanied with as much media blitz as is sustainable, and this leads to an initial spike in stock value. Whether its of the flash in the pan variety or not can be difficult to determine, which means investing in a stock from a biotech company forging new frontiers comes with a lot of risk. You need to be sure to watch them and stay abreast of all trends related to their progress. As suddenly as they’ve appeared, they may disappear. A company that has innovated solidly over several years is, like the company with the numerous successful treatment options mentioned earlier, much more likely to have additional success.
Cancer treatments are very necessary, and the public is exceedingly conscious of them. Cancer seems to be on the rise. Whether or not it is may be something for medical practitioners to debate, but what is absolutely certain is that pharmaceutical agencies in the biotech industry who are developing solutions for cancer are very likely to see an increase in stock value; especially if they’ve had successful treatments in the past. As well, new treatments for cancer are coming from unexpected organizations regularly, meaning sometimes a completely new biotech agency can increase stock-value a hundred fold immediately.