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A Guide to Analyzing Biotech and Pharmaceuticals Stocks

Kyle DennisKyle Dennis ·

Analyzing which biotechnology and pharmaceuticals companies are worth investing in can be challenging and daunting for new stock traders. However, with the right strategies in place you can quickly and affordably assess your options and learn how to choose biotech stocks with confidence. We understand new investors want to reduce their costs so they can trade more and “protect” their capital, so most of the information we use is available for free. Discover how our biotech stock analysis techniques can teach you how to choose biotech stocks without compromising your kitty.

  • Check the Company Website
  • Look for Drug Diversity
  • Note Upcoming Catalysts
  • The Bottom Line

Check the Company Website

The company website is your first and arguably most important stock analysis tool. Almost every publicly traded biotech pharmaceuticals firm has a website displaying information on the business, its history, its officers and directors, and the drug treatments in its pipeline. Look for companies with a history of success, diverse offerings, and an experienced team of leaders at the helm. Many biotech pharmaceuticals firms also publish their press releases on their website. Browse through the press releases to learn about the business’ notable achievements, including clinical trials and FDA approvals.

Look for Drug Diversity

Biotech pharmaceutical companies with a diverse selection of drugs have the greatest chance of success. You can learn more about a company’s drug offerings through their website and independent sites publishing press releases.

Investing in biotech pharmaceutical companies that are one-trick ponies is incredibly risky. Organizations with a single primary treatment have just one line of revenue. If this drug fails, the value of its stock could potentially drop substantially. A single drug could retain its value though if it can treat multiple conditions. If the clinical trial for one specified condition fails, the treatment could still be useful for easing or curing other ailments.

Take the case of Clovis Oncology, Inc. (CLVS) for example. When it developed Rucaparib, it was Clovis Oncology’s only treatment. In June 2017, it reported positive data on its Phase III trial for the treatment of ovarian cancer patients with a BRCA-like gene mutation. It took until April 2018 for the U.S. Food and Drug Administration to approve the drug for this purpose.

If Rucaparib was only being developed to treat recurrent ovarian cancers, biotech pharmaceutical investors would have been very nervous waiting for the FDA approval. However, educated investors could read via company press releases that Clovis Oncology, Inc. was conducting studies to use Rucaparib to treat prostate, breast, gastroesophageal, pancreatic, and lung cancers too. Investing in any biotech pharmaceutical company with a single drug, as Clovis Oncology, Inc. had, is still a risky proposition, but the risk is reduced if it has multiple potential applications.

Note Upcoming Catalysts

Catalysts are events that are likely to impact a biotech pharmaceutical stock’s value. They might include FDA approvals or the publishing of data from clinical trials. Some of this information is published on company websites. However, one of the most valuable helpful stock analysis tools for tracking catalysts is BioPharm Catalyst. This website lets you search for companies and discover the catalyst events they have approaching.

Understanding when a biotech pharmaceutical organization has catalysts on the horizon can help you buy and sell their stock at the right times. It’s a good strategy to buy biotech pharmaceutical stock months before a catalyst event, before interest in the organization starts ramping up, then sell weeks before the catalyst. While catalysts can dramatically increase stock value, they can also dramatically decrease value, so many investors don’t like to take the risk.

The Bottom Line

If you want to trade biotech pharmaceutical stocks, do your own due diligence and use biotech stock analysis techniques to assess whether the stocks you’re interested in can weather a storm. Look for companies with strong leadership and diverse offerings that can stand up to unfavorable data reports after clinical trials. Then consider the catalysts when deciding if and when you should buy and sell. Check out our podcasts to expand your knowledge about investing in biotech pharmaceutical stocks.

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