We recently highlighted the life sciences and biotech space on BTV and were amazed at the growth this sector has seen over the past year! Not for the faint of heart, and not unlike other sectors, investors should be able to endure some degree of volatility. The fact remains however, that we have an aging demographic, so the sector fundamentally speaking is poised for gain.
According to Citigroup’s Yaron Werber and Jonathan Eckard, the biotech IPO market has been hectic with more than 30 offerings this year. The offering’s average return has been 93 per cent from launch to peak share price. So far this year, the Nasdaq biotechnology index has jumped 50 per cent – that’s more than double the gains of the benchmark S&P 500 index.
What are some tips? According to Paul Drohan, President and CEO of Life Sciences BC, an investor should:
- Understand the technology a company has.
- Understand the marketplace the company is in.
- Know who is on the team driving the company forward and who will take it through to commercialization.
Another way to mitigate risk, according to ETF Daily News is to consider the myriad of Biotech ETFs (exchange traded fund). It’s basically an investment that is traded on the stock market like an individual stock but is more diverse since it is a collection of different stocks in the biotech sector.
Chris Wood, Senior Analyst at Casey Research says one should apply a simple rule: Only invest in biotech stocks with at least one near-term, value-driving catalyst. He defines a catalyst as a milestone in a company like a clinical trial or impending FDA approval.
For more insights on the sector as well as some emerging stories we found – some with near term catalysts – catch our BTV Life Sciences episode on BNN and FOX this weekend, or online here.
Until next time, may your portfolio prosper!