Biotech is arguably the most exciting sector to invest in. This year, the NYSE Arca Biotechnology Index has more than doubled the S&P 500’s 14.6% total return with a 32.5% gain.
That being said, the swings can be large.
For example, on January 8, Pain Therapeutics (Nasdaq: PTIE) closed at $4.45. The next day it spiked on clinical trial data, tagging an intraday high of $12.80. Less than six months later, the stock lost 81% in a single day after the FDA rejected its pain management drug. Today, Pain Therapeutic trades for less than $1.
Meanwhile, the share price of cancer fighter Endocyte (Nasdaq: ECYT) has more than quadrupled year to date.
Thirty percent, 40%, 50% or more single-day gains in biotech stocks seem to happen on a regular basis, due to an acquisition, strong clinical trial data or an FDA approval.
So it might be tempting to buy an IPO of a biotech company – you know, get in early before everyone else does.
A Coin Flip
This year, 42 biotech companies went public. Twenty-two of them are currently trading above their IPO price.
Some of them have been monster winners…
On the other hand, there have been some serious losers too.
