Edit: 4 Interesting Biotech/Pharmacy Stocks

I am not one to chase trends. I do not own any men’s tanks, or boat shoes as my wife will sadly tell you. Most investors are aware of The Crazy Biotech Run over the past year. Everything about these stocks should make prudent investors run for the hills. Every promising Biotech wonder-stock out there makes no profit, and probably won’t for several more years. Yet there is potential. Amgen, which started as a penny stock in 1983 has grown by 35,820% to date, and is still growing. As the school fund’s Healthcare Sector Analyst I would be remiss to completely ignore the potential, although great care is warranted.

The risks with new Biotech/Pharmacy companies are much higher than most staid firms with established cash flows and customers. The FDA has three basic phases for drug testing. With the passing of each phase, probability of future cash flows occurring rises, resulting in a higher price as a company’s drugs clear each phase. To the uninformed, gambling on barely understood companies, this can be a very risky, but rewarding proposition.

Big Pharma is scared stiff of Biotech. Companies like Merck and Pfizer are snatching up small, promising start-ups to supplement their upcoming patent cliffs. I believe that there are still some attractive investment opportunities out there for enterprising investors. I have identified Edit:4 stocks which I believe may be worth buying or selling, and will investigate and report on each one in a separate post. The three long names are: Epizyme, Aratana Therapeutics, and Synta Pharmaceuticals. The short contender is Oramed Pharmaceauticals.

I believe the recent IPO binge for Biotech firms is going to shake out into at least a few bad eggs. I should caveat my shorts. They are very rough sketches at this time, and I have a LOT of digging left before I can make a definitive judgement on whether or not to open a position. More to follow as I dig into each company separately.


Author: secondhandstocks

The genesis for this blog stems from a Marine buddy and I came back from Afghanistan with more money than knowledge, and heedlessly tossed our hats into the stock market ring. A few months later, I remember discovering the classic book The Intelligent Investor by Graham and Dodd, and ravenously devouring my first introduction to value investing. That framework - with some generous additions by Seth Klarman, and Joel Greenblatt among others - guides my investment philosophy. I spent five years working in the intelligence field, both in the Marine Corps and then for a government agency after that. I speak Arabic and Pashto, have programming and analysis experience, and enjoy investing in technology companies as a hobby. I also spent a year on Wall Street working on a #1 Ranked Institutional Investor team, before deciding that that the Sell-Side was not for me.

1 thought on “Edit: 4 Interesting Biotech/Pharmacy Stocks”

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