Willing to Roll the Dice on Biotech? Buy on FDA Failure

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By Jacob Maslow

blood sampleHere’s a very controversial piece of advice. Take this advice with a big block of salt. Also, make sure that you have money to burn. Don’t bet your house on this. Willing to Roll the Dice on Biotech? Buy on FDA Failure

Don’t bet the money that you’ll be spending on that much needed operation on this piece of advice.

Regardless, if you are looking for stock that would have a tremendous upward potential, and you want to buy on the cheap, look for biotech stocks that recently got spanked by the FDA as far as approvals are concerned. Similarly, look for biotech stocks that report disappointing clinical trial results.

The reason why you need to do this is when these types of news become public, the prices of these stocks get hammered really, really hard. We’re talking about sending the stock all the way to $1 range. That’s how crippling such news results can be.

However, not all biotech stocks will be down for the count. Not all of them would be knocked out. Sure, a lot of them will basically go under because they are simply one-trick ponies. Maybe they are just focusing on developing one compound, and that compound doesn’t appear likely to be approved or to be all that effective in treating a particular condition. However, there are other companies that will recover.

My advice is to look at the company and see what other drugs it has in the pipeline. Look to see if it already has certain drugs that are already advanced in clinical trials and are showing a lot of promise. The best scenario would be to find a company had a very promising drug fail recently but already has drugs in the pipeline but whose stock took a massive hit. These companies are worth buying because they actually have solid assets that they can generate money from while at the same time, their stock price is depressed because of the bad news.

You need to look really hard but these companies do exist, and they are good values once the dust settles. Stay away from companies that are one-shot wonders. Meaning, they only have one shot, and they blew that shot because the drug turned out to be ineffective. Stay away from those. Those stocks are basically dead.



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