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Investing in biotech stocks - My experience so far

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  • BrockStoker
    BrockStoker Posts: 917 Forumite
    Seventh Anniversary 500 Posts Name Dropper Combo Breaker
    Voyager2002 said:
    adindas said:

    BrockStoker, would you please share your knowledge how you screen these stocks. What tools, method robo software are you using ? The problem here is that it is  difficult to find analysts or Robo analyst opinions about them because of lacking of information.
    These were my questions as well, so thank you for responding. A couple more: how do you control trading costs? Do you use a platfom that offers a number of free or low-cost trades each month? And what background did you start with in Bioscience and Medicine?
    IWeb charges only £5 per trade, but FX rate is 1.5% which can eat into profits if you trade too much. I try not to trade much basically, but it does not always work out that way. I'm putting at least part of that down to learning - I was not picky enough to begin with, and put my eggs into a few too many baskets, so I've corrected that mostly. 
    It certainly helps to buy in larger chunks, and then to hold. If your stock goes up a few hundred percent, and you have invested a significant amount (an initial of around £500 is my minimum, but £1000+ is better), £5 or even £10 in fees is irrelevant.
    Ultimately, I'm relying on double, triple, and hopefully quadruple digit percentage gains to make up for charges.

    My background: I studied on a marine and freshwater biology degree course, although (regretfully) I did not complete it due to other distractions (It was the late 80's, early 90's!) and a lack of focus at the time, but I did also work as a laboratory assistant at a school for a short while when I was younger. Science, nature and biology has always been an interest since I was small, and led to me becoming a photographer, specializing in nature, and in particular certain aspects of astrophotography and atmospheric phenomena. Science in one form or another has been a running theme throughout my life, despite a lack of formal qualifications at degree level or over. My interest in biotech only really began around 2013 when I took over managing my own portfolio of funds, but I have followed the sector, and at least some of the larger companies since then, albeit in no where near as much detail as I look at them now.
  • adindas
    adindas Posts: 6,856 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    edited 9 July 2020 at 3:06PM
    The fanalist for Operation Warp Speed"
    AstraZeneca, Johnson & Johnson, Merck, Moderna and Pfizer
    It is currently moving sideline as soon as manufacturing are confirmed I fully believe they will launch like a rocket.
    It is a very good risk and reward ratio as wIth exception with Moderna all of those companies are meidum cap well establish companies so betting against virus vaccine might be worthy considering risk vs reward. I personally own share two of these companies shares.
    The new incomer is Regeneron
    Unfortunetely the price just rise sharply a few days ago for this stock.


  • BrockStoker
    BrockStoker Posts: 917 Forumite
    Seventh Anniversary 500 Posts Name Dropper Combo Breaker
    I'd be very careful about chasing covid-19 stocks, even the big ones. There is going to be a lot of pressure from the public to supply any drugs at cost (or with minimal profit). Bubbles could burst. That is one of the reasons I sold my Moderna stock.
    If you do want to own some mid-caps/large-caps, it might just be better to hold a biotech fund (I like the biotech growth trust and Polar Capital biotechnology). You'll still catch plenty of upside, without having to worry so much about any of your stocks taking a major dip (let the fund manager worry for you). Look at how the index performed last time biotech rallied:
    It's just getting started for the next leg up..

  • adindas
    adindas Posts: 6,856 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    edited 9 July 2020 at 3:12PM
    BrockStoker said:
    I'd be very careful about chasing covid-19 stocks, even the big ones. There is going to be a lot of pressure from the public to supply any drugs at cost (or with minimal profit). Bubbles could burst. That is one of the reasons I sold my Moderna stock.
    If you do want to own some mid-caps/large-caps, it might just be better to hold a biotech fund (I like the biotech growth trust and Polar Capital biotechnology). You'll still catch plenty of upside, without having to worry so much about any of your stocks taking a major dip (let the fund manager worry for you). Look at how the index performed last time biotech rallied:
    It's just getting started for the next leg up..

    I am happy to learn Would you please elaborate more how come the bubble will burst if the demand is high. They will definitely be selling it for a profit and they are private companies not charities who will determine the price level they are happy to sell.

    Good examples here are during the early days of lock down; the price of toilet papers, sanitiser were shooting up due to sudden spike in demand of these items. In one news I saw a small company producing sanitizer put forward argument why she doubled the price.

  • BrockStoker
    BrockStoker Posts: 917 Forumite
    Seventh Anniversary 500 Posts Name Dropper Combo Breaker
    adindas said:
    BrockStoker said:
    I'd be very careful about chasing covid-19 stocks, even the big ones. There is going to be a lot of pressure from the public to supply any drugs at cost (or with minimal profit). Bubbles could burst. That is one of the reasons I sold my Moderna stock.
    If you do want to own some mid-caps/large-caps, it might just be better to hold a biotech fund (I like the biotech growth trust and Polar Capital biotechnology). You'll still catch plenty of upside, without having to worry so much about any of your stocks taking a major dip (let the fund manager worry for you). Look at how the index performed last time biotech rallied:
    It's just getting started for the next leg up..

    I am happy to learn Would you please elaborate more how come the bubble will burst if the demand is high. They will definitely be selling it for a profit and they are private companies who will determine the price level they are happy to sell.

    Good example here are during the early days of lock down the demand for toilet paper and announcement the price of toilet papers, sanitiser was shooting up. In one news I have seen a a small company producing sanitizer justifying why she double the price.





    Possible reasons:
    1. As stated above, there may be little or no profit in it, while many companies are spending money to begin/ramp up production. Some companies are already saying they will be giving away millions of doses, so the expectation of the public is that they won't have to pay for it, or if they do, the price will be low/trivial. Many companies that are seen as having promising candidates have already partially signed away rights to said candidates (part of the deal in exchange for funding) - Moderna for example.
    2. Many drugs/vaccines are not proven to work yet. Some may work, but not be very effective. Gilead looks like it may fall into this category for example.
    Either reason could cause share prices to tumble in specific stocks, especially if there are already great expectations that have been baked in to the share price.
    These products can't really be compared to things like toilet paper/sanitiser for the above reasons. Apples and oranges.
    Of course, there will be some successful treatments, but reason 1 above might well come into play, making this irrelevant.
    The good news is that if the biotechnology sector comes up with a cure/cures/vaccines that work, and makes them available at cost, the sector will become a "hero" in the eyes of the public, where in the past it was seen as the money grabbing villain. Drug pricing was an issue in the public eye, but this crisis might result in less scrutiny, which would be a huge win for the sector as a whole (and investors). A rising tide lifts all boats, hence why there is no need to chase.
    IMHO it's very risky getting into a stock that has gone up significantly anyway, let alone adding biotech/covid-19 to the mix. You might get lucky and get away with it, but it's more of a gamble.
  • adindas
    adindas Posts: 6,856 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    edited 9 July 2020 at 4:46PM
    BrockStoker said:
    adindas said:
    BrockStoker said:
    I'd be very careful about chasing covid-19 stocks, even the big ones. There is going to be a lot of pressure from the public to supply any drugs at cost (or with minimal profit). Bubbles could burst. That is one of the reasons I sold my Moderna stock.
    If you do want to own some mid-caps/large-caps, it might just be better to hold a biotech fund (I like the biotech growth trust and Polar Capital biotechnology). You'll still catch plenty of upside, without having to worry so much about any of your stocks taking a major dip (let the fund manager worry for you). Look at how the index performed last time biotech rallied:
    It's just getting started for the next leg up..

    I am happy to learn Would you please elaborate more how come the bubble will burst if the demand is high. They will definitely be selling it for a profit and they are private companies who will determine the price level they are happy to sell.

    Good example here are during the early days of lock down the demand for toilet paper and announcement the price of toilet papers, sanitiser was shooting up. In one news I have seen a a small company producing sanitizer justifying why she double the price.





    Possible reasons:
    1. As stated above, there may be little or no profit in it, while many companies are spending money to begin/ramp up production. Some companies are already saying they will be giving away millions of doses, so the expectation of the public is that they won't have to pay for it, or if they do, the price will be low/trivial. Many companies that are seen as having promising candidates have already partially signed away rights to said candidates (part of the deal in exchange for funding) - Moderna for example.
    2. Many drugs/vaccines are not proven to work yet. Some may work, but not be very effective. Gilead looks like it may fall into this category for example.
    Either reason could cause share prices to tumble in specific stocks, especially if there are already great expectations that have been baked in to the share price.
    These products can't really be compared to things like toilet paper/sanitiser for the above reasons. Apples and oranges.
    Of course, there will be some successful treatments, but reason 1 above might well come into play, making this irrelevant.
    The good news is that if the biotechnology sector comes up with a cure/cures/vaccines that work, and makes them available at cost, the sector will become a "hero" in the eyes of the public, where in the past it was seen as the money grabbing villain. Drug pricing was an issue in the public eye, but this crisis might result in less scrutiny, which would be a huge win for the sector as a whole (and investors). A rising tide lifts all boats, hence why there is no need to chase.
    IMHO it's very risky getting into a stock that has gone up significantly anyway, let alone adding biotech/covid-19 to the mix. You might get lucky and get away with it, but it's more of a gamble.
    It seems it is contradictory to what the analysts have said here.
    https://www.moneysense.ca/save/investing/investing-in-biotech-stocks/
    The problem with biotech companies racing against COVID-19, it will take years before it will get approved. 
  • BrockStoker
    BrockStoker Posts: 917 Forumite
    Seventh Anniversary 500 Posts Name Dropper Combo Breaker
    adindas said:
    BrockStoker said:
    adindas said:
    BrockStoker said:
    I'd be very careful about chasing covid-19 stocks, even the big ones. There is going to be a lot of pressure from the public to supply any drugs at cost (or with minimal profit). Bubbles could burst. That is one of the reasons I sold my Moderna stock.
    If you do want to own some mid-caps/large-caps, it might just be better to hold a biotech fund (I like the biotech growth trust and Polar Capital biotechnology). You'll still catch plenty of upside, without having to worry so much about any of your stocks taking a major dip (let the fund manager worry for you). Look at how the index performed last time biotech rallied:
    It's just getting started for the next leg up..

    I am happy to learn Would you please elaborate more how come the bubble will burst if the demand is high. They will definitely be selling it for a profit and they are private companies who will determine the price level they are happy to sell.

    Good example here are during the early days of lock down the demand for toilet paper and announcement the price of toilet papers, sanitiser was shooting up. In one news I have seen a a small company producing sanitizer justifying why she double the price.





    Possible reasons:
    1. As stated above, there may be little or no profit in it, while many companies are spending money to begin/ramp up production. Some companies are already saying they will be giving away millions of doses, so the expectation of the public is that they won't have to pay for it, or if they do, the price will be low/trivial. Many companies that are seen as having promising candidates have already partially signed away rights to said candidates (part of the deal in exchange for funding) - Moderna for example.
    2. Many drugs/vaccines are not proven to work yet. Some may work, but not be very effective. Gilead looks like it may fall into this category for example.
    Either reason could cause share prices to tumble in specific stocks, especially if there are already great expectations that have been baked in to the share price.
    These products can't really be compared to things like toilet paper/sanitiser for the above reasons. Apples and oranges.
    Of course, there will be some successful treatments, but reason 1 above might well come into play, making this irrelevant.
    The good news is that if the biotechnology sector comes up with a cure/cures/vaccines that work, and makes them available at cost, the sector will become a "hero" in the eyes of the public, where in the past it was seen as the money grabbing villain. Drug pricing was an issue in the public eye, but this crisis might result in less scrutiny, which would be a huge win for the sector as a whole (and investors). A rising tide lifts all boats, hence why there is no need to chase.
    IMHO it's very risky getting into a stock that has gone up significantly anyway, let alone adding biotech/covid-19 to the mix. You might get lucky and get away with it, but it's more of a gamble.
    It seems it is contradictory to what the analysts have said here.
    https://www.moneysense.ca/save/investing/investing-in-biotech-stocks/
    The problem with biotech companies racing against COVID-19, it will take years before it would get approval.
    Also the big name producing vaccines also have biotech division.
    I will be very carefull investing in a small bio tech companies for the reasons I have mentioned before, news manipilation about the effectiveness of the treatment, pump and dumb, insider trading, But if you know which stock to invest and with a little bit luck it might be worthy considering some companies have seen their shares soaring up more than 300%.
    Analysts often get it wrong.
    Note the "news" at that link saying "hedge funds have never been less bullish on VG", just a few days old. Hedge funds spend a lot of money on analysis. Look what the stock is doing today - up over 15% at one point today. OK perhaps not the greatest example, because it's so soon, but examples of where analysts got it wrong are easy to find if you look.
    The trouble is most analysts don't have a background in science, so they miss things that can make a big difference. Much the same problem that Wall St. has with biotech valuations.
    Regarding approval times - the FDA has been speeding up/fast tracking approvals where it can recently, and not just for covid-19 drugs. This is a big change in the sector, and once again it's a case, of a rising tide lifts all boats in terms of the sector.
    If you go for a stock that is already up 300%, there is potentially a lot of downside. Personally I wouldn't be comfortable with that in most cases (although I have in at least one case bought when a stock is up strongly - AXSM after it had gone up one or two thousand percent), unless I had a huge amount of confidence in a stock. At the end of the day it's your money, and your choice, but relying on luck to that degree is probably not a great idea.
  • adindas
    adindas Posts: 6,856 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    edited 9 July 2020 at 6:03PM
    BrockStoker said:
    adindas said:
    BrockStoker said:
    adindas said:
    BrockStoker said:
    I'd be very careful about chasing covid-19 stocks, even the big ones. There is going to be a lot of pressure from the public to supply any drugs at cost (or with minimal profit). Bubbles could burst. That is one of the reasons I sold my Moderna stock.
    If you do want to own some mid-caps/large-caps, it might just be better to hold a biotech fund (I like the biotech growth trust and Polar Capital biotechnology). You'll still catch plenty of upside, without having to worry so much about any of your stocks taking a major dip (let the fund manager worry for you). Look at how the index performed last time biotech rallied:
    It's just getting started for the next leg up..

    I am happy to learn Would you please elaborate more how come the bubble will burst if the demand is high. They will definitely be selling it for a profit and they are private companies who will determine the price level they are happy to sell.

    Good example here are during the early days of lock down the demand for toilet paper and announcement the price of toilet papers, sanitiser was shooting up. In one news I have seen a a small company producing sanitizer justifying why she double the price.





    Possible reasons:
    1. As stated above, there may be little or no profit in it, while many companies are spending money to begin/ramp up production. Some companies are already saying they will be giving away millions of doses, so the expectation of the public is that they won't have to pay for it, or if they do, the price will be low/trivial. Many companies that are seen as having promising candidates have already partially signed away rights to said candidates (part of the deal in exchange for funding) - Moderna for example.
    2. Many drugs/vaccines are not proven to work yet. Some may work, but not be very effective. Gilead looks like it may fall into this category for example.
    Either reason could cause share prices to tumble in specific stocks, especially if there are already great expectations that have been baked in to the share price.
    These products can't really be compared to things like toilet paper/sanitiser for the above reasons. Apples and oranges.
    Of course, there will be some successful treatments, but reason 1 above might well come into play, making this irrelevant.
    The good news is that if the biotechnology sector comes up with a cure/cures/vaccines that work, and makes them available at cost, the sector will become a "hero" in the eyes of the public, where in the past it was seen as the money grabbing villain. Drug pricing was an issue in the public eye, but this crisis might result in less scrutiny, which would be a huge win for the sector as a whole (and investors). A rising tide lifts all boats, hence why there is no need to chase.
    IMHO it's very risky getting into a stock that has gone up significantly anyway, let alone adding biotech/covid-19 to the mix. You might get lucky and get away with it, but it's more of a gamble.
    It seems it is contradictory to what the analysts have said here.
    https://www.moneysense.ca/save/investing/investing-in-biotech-stocks/
    The problem with biotech companies racing against COVID-19, it will take years before it would get approval.
    Also the big name producing vaccines also have biotech division.
    I will be very carefull investing in a small bio tech companies for the reasons I have mentioned before, news manipilation about the effectiveness of the treatment, pump and dumb, insider trading, But if you know which stock to invest and with a little bit luck it might be worthy considering some companies have seen their shares soaring up more than 300%.
    Analysts often get it wrong.
    Note the "news" at that link saying "hedge funds have never been less bullish on VG", just a few days old. Hedge funds spend a lot of money on analysis. Look what the stock is doing today - up over 15% at one point today. OK perhaps not the greatest example, because it's so soon, but examples of where analysts got it wrong are easy to find if you look.
    The trouble is most analysts don't have a background in science, so they miss things that can make a big difference. Much the same problem that Wall St. has with biotech valuations.
    Regarding approval times - the FDA has been speeding up/fast tracking approvals where it can recently, and not just for covid-19 drugs. This is a big change in the sector, and once again it's a case, of a rising tide lifts all boats in terms of the sector.
    If you go for a stock that is already up 300%, there is potentially a lot of downside. Personally I wouldn't be comfortable with that in most cases (although I have in at least one case bought when a stock is up strongly - AXSM after it had gone up one or two thousand percent), unless I had a huge amount of confidence in a stock. At the end of the day it's your money, and your choice, but relying on luck to that degree is probably not a great idea.

    I agree it is not a good idea to bet against the stock  that have gone up significantly recently, especially Moderna which have seen a sudden increase of 300%+. It is also well argued here the small companies lile Moderna is probably no longer a good buy in the curent price.
    But as far as I observe the big names suc as AstraZeneca, Johnson & Johnson, Merck and Pfizer have not seen the significant increase in share price. These big names producing vaccines also have biotech divisions.
    Comparing the products like Vaccines and toilet paper/sanitiser might not be a good examples. But what about the face mask, testing kits for COVID-19 etc. The small companies producing these items as well as the distributors have benefitied massively from COVID-19 from sudden demand on their products.
    I will be very carefull investing in a small bio tech companies for the reasons I have mentioned before, news manipilation about the effectiveness of the treatment, pump and dumb, insider trading.
    But if you know which stocks to invest and with a little bit luck in timing to pull from from the market it might be worthy considering some companies have seen their shares soaring up more than 300%.
  • BrockStoker
    BrockStoker Posts: 917 Forumite
    Seventh Anniversary 500 Posts Name Dropper Combo Breaker
    The problem is that you have a lot of investors piling into biotech, and not knowing much about it. Covid-19 stocks are susceptible to being over bought in this situation - ie. creating bubbles which could pop.
    Some companies producing things like masks or other PPE have seen their stocks go up thousands of percent. Remember, valuations are forward looking, so investors are expecting a need for PPE to carry on. It they are wrong, and that does not happen, some stocks will crash. There are potentially many reasons investors could be wrong - eg. drugs could solve the problem, or too much competition and no "wide moat" (suddenly everyone is making masks and there is a glut). There are potentially reasons which no one can easily foresee.
    I think if you already own a stock like this that has gone up, you have at least some safety-net. Buy now, and you are risking a lot of downside for potentially not much upside. Bad risk/reward profile IMO.
    I have had many arguments with myself about this - it's very tempting to see big profits and think they will continue - but the truth is, it's just gambling in the hope for short term profits. Better to stay away altogether, and save your money for stocks that have yet to be discovered. I think that is where the big gains are, without taking on excess risk. I might be wrong, but so far the strategy is working!
    Keep in mind, what works for me, may not work for you, so you may have to develop your own strategy. In the mean time, be cautious, and wait for the right opportunities, and till you understand things better. There will still be plenty of opportunities.
  • BrockStoker
    BrockStoker Posts: 917 Forumite
    Seventh Anniversary 500 Posts Name Dropper Combo Breaker
    Just to add a bit more regarding large (but not the very large like AZN) companies in the sector. Even they can be risky. Just look at what Gilead has done over the last 5 or so years: https://finance.yahoo.com/quote/GILD?p=GILD
    Is it about to recover, or just continue on it's downward trajectory? I'd say there's a good chance it's the latter, especially if Remdesivir is not a big hit. Remdesivir is not that great if you look at the data so far - relatively high toxicity and little effect. It looks crap compared to Biocryst's Galidesivir to be blunt. When this becomes clear to investors Gilead investors are going to suffer. Biocryst is a tiny company compared to Gilead, but the safer investment is Biocryst. The data is clear so far, and for all to see, but most it seems have not looked. There is almost no chance of manipulated data if you read the data directly from the company. If they lie or mislead, they will end up in court. Most companies don't want to risk it, but some will. If you do your due diligence it's not an issue. Be wary of companies that have not been around very long especially.
    Here is another example of a large biotech who ran into problems in February last year, although it has since recovered, but could you take a 40-60% (or worse) hit?
    True the downside from a small company could be even more devastating (it shouldn't be if you are careful to invest in already undervalued companies - part of my strategy), but the upside potential can be huge over a relatively short time frame. So you have to ask yourself, what type of investor am I - growth or value? You can do a bit of both of course.
    There are many ways to skin a cat, but you have learn what a cat looks like on the inside as well as see someone else perform the procedure before you even stand a chance of making a good job of it. Our biotech cats may look similar to other cats (stocks in other sectors), but the anatomy is actually very different, and so you you need to approach the sector differently to other sectors to stand a chance.
    What I'm saying is, don't rush in too fast. Watch and learn from the mistakes of others like myself. I'm still learning too! Happy to share my ideas for biotech stocks to buy now, or look at your ideas, if you want to get some money in stocks sooner, but again, I'd urge you to think hard before pulling the trigger on any you find yourself.
    Regarding Regeneron, it's a good solid company in my experience - although I've never held the stock, I have followed it over the years as it's often been in the top ten holdings of biotech funds that I hold (it still is now). Having said that, I would have to have a close took at it before investing in the stock. The above two examples (Gilead and Biogen) are in the same class as Regeneron, and look what happened to them!
    Vertex is also of a similar size, but Arrowhead could pummel it (and possibly quite a few others) in the coming years. The new tech coming through now has the potential to disrupt almost everything.
    RNAi tech for example is around 10x better than the industry as a whole at finding successful treatments, as this chart shows:

    That's the same tech that Arrowhead is using, except Arrowhead has a significantly better platform.
    This is why very little is safe, and a major reason why I think Arrowhead is such a good bet for the long term.
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