{"id":27307,"date":"2024-11-14T03:04:39","date_gmt":"2024-11-14T03:04:39","guid":{"rendered":"https:\/\/www.wallstreetzen.com\/blog\/?p=27307"},"modified":"2025-05-22T15:42:57","modified_gmt":"2025-05-22T15:42:57","slug":"biotech-investing","status":"publish","type":"post","link":"https:\/\/www.wallstreetzen.com\/blog\/biotech-investing\/","title":{"rendered":"Biotech Investing: Risks, Benefits, and How to Avoid Losses"},"content":{"rendered":"\n

To illustrate the appeal of biotech investing, I invite you to take a look at this chart:<\/p>\n\n\n

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\"Novo\"<\/a><\/figure><\/div>\n\n\n

That\u2019s the all-time chart for Novo Nordisk (<\/strong>NYSE: NVO<\/strong><\/a>)<\/strong>, a manufacturer of medicines including Ozempic, the blockbuster weight-loss drug. NVO was once a penny stock; it has risen more than 88,000% since its IPO. <\/strong><\/p>\n\n\n\n

Investing in biotech stocks has the potential to deliver spectacular returns. But it’s crucial to know that results like NVO’s are not typical. <\/strong><\/p>\n\n\n\n

Biotechs are risky. You could lose everything that you invest. <\/strong><\/p>\n\n\n\n

However, educating yourself and gaining an understanding of the sector could potentially help you avoid unnecessary losses.<\/p>\n\n\n\n

Below, I\u2019ll explain the basics of investing in biotech companies, including how the sector works and the best resources for doing your DD (due diligence) on potential investments.<\/p>\n\n\n

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You need a brokerage account to buy shares of biotech stocks. If you don’t have one, we recommend eToro.<\/p>\n

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What is Biotech Investing?<\/strong><\/h2>\n\n\n\n

Biotech investing refers to investing in assets related to biotechnology (a mashup of \u201cbiology\u201d and \u201ctechnology\u201d). These companies combine both of the aforementioned elements to research and develop new drugs, vaccines, therapies, diagnostic tools, and bioengineering solutions. <\/p>\n\n\n\n

Here\u2019s a key difference between biotechs and many other companies: Most biotechs are not profitable at first, and it can take years to become profitable (if at all).  <\/strong><\/p>\n\n\n\n

Why? Because early on, biotech companies have massive costs associated with research and development (R&D) \u2014 but they aren\u2019t necessarily making much money. <\/strong><\/p>\n\n\n\n

As such, biotechs are constantly raising cash or forging partnerships with bigger companies to continue their work. <\/p>\n\n\n\n

Investing in biotech startups is typically cheap at this stage. This can be enticing to investors who want to get in \u201con the ground floor.\u201d<\/p>\n\n\n\n

Some biotechs will achieve great success. Many others won\u2019t. <\/strong><\/p>\n\n\n\n

These stocks live and die by catalysts, particularly the results of clinical drug tests. They have the potential to appreciate based on the results, but can completely fizzle out too. <\/p>\n\n\n\n

If you decide to buy stock in a biotech company, you must be prepared to stay on top of the company\u2019s cash needs and cash expenditures for their trials from SEC filings. <\/p>\n\n\n\n

List of Big Biotech Companies<\/strong><\/h2>\n\n\n\n

Looking for a few examples of big biotech companies?<\/p>\n\n\n\n

Here are 3 few examples of the largest market cap biotech companies from our Best Biotech Stocks to Buy Now<\/a> screener: <\/strong><\/p>\n\n\n\n

Moderna (NASDAQ: MRNA<\/a>) <\/strong><\/h3>\n\n\n\n