2 Tips for Investing in Biotech Stocks With High Growth Potential
The biotech industry is a strange part of the stock market in that it is highly regulated by the federal government. So a pharmaceutical company has to first prove that its drug is safe and effective via clinical trials before it's allowed to market it to doctors.
From a healthcare perspective, that makes a lot of sense. But from a financial perspective, it's kind of wacky. A biotech company has to spend a lot of money before it can make any money. And if the drug fails its clinical trial, the company might not make any money at all.
That can be terrifying to investors. Nonetheless, many biotech companies go public without profits or revenue, precisely because their need for cash is so great. In the biotech world, it has become normal (albeit scary) to invest in stocks that have no drugs on the market.
Source Fool.com
