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How to Find the Best Biotech Shares – Every Time

Spot these, and you'll never walk away from pharma profits again...

When you're evaluating most new stocks, it makes good sense to look at technical indicators – such as price-to-earnings ratio (P/E), profit margins, or revenue per share, to name a couple – so you know what you're buying.

But here's the rub. When you're scouting a promising biotech stock, the indicators I mentioned just won't tell you what you need to know.

Of course, we're dealing with a sector that can hand out uncommonly large profits, so our approach needs to be a little different.

Weigh these before you take your next biotech position, and you'll enjoy much bigger potential profits and lower your risk…

Why the Usual Indicators Just Won't Work

The reason is pretty straightforward: many small- and mid-cap biotechs haven't yet made a profit and probably won't for years to come.

Unlike big pharmaceutical companies, these smaller startups focus their time, money, and effort on research and development, rather than marketing new products.

In fact, many of them don't maintain a sales force and have no intention of building one. Instead, they rely on business partnerships with companies that

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About the Author

Ernie Tremblay has more than 25 years of experience in following and analyzing the latest developments in health, medicine, and related technologies. He understands the FDA approval process, as well as the "hard science" behind new, experimental drugs and the market demand for them - and has a comprehensive grasp of the complex dynamics that determine whether a new drug will be a breakthrough winner, or just another casualty of the FDA approval process.

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  1. John Scrivens | February 20, 2015

    Thanks for the article Ernie. You are right to emphasise that the financial parameters of a biotech company are very important to evaluate. My opinion based on 30 years of biotech investing is that the most important financial parameters are revenues and profitability as these minimise shareholder dilution arising from fundraising, which is often a major drag on shareholder returns. I normally only invest in biotechs with revenues which at least pay for a substantial part of their drug development programme or which are profitable. I also look for companies which have a simple, easy to understand technology (non-revolutionary) as their drugs are more likely to reach the market. This may sound a bit boring but I have found that it works.

    • Ernie Tremblay | February 20, 2015

      John, thanks for your great comments. I wouldn't call your approach "boring." I'd call it very smart, especially for folks interested in long-term, value investing. And I really appreciate your insight with regard to non-revolutionary technology and ease of entry into the market. Of course, many readers have an interest in shorter term investing, particularly in young, pre-profit companies where–as I'm sure you know–profits can be very high, but so is the concomitant risk. So I hope the indicators I've listed in the article will help them mitigate that risk, filter out the non-starters from a very broad field of investment possibilities, and significantly increase their chances for success. Again, I appreciate your feedback. Good to hear from you!

  2. Don Murfin | September 10, 2016

    Is EARS a buy @ less than $2.00?

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