Opal,
I think it's fair to say that most of the 2nd and 3rd tier biotechs are excluded from the "lower-risk" category. By and large these are companies that are engaged in P1 and/or early P2 trials. By definition these are companies that require consider sums of capital to conduct clinical trials and will require several years or more of studies before they obtain a marketable product, if then.
This leaves the cautious bio-invester with two categores of investments. Biotech companies that are in the 1st tier and a handful of biotechs whose unusual circumstances allow for a special case to be made.
Icos, which you mentioned earlier, is a 1st tier company that also has a 'special case' quality to it. They are flush with cash, have a large well-known investor, a CEO with a proven track record and, by all accounts, are doing first-rate science. Further, the stock price has recently gone south which makes it a very timely buy.
I think a special case can also be made for some of the genomic companies. Millenium Pharmaceuticals (MLNM), for instance. Millenium is still in pre-clinical studies for proprietary products, however, they have been cutting deals with large pharmaceuticals to discover new products. They regularly receive milestone payments and will eventually be entitled to royalties on product discoveries. Though they are not currently profitable, their stock regularly moves up in anticipation of future earnings. Given the large number of drugs they have discovered that are currently in clinical and pre-clinical trials I believe that it is a good bet that it will become profitable, perhaps 3-5 years in the future. |
