A lot of research is going on in the biomedical industry, and there are a lot of start-ups in the biomedical field. Most of these stocks trade as penny stocks and investments in these stocks are considered highly risky . This is because biomedical research has a high risk of failure and there are also other risks involved such as the FDA rejecting the finalized drug. Combine with this the inherent risks of investing in penny stocks and the result is a potent mix with a high risk of failure. However investments in biomedical research penny stocks can also reward the investor with a high rate of return if everything is done after careful research and planning.
Introduction to Penny Stocks
Penny stocks are stocks that trade below $5 per share and they usually have a market share of less than $200 million. Market share of a company is the price per share of a stock multiplied by the total number of shares of the company. Since most of the penny stocks are start-ups and not much information is available about them, it is difficult to research them and inexperienced investors can sometimes be tricked into buying worthless penny stocks. There are many scams involving penny stocks in which scammers heavily promote a penny stock, thus driving its value up and then selling off the stock when it is priced higher.
Investments in Biomedical Research and Bio-Tech Penny Stocks
Investments in biomedical companies carry a lot of risk, but when done right it can also give a high return on investment. The key is to research thoroughly the company and the products that are in the pipeline. Products in the pipeline are drugs that are undergoing clinical trials or that are pending approval of FDA. A company that has at least two products in the pipeline has a better chance of survival than a company which has only one product in the developmental stage. More and more people are prone to life-style diseases like diabetes, cancer and heart disease. Research related to these areas are more likely to generate more interest and success in one of these areas is a surefire method of getting a high return.
An important aspect which influences the success of any company is its management. In the case of a highly scientific field such as the biomedical industry, it is important that management possess both the technical knowledge and the business acumen required to succeed. The company should also have enough cash reserve to overcome temporary setbacks, good financial support and low debt.
While researching biomedical penny stocks, it helps to seek the advice of a scientist who has a good idea about the technology that is involved. If investing through a brokerage firm, which is recommended for inexperienced investors, look for a broker who has experience in investing in biomedical stocks.
1. Choosing biotech stocks, About.com website, https://biotech.about.com/od/investinginbiotech/tp/ChoosingStocks.htm
2. U.S Securities and Exchange Commission website, https://www.sec.gov/answers/penny.htm