Beat And Battered

If you read my primer yesterday on biotechnology investing you found out the basics of what comprises biotech and probably thought, “That’s great, but where do I put my money?” I’ll tailor this to those investors who aren’t independently wealthy or otherwise come to investing with a lot of capital. Those investors can’t afford to fail. Obviously, no one wants to lose money, but there’s a certain caliber of investor who’s more risk-averse than others, and because biotech investment is a particularly risky sort of investment, it can be a difficult prospect for a lower-roller investor.

Let’s take a look at the top biotech investments out there: good places to start if you’re an investor who’s a little gun shy. For every hot investment in biotech, there are countless poor-performers, so these stocks are a good way to get your feet wet. One thing to mention is that biotech is a pretty narrow field for investment. In no form of investment is “buzz” so important. At any one time only a few companies are performing or overperforming, so you’ve got to be extra careful.

Medical Biotech

Pharmaceutical biotech investing is the most stable of all the biotech fields, so this is where you should start. Though Genentech had some negative press recently which investors feared would send the stock tanking, it remained stable. Generally, Genentech is considered the standard-bearer for medical biotech investing, and the projections for the second quarter are healthy.

In pharmaceutical investing, cancer treatment is a big avenue for investment. However, there are some biotech companies, such as Northfield Laboratories, that focus on one type of therapy. Though this could be lucrative, you should be looking at a biotech firm that has a diversification in the medical field – as not all therapies take off and some can even be met with lawsuits. So not only should your own investments be diversified, the investments themselves should be diverse.

Genentech is a diverse company, and with the pickup of cancer drug Avastin, it is expanding at a healthy clip. Avastin is set to take in 0ver $660 million in sales. As mentioned, not all pharmaceuticals pay out to such a degree, so Genentech does have its share of underperformers, but this is balanced by the success of other drugs and new acquisitions.

Another solid investment is Biogen Idec, which had first-quarter earnings that exceeded expectations. Another pharma stock, Biogen is selling a lot of pharmaceuticals. Partly the profits are due to prices going up, but not entirely – this is true across the board for the big pharma biotech corporations. In a fairly unstable investment sector, you can feel confident that people are always going to want to find ways to stay healthy and new advancements in the industry are guaranteed.

Rounding out the top performers: Genzyme, aka Isis Pharmaceuticals, and Cephalon. Amgen has recently fallen on some harder times, as has Gilead Sciences.

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What on earth is biotechnology? Think of it as ways that man controls nature. That could be read negatively, but it doesn’t have to be. Biotechnology comprises all of the ways that humans try to overcome natural limitations be more cost-efficient. Examples of biotechnology are pest-resistant crops, new animal breeding, or pharmaceutical research. Certainly some wings of the biotech industry are controversial – such as cloning – but humans can “manipulate” nature in positive ways as well: producing more nutritionally-complete crops on a larger scale, aiding third-world countries. Really, something so simple as fermenting grapes into wine is a form of biotechnology, so biotech casts a wide net. It’s not all about playing God with nature and trying to turn a profit.

Of course, what’s a burgeoning industry without talk of profits. Biotechnology is also one of the fastest-growing forms of investment. Chances are that a new investor wants to get involved in the new developments in the biotech industry. Sure, investing in wine can reel in some money, but that’s not what is commonly referred to in biotech investment. True biotech investment is based around new technologies, such as gene manipulation. Some of these methods are already being used and some are yet to be discovered: which is why it’s so wide open for investment.

Where is Biotech Today

The new wave of biotechnology is mainly centered around health issues and extending human life, though agricultural advancements are also a large part of biotechnology investing. But whereas the issue of manipulating crops is fairly straightforward and understood, human life extension via gene manipulation has a much larger ceiling. For instance, imagine a product that would reverse aging – this would be hugely profitable in a short amount of time. So while agriculture biotechnology (green biotechnology) is potentially lucrative, medical biotech (red biotechnology) has even more potential, as so many techniques have yet to be discovered. Gene therapy is in its infancy.

Other forms of biotechnology are white biotech, which is biotechnology applied to industrial practices – such as creating and utilizing an enzyme that will break down harmful chemicals. Blue biotechnology refers to ocean and water-based biotech, but this type of biotech is less prevalent. Put that all together and you get the Bioeconomy.

Investing in Biotech

Like all forms of investing, there are riskier forms of biotech investing than others. Generally, biotech investing is higher risk overall than other types of investing – but again, like other investing, the higher the risk also means the higher the payout. Are you interested in stock investing or becoming a major venture capitalist in the biotech industry? There are penny stock options available that can be found through a broker, or you could do this yourself if you’re not a newbie. It depends on the investor, but you’re going to want to choose a biotech company based on location, industry, proof of concept, niche market, good history, and lucrative potential.

The less risky stocks are established companies, like large pharmaceutical companies. This is recommended if you’re also going to be investing in riskier ventures, as big pharma stocks are a more stable investment. Investing in biotech does take some significant research. A biotech research company is likely dealing with some very technical information. You want to make an informed decision about an investment and you need to make sure that a biotech’s company’s goals are achievable. They could rattle off a long list of technical details that sound impressive, but may actually be far-fetched. You need to be able to know what you’re reading, so a partnership with a science-minded investor may be necessary.

To get you started, here’s a list of the top 100 biotech companies, ranked by revenue. Here are the top biotech buzz stocks for 2008. As mentioned, you may want to invest in a start-up because these have the most earning potential per dollar (and also the greatest risk) but this of course means that the company does not have an established history. If this is the case, go with a biotech company run by people who have had proven success in the past. As with other forms of investing, diversification across industries and types of companies is recommended.

Check back tomorrow when I’ll talk about where to start investing in biotech.

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