The Big Secret

Did you know many succesful biotech traders make their money on the short-side? And many have little to no medical background? Given the amount of books, articles, publications on trying to find the next DNDN, it was pretty counter-intuitive to me! Any clues or comments on how to do it, leave a comment?

EDIT (8-15-10):

Looking back, what I’m saying isn’t technically a “secret”. If i was selling some sort of product based on this review then perhaps I could call it a secret; it’s more of just approaching a problem from a different perspective. Here’s some interesting stats to consider:

From a 2004 study by Kola & Landis, found that 62% of compounds failed Phase II trials and an additional 45% of compounds failed Phase III trials. Do some quick math, that means only ~21% of drugs successfully pass through Phase III trials. Then after Phase III a drug has to gain FDA approval! From that same study, they found that of the top 10 pharma companies, only 11% or 1 in 9 drugs received approval.

Another study from Avance looked at data from 2003-2009 for strict biotech companies excluding the large pharma companies. They found overall ~12% success rate.

So more or less your looking at an 80% plus probability trade from the get go. Before diving in head first, we would need to study the potential loss from the ~20% that DO receive positive results. If we make $1 8 times but lose $5 2 times our strategy losses $2. Finding data on this is difficult because many of these companies are de-listed from exchanges and simply disappear. A survivorship free database is ~$250 from an online source if anyone is interested.

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~ by largecaptrader on August 14, 2010.

2 Responses to “The Big Secret”

  1. What is the name/link to that database you mention

  2. http://www.premiumdata.net/products/premiumdata/ushistorical.php

    Let me know if you decide to get it!

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