Medical biotechnology is a tricky sector to invest in, but also one of the most rewarding.
With a responsible investment strategy that’s based on due diligence, a deep knowledge of the sector, and trading skill... just one big winner could seriously boost your retirement fund.
Take Aquinox Pharmaceuticals (AQXP), for example.
On Friday, August 7, 2015, the tiny Vancouver-based biotech with a $175 million market cap closed at $2 per share.
The following Monday, shares shot up to $21 and beyond. At one point during the day, they peaked at $55.75—a staggering gain of 2,687%.
As an AQXP shareholder, your $1,000 investment would have turned into $27,875 in one day.
The stock soared after Aquinox announced positive early-stage test results for its AQX-1125 drug that targeted bladder pain.
Two big catalysts in Aquinox’s recent history had already foreshadowed this stunning success:
One of Aquinox’s top shareholders, the Baker Bros. Advisors hedge fund, revealed that it had bought three million more shares of the biotech.
Two Big Pharma companies, Pfizer and Johnson & Johnson, showed in their SEC filings that they owned more than 10% of Aquinox.
For those shareholders who employed the right investment strategy, did their research, and got out in time, this was a historic win.
Small-cap biotechs are not “set and forget” stocks. It requires a rather active trading style so you don’t miss the warning signs when something goes wrong.
Ironically, the very same company mentioned above became the poster child for the “caution” part of our equation a few years later.
In June 2018, Aquinox’s stock plummeted 85% after disappointing test results. The kicker: The cause of the drop was the exact same drug that made it go up 2,687% three years earlier!
According to the late-stage test results, the once so hugely promising bladder pain drug turned out to be a dud when it failed to perform better than a placebo.
Could shareholders have seen this coming? Were there any warning signs?
There were indeed.
Aquinox had been struggling financially for years. It hadn’t generated any product revenue or shown profitability since its inception, and its entire hope had rested on the success of its flagship drug, rosiptor.
Obviously, catching the winning streaks really depends on the right strategy and extreme vigilance. But that can easily turn into a full-time job... unless you have help.
In just a moment, you’ll find out how to make biotech work for you—without much effort on your end.
Of course, not all small-cap biotech stocks will see meteoric rises like that. But double- and even triple-digit gains are commonplace.
Dova Pharmaceuticals (DOVA) gained 58% in one week after the FDA approved a label expansion that would boost sales of its platelet-bolstering therapy, Doptelet.
Axsome Therapeutics (AXSM) skyrocketed 787.7% within 10 months. The catalyst: a successful phase 2 trial that saw 47% patients with major depressive disorder go into remission.
NextCure (NXTC) moved up 203% within one week following the release of positive news from its phase 1/2 trial in patients with non-small cell lung cancer. The treatment managed to stabilize 71% of patients and caused one complete and one partial remission.
Agile Therapeutics (AGRX) shares moved up 224% within days after an FDA advisory committee voted 14:1 for approval of the new-drug application (NDA) for its contraceptive patch, Twirla.
Madrigal Pharmaceuticals (MDGL) gained 1,725% in eight months as it was hitting several milestones with its drug candidate MGL-3196. The drug targets non-alcoholic steatohepatitis (NASH), a form of fatty liver disease that is not caused by alcohol.
Here’s how you can get results like these (and better) with a solid investment formula...
Chris Wood is Mauldin Economics’ chief investment officer for healthcare and biotech, as well as the chief investment officer at RiskHedge, a professional investment research firm focused on understanding and profiting from disruption.
A 16-year market veteran, he’s one of America’s most respected analysts and has the track record to prove it. His unique ability to consistently pinpoint stocks that double and triple has intrigued thousands of readers.
Jake Weber is the co-editor of Biotech Millionaire. His professional, 12-year investment experience spans a wide range of asset classes, including precious metals, commodities, currency and equity options, fixed income, and the healthcare and biotech sectors.
Jake previously worked as a fixed-income trader at a proprietary trading shop in Chicago. He graduated from Loyola University with a BA in Business Administration in Economics. When he is not working to uncover the next great investment opportunity, Jake is usually getting his passport stamped. He is a world traveler who has visited over 40 countries and counting.
Many investors get frustrated with biotech’s high volatility and risk, and give up on it altogether.
That’s a shame because few sectors offer as magnificent profit opportunities as this one.
But it’s true that you need to know what you’re doing. It takes intestinal fortitude, good instincts, and a deep knowledge of the sector to find and cash in on the big gains in this field.
Biotech Millionaire editors Chris Wood and Jake Weber have all three.
In their premium alert service, they focus on small-cap, pre-revenue drug companies with exciting pipeline candidates in clinical trials.
Their goal with each portfolio stock is to get at least a 100% return in the span of 12 to 24 months...
...though, as Chris says...
“many of our picks will have much more upside than that with a shorter
That requires an active trading approach—and the editors’ unique CASH investment strategy.
Chris and Jake religiously use their formula for biotech trading because it ensures the highest probability of success.
These are the four components:
Chris and Jake target only small-cap biotech companies with at least one near-term, value-driving catalyst. “Near term” here means within the next 12 months at the most.
“Without catalysts,” says Jake, “there’s no reason for the stock to go up... so there’s no reason to own it.”
Pending events that can be a catalyst for serious share price gains include:
Chris and Jake constantly monitor the stocks in the Biotech Millionaire portfolio for these catalysts, as well as red flags. They do the same with the stocks they consider adding.
One thing that’s important to the editors is to target companies with drugs that have a large addressable market... in dollar terms.
Chris comments, “If a $300 million market cap biotech company is about to release phase 2 results for a drug that has a potential 50-million-dollar market, the stock is already overvalued. We want a $300 million market cap company that’s about to release phase 2 results for a potential three-billion-dollar drug. That’s the kind of stock that can pop.”
The drugs in question can be low-priced but will treat a lot of patients—or treat a rare disease at high prices. Either way, Biotech Millionaire subscribers are poised to make outsized returns.
Sound science is key here. This should be self-evident, but as with any other field, the biotech sector features its share of snake oil salesmen with big stories and little to back them up.
These types of companies are like candles in the wind—here today and gone tomorrow. Not the kind of biotech you want to put your money in.
Chris and Jake make a point of only following companies and drugs with sound science behind them. They take a close look at the research and management teams, the technology, the patients, and the mechanism of action—for your peace of mind.
While Chris and Jake are wary of companies with nothing but a story, the story is nonetheless important.
“You sometimes see companies with amazing products but no talent for marketing,” says Jake. “They just don’t know how to get the word out.”
Those companies can fizzle out and die of lack of funding, despite a promising start.
“A good story means that the company’s product is thrilling and relatable,” says Chris. “For example, it can’t be too difficult to understand for the general public. We’ve seen biotech companies with great therapies go under because the science was so complicated—and the story so hard to tell—that it failed to generate excitement in the market.”
Not every company is out to cure cancer, of course. But the bigger the problem, the greater the hype potential.
Without cash flow, nothing else matters. That’s especially important because with no approved drugs, small-cap biotechs are pre-revenue companies.
“I’ve seen perfectly good biotech startups fail,” says Chris, “because they ran out of cash before they could prove out their research and bring their products to market.”
The four CASH components, done right, can ensure that a company is well financed throughout a drug’s development cycle... providing enough money to make it to the next value-driving catalyst.
“That’s why the CASH formula is the key strategy for the Biotech Millionaire portfolio,” says Jake. “We want to make sure the various catalysts our portfolio companies move through will make us some real money.”
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