Another common mistake: “don’t rush into an investment and make sure you know what you’re getting into on multiple levels.” Mc Camant pointed out that investors need to be aware of the phases that most life sciences companies go through as they advance from initial drug testing to human clinical trials, to eventual commercialization.Timing it right can result in every investor’s dream of a 10 bagger.While the life sciences sector is not immune to the vagaries of stock markets and macroenomic trends such as inflation and economic growth, recent numbers show that it has done quite well in the face of some challenging economic headwinds.
Mc Camant believes that from an investor point of view, pharmaceutical companies carry the best chance of high returns considering their potential for developing cures for intractable diseases like cancer, Alzheimer’s disease and multiple sclerosis.
Companies that succeed in finding cures can develop drugs whose patient costs run up to $100,000 a year; while that is a heavy burden to pass onto a patient, it translates into huge profits for the corporations that manufacture such drugs.
Investors who get into these stocks early enough can see returns in excess of 10 times their original investment.
However, there are risks, an important one being side effects from drugs.
“It’s risk versus benefit or greed versus reward,” he said in an interview with Life Science Investing News.
“How much effect am I having on the patient versus the side effects?Mistime it and your gains could quickly turn to losses, especially if the company has poor testing data or runs afoul of the FDA, whose job is to protect the public.And like other sectors, it’s important to watch out for red flags such as overdilution, or what Mc Camant describes as “monsters,” such as Obamacare, which resulted in the whole sector trading off.For example, those associated with chemotherapy can make the treatment unworthy of the payoff.Mc Camant equates it to the stock market in terms of risk versus reward.“You’ve got to be able to interact with your own scientists, the FDA are very detailed and they also need to know and understand the science, and if you’re public you need to deal with Wall Street.You also need to potentially do partnerships with large and small companies.” Those that do well are the ones that best manage expectations, he noted.The baby boomers will continue spending on healthcare and healthcare products, even as budgets get crimped by entitlement reductions,” he noted.Small-pharma, cancer treatment are investment targets John Mc Camant is the editor of the Medical Technology Stock Letter, an established source for stock recommendations and news about medical technology companies.Over the years, as medical science and other technologies, like computing power, have advanced, the industry has morphed into a sector containing hundreds of companies, some of which have market capitalizations well over billion.With healthcare eating up an ever-greater proportion of government budgets — last year, health expenditures represented close to a quarter (23 percent) of government spending in the United States — and the western world’s reliance on pharmaceutical drugs unlikely to abate, investing in health-related companies is a solid investment strategy.