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Should you invest in biotechs?


It is never easy to choose a sector to invest in, as it all depends on your risk tolerance, your objectives, your investment horizon, your trading strategy, as well as the current market cycle. For some analysts, biotechnology is one of the most promising sectors to invest in, as scientific and technological advances are providing new techniques and solutions to prevent and/or treat diseases. Before we have a look at what you need to know about investing in biotechs to decide if this sector is a good fit for your investment portfolio, here are the top biotech stocks to watch now.

What are biotechs?

Biotech companies are firms working on new disease treatments, cures, as well as vaccines using living organisms, like bacteria or enzymes. The main difference between biotechs and pharmaceutical companies is that the latter bases its research on chemicals, not living organisms.

What are the upsides to investing in biotechs?

The biotechnology sector is a fast-growing industry, as it works on finding new drugs and treatments for health issues. This sector attracts many investors – not surprising given all the news and events surrounding the Covid pandemic – but you can find companies working on a range of different healthcare issues.

Investing in biotechs isn’t only about investing in a company that might find a new cure for an illness, but it’s also investing in a company that might develop new innovations for a range of health issues. Of course, technology plays an important role within the biotech firm development model, as technology can add value in the process of finding cures.

Investing in biotechs also means that you’re doing something potentially good for humankind, as you’re investing in a company that might save lives – by investing in this company, you’re supporting the research that might help find a cure to a significant disease. You’re therefore contributing to improving scientific research.

What are the risks of investing in biotechs?

Finding reliable and useful drugs and vaccines takes time and money – not to mention that the results still need FDA approval to be sold in the United States. It is a rather complex process to succeed in the biotechnology industry, as there are different steps to go through when developing a new drug, such as drug discovery, preclinical testing, clinical testing, regulatory approval, etc. 

That’s why investing in biotech companies can be risky, as many of the developed products never see the light of day. Another considerable risk in this industry is the regulatory framework biotech companies must go through, which is different in each part of the world where they want to have a presence.

So, should you invest in biotechs?

The first thing to highlight here is that you have to know what you’re investing in and what the risks are before you go ahead. Finding the right biotech company to invest in might be complex and take time, but if you do your research, you might find a biotech whose product could very well revolutionize its industry. The biotech sector is a very exciting and promising sector that can be very rewarding, but you need to take the time to select the right companies and be sure they fit your trading profile and strategy.