Investing in the biotech industry will take an aggressive investor at heart with the patience that will last a long time. The biotech industry takes about 10-15 years of development and research to complete, compared to the Pharmaceutical industry which is typically half the time to the end result. An investor in the biotech industry will have a blind period of testing as the company uses research and development. There seems to be high risk involved for the investment of biotechnology. As an investor it is hard to compare profit ratios like net profit margin, return on equity, and return on assets. The main reason these ratio will not help an investor make a decision is because the biotech company will not see the profits until they are successful with the end product. If the end product is deemed successful, the company can see profits of two and three times. However, if the company’s end product is not successful, the company can lose just as much as it can gain. Typically the biotech industry will use ratio’s such as price-to-sales ratio which is the value of each dollar of a company’s sales and revenues. Ultimately I would consider investing in the biotech industry to develop a chemical-based compound to reduce the effects or onset of Alzheimer’s Disease because if successful, the investment could prove very lucrative. I will also be seen as someone looking to better the world.
Kristina Zucchi, CFA. (2014). Investopedia. In Pharmaceutical Vs. Biotech Investing: Is It Worth The Risk? Retrieved from http://www.investopedia.com/terms/p/price-to-salesratio.asp
Timothy Noah. (2014). Slate. In The Make Believe Billion. How drug companies exaggerate research costs to justify absurd profits. Retrieved from http://www.slate.com/articles/business/the_customer/2011/03/the_makebelieve_billion.html
Peter Gwynne and Gary Heebner. (2014, February 7). Science. Drug Products. In Pharmaceutical and biopharmaceutical firms need to reduce the cost and lead time of recently developed technologies makes that goal possible. Retrieved from http://www.sciencemag.org/site/products/ddbt_0207_Final.xhtml
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