The Dangers of Chasing Performance in Biotech

The biotech industry is home to some of the biggest single-day gains investors will ever see. Consider Sarepta Therapeutics (Nasdaq: SRPT  ) , whose shares soared 200% in a single day earlier this month following incredible phase 2 data for its muscular dystrophy drug eteplirsen. These types of moves can give investors an urge to jump in and join the party, but in many cases investors would be well-served to take a step back and resist any impulsive buying behavior. In Sarepta's case, the stock has trailed off nearly 40% since this incredible one-day gain, and while there's potential for an accelerated approval from the Food and Drug Administration for eteplirsen, it's not a done deal.

Investors have to be aware of some of the obstacles that face even the most impressive drug candidates, and in the following video, health care bureau chief Brenton Flynn runs through a few examples of what to watch out for.

The biotech space can make or break investors overnight, and while a stock like Amarin might not disappear into thin air, the success of its new triglyceride-lowering drug is key to the company's future success -- or failure. The company has huge potential, but don't invest a dollar before reading everything you need to know about Amarin. You can start now with top analyst and Ph.D Max Macaluso's premium research report. Click here now to keep reading.

Brenton Flynn has no positions in the stocks mentioned above. The Motley Fool owns shares of Dendreon. Motley Fool newsletter services recommend Vertex Pharmaceuticals. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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  • Report this Comment On October 18, 2012, at 6:20 PM, Paulson545 wrote:

    If and when SRPT gets accelerated approval Sarepta ,considering it's low float, could see a double or triple. Jerry Lewis has been involved in the fight to cure MD for a long time and i'm sure he is trilled with Sarepta's breakthrough drug.JMHO

  • Report this Comment On October 19, 2012, at 3:09 PM, zzlangerhans wrote:

    I wonder how many shares he bought.

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