The world of pharmaceuticals is very complex. Drugs take the better part of a decade to push through the pipeline and, once marketed, have to outmaneuver the competition and race to be reimbursed by insurance plans. Some drugs show immense promise in mid-stage trials only to flop in late-stage trials -- leaving the company and shareholders empty handed. Not to mention the degrees in Latin and statistics that investors need to keep up with all of the scientific names of compounds and post-hoc-but-pre-approval-marketing analyses.
Understanding the ins and outs will come with time, but to get there investors need to grasp some of the basics. For instance: the difference between biotechnology and "traditional" pharmaceuticals. The two terms are often used (mistakenly) interchangeably. Some companies even throw a "biopharmaceuticals" in their name -- despite having nothing to do with biotechnology -- just to complicate things further. Fear not! Fool contributor Maxx Chatsko defines biotechnology with examples of drugs and companies in the following video.
While you can certainly make huge gains in biotech and pharmaceuticals, the best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.