Regencell Bioscience (RGC +0.63%) has a surprisingly large market cap of nearly $12 billion. The stock is up a shocking 21,000% over the past year. It started the 52-week period as a penny stock. Investors need to tread with caution and not get lured in by the massive price gain.
What does Regencell Bioscience do?
Regencell describes itself as an early stage bioscience company. That basically means it's researching drugs it believes may have promise, but it hasn't found anything yet. This is a high-risk area of the pharmaceutical sector that only the most aggressive investors should consider.
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If a bioscience company's research leads to a marketable product, its stock could take off. If it doesn't, the company could have trouble remaining a going concern. It is a bit of a moonshot type of investment. In order to justify buying a company like Regencell, you need to believe very strongly in the drug candidates that the company is researching. Most investors should stick to more established pharmaceutical companies that already have a portfolio of patented drugs.
Regencell has spent 14 years examining "TCM"
What's interesting about Regencell is that it has been operating since 2014 and still doesn't have a patented drug. Its focus is on traditional Chinese medicine, which the company usually just describes as TCM on its website.
NASDAQ: RGC
Key Data Points
The foreign company's annual report states the risks very clearly, summing the problem up in one sentence: We have no saleable products and have not generated any revenue from product sales. Unless you are deeply versed in TCM and have a strong belief that Regencell is on the verge of some breakthrough, you should probably avoid this stock.
Why I would avoid Regencell (and what I would buy instead)
I wouldn't touch Regencell with a 10-foot pole because of the high risks involved in the business. That includes the lack of a product, the focus on TCM, and the very nature of the early stage bioscience sector. From a big-picture perspective, Regencell simply doesn't stand up as an investment compared to a large, established drug company.
Buying Regencell is fraught with risk, and there's little to suggest it's worth it. If you are willing to take on risk, you'd be better off with a drug company like Pfizer (PFE 1.65%), which has an established and successful track record. It isn't hitting on all cylinders today, and Wall Street is downbeat on the stock. However, management is investing heavily in the GLP-1 space to catch up with its peers, and it has a large portfolio of patent-protected drugs to support that effort.
