From Wall Street Journal:



Stocks are starting to factor in interest-rate cuts next year, making the biotech sector attractive for investors seeking riskier bets with longer-term payoffs. However, investing in biotech is tricky due to the binary nature of drug development, where companies either succeed or fail with their medical approaches, leading to potential triple returns or complete losses. This makes the biotech industry a sector of haves and have-nots, with larger gaps between winners and losers compared to other industries.

The binary nature of drug development in the biotech sector leads to significant disparities between successful companies and those that fail, creating larger potential gains or losses for investors. The uncertainty and riskiness of the industry require investors to carefully consider their investments in biotech stocks, as the success or failure of a company’s medical approach can make a significant difference in investment outcomes.



Read more: How to Ride the Biotech Roller Coaster