Do Pro Biotech Rollercoaster Riders perform Better?
The peaks and troughs of biotech stocks are legend. Life and death by the rigorous FDA and unforgiving clinical trials easily makes millionaires into thousandaires. The stock above is Metacrine Inc. two years ago it IPOed at $13 now its 46 cents and the insiders went down with the ship.
Don't Insiders know what their business does? Yes, hopefully. In the case of biotech stocks almost all get of the ground through significant insider funds meaning a large initial investment says nothing about the likelihood of passing clinical trials.
Do Insiders only lose money? No. There are plenty of examples of insiders buying biotech stocks that rally, the image above is Axsome Therapeutics. Multiple insiders buying over a short period is called a cluster buy, and is one of the strongest indicators as it shows multiple people in the know coming to the same conclusion. That being said, it appears insiders are not immune to the volatility of Biotechnology and cluster buy before both rallies and cliffs. We learned what we already knew biotech is risky.