The public market for biotech stocks is notoriously volatile. Retail and generalist investors may become confused or react irrationally when a small biotech company releases “positive” or “encouraging” data from tests conducted on a handful of rodents using an unvalidated disease model for its experimental drug. This issue has worsened with the advent of trading algorithms that might be programmed to disregard preclinical announcements but could still buy the stock of a company announcing a “positive” clinical trial, with the only positive element being that the active arm shows the same safety (with efficacy mentioned much further down in the announcement) as placebo.
Stock Watch: Do Regeneron And BridgeBio Stock Movements Signal Smarter Investors?
Volatility Has Been Lower Than Usual Following Recent Announcements
Historically, announcements from biotech companies have triggered stock price fluctuations as investors misinterpret the details. However, two recent instances suggest this pattern might be shifting.
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