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Investing lesson I in 2010: pharmaceutical stocks

Maybe speculation lessons will be more appropriate. I bought 3 pharmaceutical stocks recently. With the outcome of MA senate race, US healthcare reform is unlikely be massive, which is good news for the pharmaceutical companies. I learned some lessons in the short span of trading small pharma stocks. I think it’s a good idea to summarize here:

1) Pay attention to the trial phase of drug under development: Typically the earlier in phases, the more risk, sounds simple both from common sense and probablity point of view. Apply this to real world, for Athersys (Nasdaq:ATHX) all drugs are in phase I or earlier. On the other hand, pSivida (Nasdaq:PSVD) has drugs are in all phases (from preclinical, phase I, II and III and marketed); 4 out of 5 drugs from Lexicon (Nasdaq:LXRX) are in phase II.

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