Why Biotech Stocks Are So Wildly Unpredictable

TIME

To understand why some investors are growing nervous about the biotech sector, consider the recent IPO of Axovant Sciences. The company was founded last October, isn’t profitable, and has already racked up a $21 million loss. Its CEO has much more experience with hedge funds than he does with biotech startups. Axovant has only one product candidate, an Alzheimer drug it bought from GlaxoSmithKline last December after it was tested on 1,250 patients in 13 trials and then stalled in development.

Two weeks ago, Axovant went public in an offering that raised $315 million. Axovant, which paid $5 million for the Alzheimer’s drug, says it needs the cash because it will have to pay Glaxo as much as $160 million more if the drug makes it to market. Incredibly, the stock doubled on its first day to $31 a share, but has since fallen by nearly a third of…

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