Just curious what you look at in regard to the smaller biotechs? Is there a specific website you like to go to in order to sift through looking for more promising ones?
Many times I'm piggy-backing off a free Seeking Alpha article from folks who publish the articles professionally - Bret Jensen (Biotech Forum); O'Neil Trader; Avisol Capital Partners are some examples of authors I follow. From there, if the company sounds interesting it's time for some DD, which includes checking the 'pulse of the people' on a site like Stocktwits (where I'm also introduced to new companies from x-pollinating posters I'm familiar with) and reading into the corporate presentations/SEC filings.
Normally, what I'm looking for are:
1a) Age of company and drugs on the market - if the company has been trying to get their first drug approved for the last decade, I question the ability of management to actually cross the finish line; usually if the company has nothing on the market after 6-8 years it falls further down my list, 10+ years and I don't pursue any further
1b) High unmet need (or strong differentiation in drug performance - e.g. efficacy, lower severity side-effects, dosing regimen or method (IV, sub-c, oral, etc.)) - NASH, Alzheimer's, LN, MS, various rare cancers are the focus of many of the companies I am invested in
2) Upcoming catalysts such as an upcoming trial data readout, PDUFA date, or if I see an approved drug with ramping sales - typically, I avoid anything which the lead drug candidate isn't at least through ph.2 (though I occasionally play a ph.2 readout catalyst). I've also played some companies which crash after getting a CRL which is navigable (usually a manufacturing facility issue) and have the cash to resolve the issue in the necessary extra time.
3) Market cap - I'm not overly interested in companies with market caps >$5B and normally the ones I get in are $250M - $1B at the time I buy-in.
4) Debt/Cash/Burn - I've had some poor outcomes with companies which are saddled with debt (even if it's $50M) so if at all possible I try to avoid those situations; cash is king for a developmental biotech and if the burn rate is showing me less than 6Q of cash left then I know either debt or an offering are coming and I'll usually wait and see - if/when those issues are resolved (usually an offering leading to a decline in share price) then that is when I consider buying in
5) Pipeline - Is there one? If there is, does it seem aligned or is this company throwing darts at a wall hoping to catch lightning in a bottle
6) Reason for investing - am I playing a catalyst in which case a 20%-50% gain is all I'm hoping to capture in a short timeframe, or do I think the company really is on the cutting edge of a breakthrough where I'll retain a position (i.e. not sell or sell calls against) for the 'long haul'
I'm no expert. I started trying to find my method circa 2013 when I graduated from ISU and had some money from my first job to start investing.
I'm still trying to dial in my methods and have learned many a 'hard-lesson' (mostly management really does make/break a company, and I still don't have a great handle on separating the wheat from the chaff - other than some to stay far, far away from). But I've found it effective to sell covered calls against my positions in the 'downtime' between catalysts, also getting better at trimming when price appreciates which lends well with the covered call strategy because then it is out of my hands.
The only trouble with the CC strategy is it limits my upside - ex. sold some $12 TGTX covered calls last October (SP was in the $6's) I will double my money on those shares in ~3.5 months, but the upside has been closer to 4x over that same time. Similarly, I sold CCs against PRVB bio for a year plus and shortly after I re-upped them in the $15 range the company was bought out for more than $24. Again, I did alright (~$10 cost basis) but I limited my upside which really makes a difference when I swing and miss on a stock (ex. HEPA, SGYP, AKAO). I'd say the biggest lesson though is the 'know why you invested' I've had a number of 'flips' which I decided to stay long with as the SP just kept climbing, but then I didn't jump off the ride in time and lost significant paper-gains. If you have tickers in mind, send me a DM, always looking for opportunities and happy to share my thoughts (as 'grain of salty' as they may be)