With the All Ordinaries (Index: ^AORD) (ASX: XAO) down more than 1% in late afternoon trading, it may surprise some to know that small biotech stock Phylogica Limited (ASX: PYC) has rocketed up more than 80% to 4.7 cents.
With a price rise like that you'd have to suspect the company had some good news – and you'd be right.
The company reported today that its peptide fusions 'kill aggressive, drug-resistant breast cancer cells' and phylomer peptide fusions 'significantly boost potency of cancer drugs'.
That's good news in anyone's language, and why the shares have soared so much today.
But despite today's rise, the company's shares are still down more than 45% over the past 5 years. That's the way things can go with biotech stocks. In many ways, it's like a lottery ticket. Find one winner and shares can skyrocket, like Sirtex Medical Limited (ASX: SRX), up 243% in the past 5 years (despite a recent 50% fall).
As we wrote back in October last year, adopting a portfolio approach might be one way to invest in the sector – the equivalent of buying multiple lottery tickets – and increasing your odds of picking a winner.
Despite the excellent news today, Phylogica still has a long way to go before it becomes profitable. That could be 5 or even 10 years away – with substantial hurdles in the company's path along the way. We wish the company all the best, but investors may want to watch this from the sidelines for now.
