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Author’s note: This article was presented early to subscribers of the Total Pharma Tracker, and they also got further insight into how best to use these tools in making investment decisions.

Biotech holds a special place in my heart, both for the way it captures the imagination and for its explosive growth potential. This makes it a field full of interesting happenings, where every day you can find a company blowing up or cratering. In many cases, these are the penny stocks that you should avoid in the first place.

But if you’re reading this, then you’re probably like me: tempted by the allure of explosive growth potential. And you’re also probably confused as anything when it comes to identifying promising players. With everyone who asks me for my opinion on company X, I am reminded of the golden question for biotech in general:

How can I consistently pick winners through analysis?

If you follow the tenets of fundamental analysis, the way forward is simple, if not laborious. Gather information on the prevailing headwinds facing a company. Gather information on the company’s products. Gather information on the company’s cash flows. Use this information to gauge where there is a gap in the market’s current valuation and where the company should be.

But in biotech, you are missing so many pieces of that puzzle. First, a clinical-stage biotech, by definition, has no products. They have few, if any, sources of revenue, and they are almost always cash flow negative for the entire time you would be drawn to them. Furthermore, if a company scores a big breakthrough in a medical unmet need, it doesn’t matter what the Fed is doing to interest rates. It doesn’t matter if the economy is undergoing a recession, even.