Clinical Trials: The Stages and What to Look For
Understanding clinical trials is crucial if you are interested in investing in pharmaceutical or biotech stocks. These trials are the make or break for a company in this sector, so you need to get your head around them.
Even the most exciting treatments with massive Total Addressable Markets (TAM) are meaningless without successful trial data to back them up.
The Four Phases of Clinical Trials: Breaking it Down
Clinical trials are conducted in four distinct phases, each designed to answer specific questions about the treatment.
Multiple trials can be conducted within each phase. Each trial will have specific targets, which will inform future trials and, finally, regulatory approval.
Let’s break them down one by one.
Preclinical Testing: The First Hurdle
Before a drug even reaches the clinical phases, it undergoes preclinical testing. This can include studies on cells (in vitro) and animals (in vivo) such as mice or monkeys.
These early tests check for basic safety and biological activity. If the results look promising the drug moves on to human trials.
Phase 1: Is it Safe?
The first hurdle for any new treatment is safety.
Goodwill: A Financial Illusion
Goodwill is one of the stupidest things in the world of finance. It's pure make-believe. It's the bitcoin of balance sheets. You can't see it, use it, and no one seems to know exactly what it is, but trust us, it's there.
Yea, no thanks.
Whenever you see a sizeable chunk of goodwill on a balance sheet, your spider senses should activate. Do a quick assets test. Remove goodwill from the equity and see what's left. You might discover that big bottom line equity is nothing but hot air. A company with billions of dollars in assets at first glance, might just be sitting on a pile of debt
So, how is goodwill created you might ask?
It's simple.
If one business buys another, then the acquired assets show up on the buyer's balance sheet. This includes two types of assets.
l Tangible assets: Real estate, inventory, equipment, loans, vehicles, accounts receivable, cash etc.
l Intangible assets: Brand names, commercial licensing agreements, patents and trademarks. They aren't physical things, but we can identify and isolate them.
But it's not only assets. Liabilities are also inherited, including borrowings, lease liabilities, accounts payable etc.