The Markets IQ

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.

The Commonwealth Bank of Australia (ASX: CBA) is the undisputed heavyweight champion of ASX bank stocks. But in the last twelve months we’ve seen its valuation become unhinged from reality.

CBA shares have surged 60% in just over a year.

And for what?

Selling the same mortgages and skimming the same interest margins? There’s no growth story here. Just a bubble inflating before our eyes.

After the recent 1H FY25 result update, CBA shares fell over 11% in 7 trading days. While the price has since stabilised, the fall is a warning shot for CBA holders. The correction? This could just be the warm-up act.

The sharks are circling and it’s time to sit up and pay attention.

CBA’s recent share price decline wasn’t out of the blue. The meteoric rise in valuation was dizzying, bizarre and unwarranted.

To be clear, CBA is not in financial strife. Far from it.

The result was solid, with 4.7% growth in year-on-year revenue and Earnings Per Share (EPS) up 6.6% to $3.08. The Net Interest Margin (NIM) expanded 2 basis points to 2.08%. That’s the interest margin that the bank achieves between what it borrows and what it lends.

One of the biggest technological revolutions of all time is about to be unleashed in a big way.

Robots aren’t just knocking at the door. They’re already in the house, rummaging through the fridge and taking selfies with our smartphones.

For decades, a robotic future has held great promise. A promise that's never quite been delivered. Confined to repetitive roles in mega-factories, they’ve failed to evolve past single-use cases.

Robots that can cook your dinner, clean the gutters and diagnose your illnesses have always been just around the corner. But that’s about to change.

We're leaving the age of limited niche robotics.

And entering the age of mass adaptable robotics.

This revolution promises to upend entire industries. Including some that might not be in front of mind, like food and real estate. We’ll get to these opportunities and why right now is the time to be positioning for this mammoth change.

But first, we must address the question of ‘Why Now?’

The Spark that Ignited the Fire

We need to address the missing piece of the puzzle to answer that burning question.

So, what's been missing?

The hardware is all there. We've got the actuators, joints, ligaments, circuit boards, chips and sensors.

It's time to get excited about REITs again.

It's not the talk of the town yet. But pretty soon, you'll be hearing about the magic of Real Estate Investment Trusts REITs.

Of course, when your Uber driver talks about it, it'll be time to sell.

Smart punters will spot this trade coming and position early. They'll have made the trade and will step out of that Uber ride with a smug, self-congratulatory smile.

The REIT trade is coming. It's undeniable and unstoppable.

You see, it all comes down to basic math.

The market is expecting interest rates to start falling again this year. That means lower debt cost and lower comparative investment yields. That's a double whammy that could get REITs soaring again.

But the path of interest rates is never guaranteed.

World events could throw us curveballs. Inflation, unemployment and geopolitics leave their dirty fingerprints over these decisions.

We'll examine exactly why this trade could play out and some ways that savvy traders might play it. But first, you might be wondering what the hell REITs are and what interest rates have to do with anything.

So, let's address that first.