Sigilon Therapeutics (NASDAQ: SGTX) stock was up 650% at one point yesterday, closing out the day at 440% up. This is the reason we - or some at least - invest in pharma development stocks. It's a hugely risky area but with that comes the delight of sometimes getting these 4 and 6 baggers (“a “bagger” being market slang for some thing that goes up x times, a 10 bagger is up 10x and so on).
The specific interest here is that Sigilon has a nascent - as yet unproven but looking good - treatment for Type I diabetes. This is the type that is not caused by us all being fat lardasses, this is the type that just happens. This is also the type that has to be treated with insulin. So, those companies which make pots and pots of money by selling insulin to treat Type I diabetes are going to be interested in preserving their market position by buying up likely treatments for Type I diabetes. Which is exactly what has happened here. Eli Lilly, which does make fortunes from insulin, has made a bid for Sigilon Therapeutics.
Sigilon Therapeutics stock price from NASDAQWe are, of course, a bit late to take part in this bonanza. But it's worth comparing this with BioXcel. That stock price dropped 60% yesterday on the failure - well, sorta failure - of a drug to treat Alzheimer's related agitation. Not because it doesn't in fact work, it does, it just doesn't work very well.
Which tells us something of the risk in investing in this research and development pharma game. It's possible to lose 60% overnight in one stock, gain 600% in a day in another. Of course, those are both extreme versions but the general truth is still there. Investing in pharma is a high risk game. That means that a portfolio of positions is what is necessary, not just the one single position that we're convinced is going to be a banger.
Or, to make the more general point about investing, diversification is your friend.