Using that logic then biotech investments would only be left to late stage 3 - by that time MOST of the value of the drug is built in to the stock price - if you can find a compelling technology and story with a lot of cash and little debt - before the technology is proven and widely accepted as "it's going to work" then thats how you make $$$. Now I'd say betting on a totally unproven technology and assigning a lot of VALUE to it before it's proven is folly. Take for instance GERN and stem cells - a few weeks ago in the hype when it was around $8.5 it had about a "value" built into it's IP of about $700m and it had about $100m cash (market cap was around $800m) I think that's a recipe for disaster. But if you could buy the "hope" around some promising technology (or lets be honest - some technology someone will pay more for in the future as it gets closer to make or break time) then thats a potential decent investment. Overpaying for technology whether it is good science or not is still overpaying, and you will lose money investing that way.
Just because a company has great science or great product doesn't necessarily mean it's a good investment. Conversely a good investment doesn't always need good science/product - but it never hurts.
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