I'm often asked how I go about researching biotech stocks. The first thing I say is that it requires a lot of hard work. The successful biotech investor is part financial whiz, part savvy Wall Street technician and, most important, part scientist/medical expert.

It's the latter task that many people find the most difficult. Biotech companies issue press releases all the time touting the potential of their experimental drugs, and the stocks move as a result.

But how do you separate the truth from the hype? What sort of questions should you be asking yourself when you evaluate these press releases? And where can you find the unbiased information you need?

As Jim Cramer often says, wisely, investing requires homework. So let's dissect a biotech press release to illustrate how it should be done.

On Friday, Point Therapeutics ( POTP) released preliminary results from a phase II study of its drug talabostat in patients with advanced pancreatic cancer.

I don't know much about Point Therapeutics or talabostat, so let's get to work learning more. But remember, I'm only using this announcement to illustrate how to research biotech stocks; I'm not making any judgment on the merits of Point Therapeautics as an investment -- it's a tiny, small-cap stock that trades at around $1.

Here's how the company's press release began:

"Point Therapeutics, Inc. today provided preliminary results from the Company's open-label Phase 2 trial of talabostat plus gemcitabine in patients with metastatic pancreatic cancer (Stage IV) who have not received prior chemotherapy."

For starters, I always look at something like this with a skeptical eye. Companies are in the business of selling themselves to investors, so you want to be critical. In this case, you need to be even more cautious because these results are preliminary, which means they will change.

If you liked this article you might like


Goodbye CytRx, Your Game Is Over

Juno Therapeutics Mounts CAR-T Comeback With Strong Lymphoma Study Results

Bluebird, Celgene CAR-T Keeps Multiple Myeloma Patients Relapse Free

'APHINITY' Study Spells Major Trouble for Roche, Another Win for Puma Bio