Developing drugs to sell in the US is a complex and costly process. It's estimated that for every 1,000 compounds discovered in the pre-clinical stage, perhaps only one will make it through the entire FDA approval process to be sold on the market. Navigating this approval process can often take more than a decade; depending upon the source, the average cost of bringing a new prescription drug to market ranges from $1.2 to $1.5 billion. [Ed. Note: This Forbes article claims that the true cost is actually much higher.] But the potential reward from a blockbuster drug can be several billion dollars in sales a year for the remaining life of the patent.

Consider that in 2010 alone, the five top-selling biotech drugs on the market (Avastin, Rituxan, Humira, Herceptin, and Lantus) generated revenues of $31.8 billion. These five drugs are all big-pharma products (Roche, Abbott, and Sanofi), but many of the new potential blockbuster drugs are coming out of smaller, more innovative biotech outfits. Obviously, a multibillion-dollar blockbuster drug will affect the value of a small – say $200-million market-cap biotech company – a lot more than it would a $150-billion market-cap big-pharma company like Roche.

It's this potential of uncovering the next blockbuster drug from a relatively small company that makes biotech investing so enticing. But it's a risky game. Success or failure of your trade can often hinge on one piece of news (at least in the short run). Good news equals big gains, and bad news equals big losses.

Companies that aren't yet selling any products routinely see their stocks swing up 100% or more in a single day on good news from a clinical trial or FDA approval of a drug candidate – or watch them tumble 90% if a drug fails to impress the FDA or results from a trial are anything less than glowing.

For instance, on February 22, 2012, an FDA advisory panel voted 20-2 in favor of approval of Vivus' new obesity drug, Qnexa. The drug still requires approval by the FDA itself (decision date is expected by April 17), which has rejected previous obesity drugs after panel support. But that did not stop shares of Vivus (NASDAQ.VVUS) from soaring. The stock rose from a close of $10.55 the day before the FDA panel vote to a close of $18.73 the first trading day after the vote (trading was halted on 2/22), a one-day increase of more than 77%. By February 27 (just the third trading day after the FDA panel vote), the stock was trading as high as $25.14, a full 138% above the pre-panel vote close.

Vivus is not some lone anomaly, either. Just five days before the news about Qnexa, Corcept Therapeutics (NASDAQ.CORT) announced that the FDA had approved Korlym as a once-daily oral medicine to control hyperglycemia in adult patients with Cushing's syndrome (a rare and life-threatening endocrine disorder that results from long-term exposure to excess levels of the hormone cortisol); the stock jumped 47% in one trading day, from a close of $3.03 to a close of $4.45 on the news.

Then there's Chelsea Therapeutics (NASDAQ.CHTP). On February 23, 2012, the company announced that the FDA's Cardiovascular and Renal Drugs Advisory Committee (CRDAC) voted 7-4 to recommend approval of Northera for the treatment of neurogenic orthostatic hypotension (a condition which often causes dizziness) in people with central nervous system disorders like Parkinson's. The stock surged on the news, climbing more than 60% in one trading day.

Just to show how extreme it can get, take the example of Vanda Pharmaceuticals (NASDAQ.VNDA). Vanda received FDA approval of its schizophrenia drug Fanapt on May 7, 2009, which resulted in a one-day gain for the stock of over 625%. And just four trading days after that, the stock closed at $12.96, a full 1,100% above its $1.08 close on March 6, 2009.

Of course the converse is true as well. When the news is negative, early investors may find themselves holding little more than toilet paper. Take one of the same companies from above, Chelsea Therapeutics, for instance. About two weeks before the stock made a one-day gain of 50%, it suffered a one-day loss of nearly 40% on news from the company that it had received certain briefing documents from the FDA that sparked worries about Northera's approval chances. The stock fell from a close of $4.99 on February 10, 2012 to a close of $3.11 the next day.

And then there's Orexigen Therapeutics (NASDAQ.OREX). The FDA failed to approve this company's obesity drug, Contrave, early last year, and the stock fell more than 72% in one day, from a close of $9.09 on January 31, 2011 to a close of $2.50 on February 1.

With all this in mind, I thought it might be helpful to post a list of some of the FDA decisions that are coming up in the next few months – in case you are interested in digging into these stocks more and trying to make a play based on upcoming news.

[Ed. Note: The following list was checked to ensure accuracy, but it's possible for the timing on these decisions to change going forward.]

Company: MAP Pharmaceuticals (NASDAQ.MAPP)
Drug: Levadex
Indication: Orally inhaled drug for the acute treatment of migraine in adults
FDA Decision Date: March 26, 2012

Company: Affymax (NASDAQ.AFFY)
Drug: Peginesatide
Indication: Once-monthly injection for the treatment of anemia associated with chronic kidney disease in adult patients on dialysis
FDA Decision Date: March 27, 2012

Company: Vivus (NASDAQ.VVUS)
Drug: Qnexa
Indication: Extended-release, once-daily capsule for the treatment of obesity
FDA Decision Date: April 17, 2012

Company: Vivus (NASDAQ.VVUS)
Drug: Avanafil
Indication: Orally administered, as-needed pill for the treatment of erectile dysfunction
FDA Decision Date: April 29, 2012

Company: Protalix BioTherapeutics (NYSE.PLX)
Drug: Uplyso
Indication: A plant-cell expressed recombinant form of glucocerebrosidase for the treatment of Gaucher disease
FDA Decision Date: May 1, 2012

Company: Talon Therapeutics (NASDAQ.TLON)
Drug: Marqibo
Indication: A novel targeted nanoparticle-encapsulated anti-cancer compound currently for Acute lymphoblastic leukemia (ALL) and melanoma
FDA Decision Date: May 13, 2012

Company: Ironwood Pharmaceuticals (NASDAQ.IRWD) & Forest Laboratories (NYSE.FRX)
Drug: Linaclotide
Indication: A guanylate cyclase type-C agonist for treatment of irritable bowel syndrome (IBS) and chronic constipation
FDA Decision Date: June 9, 2012

Company: Amarin (NASDAQ.AMRN)
Drug: AMR101
Indication: A next-generation omega-3-based triglyceride-lowering therapy
FDA Decision Date: July 26, 2012

Company: Onyx Pharmaceuticals (NASDAQ.ONXX)
Drug: Carfilzomib
Indication: A next-generation proteasome inhibitor in development for the treatment of relapsed and refractory multiple myeloma
FDA Decision Date: July 27, 2012

While you're certainly free to throw your hat in the ring and start picking biotech stocks willy-nilly based on what you think a particular news outcome will be, I wouldn't recommend it. Navigating the universe of biotech is tricky, and even the professionals get creamed.

The trick is to put the odds of success in your favor so your wins outnumber your losses. And if you'll indulge a bit of unapologetic self-promotion, that's exactly what our team at Casey Extraordinary Technology has done. Sure, we've been wrong before. And we'll be wrong again in the future – but our successes far outnumber our failures. So, if you're interested in getting to know more about biotech and seeing what companies we like in the space, then sign up for a risk-free trial of Casey Extraordinary Technology. Details here.