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GID Dynamics Inc enters trading halt: Here’s what you need to know

GI Dynamics Inc (ASX: GID) has entered into a trading hold pending a material announcement regarding its business. The shares will be stuck at 30 cents until the commencement of trading on Monday, 9 March 2015, or until an earlier announcement of the material event is made.

So What: GI Dynamics is a medical device maker located in the United States which is focused on the development of non-surgical treatments for patients suffering type 2 diabetes and obesity. While it could be good news, investors are likely nervous about the announcement given that the stock plummeted 39% when it last emerged from a trading halt in October last year.

At the time, GI Dynamics announced a suspension of sales of its main product, EndoBarrier, due to its reporting systems not being up to scratch. Although shipments have since resumed, the company also lost its Chief Financial Officer while roughly 10% of its workforce was let go, indicating things aren’t going so well for the company.

As it stands, the stock has lost 55% of its value over the last 12 months, while it has fallen 72% since peaking in 2012.

Now What: As demonstrated by Sirtex Medical Limited (ASX: SRX), there is potential to make enormous profits in the biotechnology sector when things go according to plan. But for every Sirtex Medical, there are numerous other companies who show plenty of promise yet never manage to succeed.

While it is unclear what GI Dynamics’ announcement will be regarding, investors need to remember the risks involved in investing in the sector. Notably, there are plenty of safer ways to make money in the stock market.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned. You can follow Ryan on Twitter @ASXvalueinvest.

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