MannKind Corporation (MNKD), Sarepta Therapeutics Inc (SRPT): Why You Shouldn’t Buy Stocks in Biotech

However, MannKind Corporation (NASDAQ:MNKD) is now near its third attempt at approval. The stock has more than tripled so far in 2013. Investors who waited patiently could finally see Afrezza gain approval within the next year. Those who didn’t wait likely experienced significant percentage losses.

On the other hand
The good news is that biotech investors who don’t meet the above criteria can often see solid returns. I think Sarepta Therapeutics Inc (NASDAQ:SRPT) offers a nice opportunity right now.

First, investors should know what they don’t know concerning Sarepta. For example, no one knows for sure yet whether the company’s Duchenne musculary dystrophy drug, eteplirsen, will gain accelerated approval by the FDA.

Second, investors should limit how many shares are bought. Sarepta Therapeutics Inc (NASDAQ:SRPT)’s stock could take a beating if accelerated approval doesn’t happen. There are plenty of other risks that also make it a prudent decision to control the size of any stock purchase.

Finally, be willing to wait even if accelerated approval isn’t granted. Eteplirsen has shown tremendous promise thus far in clinical studies. The long-term prospects for the drug and for Sarepta Therapeutics Inc (NASDAQ:SRPT) should be strong.

As you have probably surmised, these reasons to not buy stocks in biotech also apply to any other area of investing. They all boil down to appropriate risk management. If you manage risk effectively, the rewards are much more likely to come.

The article 3 Reasons You Shouldn’t Buy Stocks in Biotech originally appeared on Fool.com and is written by Keith Speights.

Fool contributor Keith Speights has no position in any stocks mentioned. The Motley Fool owns shares of Dendreon.

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