Vertex Pharmaceuticals Incorporated (VRTX), MannKind Corporation (MNKD): Want to Invest in Biotech? Think Like a Venture Capitalist

This can be particularly tricky in the biotech world. The good news, though, is that you don’t have to throw your money at a brand new start-up. You can wait until a company has some successes under its belt first.

Sarepta Therapeutics Inc (NASDAQ:SRPT) is a good case in point. When the biotech first began developing its Duchenne muscular dystrophy drug eteplirsen, there was no way to know how successful the effort would be.

However, after Sarepta Therapeutics Inc (NASDAQ:SRPT) announced positive preliminary results from the mid-stage trial for the drug, eteplirsen’s potential became more tangible. Investors who bought shares of Sarepta Therapeutics Inc (NASDAQ:SRPT) on July 24, 2012 — the day those 36-week results were released — now claim gains of more than 280% in less than a year.

Common theme
The common theme for all of these VC principles is risk management. Successful venture capitalists make money by effectively managing their risk. So do successful biotech investors.

Sometimes companies fail even though they have promising products that address unmet needs, great CEOs with impressive experience, and seemingly solid potential for high returns. It happens. That’s why VCs spread their money across multiple candidates. So should you.

In many ways, biotech investors don’t have to imagine that they are venture capitalists. They are venture capitalists. Think — and act — accordingly.

The article Want to Invest in Biotech? Think Like a Venture Capitalist originally appeared on and is written by Keith Speights.

Fool contributor Keith Speights has no position in any stocks mentioned. The Motley Fool recommends Vertex Pharmaceuticals.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.