MannKind Corporation (NASDAQ:MNKD) could probably serve as the poster child for investor patience. The company is now on its third attempt to gain regulatory approval for its inhalable insulin product, Afrezza. MannKind Corporation (NASDAQ:MNKD), though, has a management team that believes in its vision and has forged ahead through trying circumstances. Shareholders who remained patient through the years could finally see their investment pay off later this year when the Food and Drug Administration makes a decision on Afrezza.
3. Know that business dynamics can change.
While patience is essential, it is equally important to understand that underlying business dynamics can change. These changes often impact the attractiveness of the stock.
Vertex provides a good example of this lesson also. When the company launched hepatitis C drug Incivek in 2011, everything looked up. Analysts predicted peak annual sales of $5 billion. But things changed.
Revenue for Incivek was $1.16 billion in 2012, but sales are now declining. Other drugmakers developed new products that are better.
Gilead Sciences, Inc. (NASDAQ:GILD), in particular, appears to be in the lead for developing an all-oral combination for hepatitis C. The biotech recently reported results from a study where patients in one arm were clear of hep C after only eight weeks of taking its drug combo. This doesn’t mean that Vertex can’t catch up with Gilead Sciences, Inc. (NASDAQ:GILD) (and the biotech’s cystic fibrosis opportunities still make the stock attractive), but it illustrates how quickly business dynamics can shift.
Another prime case study for this comes from Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI). Spectrum’s stock more than doubled from October 2011 through July 2012. However, shares plunged 55% from those highs because business dynamics changed since then. A shortage of a generic rival to Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI)’s lead drug Fusilev was alleviated, resulting in sales slowing down considerably.
A start
Of course, three lessons from one biotech doesn’t necessarily add up to a successful investment strategy. But it’s a start.
Look at other companies that have done well. For that matter, also examine those that have failed. Identify the reasons behind victories and defeats. Learning the right lessons from the right sources and applying those lessons should lead to developing a solid investment strategy over time. Warren Buffett didn’t begin with all the answers, either.
The article 3 Investment Strategy Lessons From Vertex’s Success originally appeared on Fool.com.
Fool contributor Keith Speights has no position in any stocks mentioned. The Motley Fool recommends Gilead Sciences and Vertex Pharmaceuticals.
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