Buy Low, Sell Lower?

Buy Low, Sell Lower?

Since the day stocks began trading one of the oldest most well-known clichés has been to buy low and sell high. That it’s best to bet against conventional wisdom as nine times out ten conventional wisdom is flat out wrong. That there’s a simple reason the majority of fund managers fail to outperform the indexes as try as they might they just can’t help but follow the herd. Pigs get slaughtered and sheep get sheered.

So one might just think that now is the time to leap into the deep end of the pool and buy shares of MannKind (NASDAQ:MNKD). Shares which are down over 40% the past three months, 20% the past six months and actually up over 10% the last 12 months.

By the way of comparison Diabetic Investor looked at three other possible investments in the diabetes space over these same time frames; Dexcom (NASDAQ:DXCM), Insulet (NASDAQ:PODD) and Tandem (NASDAQ:TNDM). Over the past three months only Dexcom is showing a gain while Insulet and Tandem are basically treading water. Over six months again only Dexcom is in positive territory and finally over the past 12 months Dexcom by far is the winner.

Now we’re sure there are investors out there who at this very moment are thinking; my goodness shares of MannKind have been beaten like a rug, they have a deal with Sanofi (NYSE:SNY) this slide can’t last forever my golly now is the time to buy. Heck over the last two years the stock is actually up nearly 100% so why not get in today, hold on for dear life and pray history will repeat itself. Heck who knows Sanofi might just be dumb enough and actually acquire the company if for no other reason than to avoid the embarrassment of seeing MannKind shares fall all the way to zero.

Just in case anyone doesn’t think this can happen we suggest going back in time and look at what happened when Johnson and Johnson (NYSE:JNJ) acquired Animas. While conventional wisdom at the time stated JNJ acquired Animas as it was a great strategic fit, that with their brand expertise, marketing skill and capital it was only a matter of time before they gave Medtronic (NYSE:MDT) a serious run for their money. The truth is Animas was actually in serious trouble at the time and without being acquired by JNJ could have possibly collapsed. In many respects JNJ who was already an investor in Animas through their venture unit, bought the company to avoid embarrassment.

On the flip side think of investors who invested in Cygnus the makers of the now-dead but once whiz bang GlucoWatch. Or what about Amira Medical, who at one time was thought to be the next great thing in glucose monitoring only to be sold to Roche in what basically was an IP deal. Yes for every JNJ buying Animas or Abbott (NYSE:ABT) buying a Therasense there is another story of a diabetes company that was supposed to be a sure thing only to become a dead duck.

So the question then becomes what MannKind will turn into, is it the ugly duckling that will turn into a beautiful swan, the frog that when kissed by the beautiful Princess turns into Prince Charming. Or is MannKind actually Frankenstein who turns on his creator becoming the hated monster the villagers want to burn at the stake.

To Diabetic Investor the answer lies not with MannKind but their partner Sanofi and their ability to bring Afrezza to market. As we have noted on many occasions Afrezza has issues however that does not mean that these issues cannot be overcome, that is possible to turn a frog into a prince. That while Sanofi also has issues, that it is possible they will find religion and actually develop a well thought out, cohesive strategy for Afrezza. That somehow they will magically make the many issues with Afrezza disappear and it really will become the greatest thing in diabetes since the discovery of insulin.

Now just in case anyone is wondering whether a company that brought us Apidra, the iBGStar and Lyxumia® all dismal failures, can turn on a dime and develop a diabetes strategy that actually works, we ask that they immediately go to the nearest emergency room as they are in serious need of medical attention. Perhaps while they are waiting in the emergency room someone from Sanofi can bring them those way cool lunch bags that were specially designed for people with diabetes. And no this is not a joke, go ahead and check it out on Google.

The harsh reality is Lantus, the goose that lays the golden eggs and provided Sanofi with the capital to build all these failures, is the one and only diabetes product they couldn’t screw up. Now that the goose is about to be cooked and the cupboard is bare the company is being exposed. Keep in mind this is the company who at one time was very vocal and very public about how they were going to overtake Novo Nordisk (NYSE:NVO) as the premier global diabetes company.

To think that this leopard can change its spots is like thinking the Chicago Bears will all of a sudden develop a pass rush. Or that President Obama will switch gears and proclaim his signature program, Obamacare a dismal failure that should be scrapped immediately. Simply put this ain’t happening, homey just doesn’t go there.

So go head and roll the dice with an investment in MannKind because that’s exactly what it is a roll of the dice and in the crap game of diabetes the dice will eventually come up 7.