It takes decades for the average person to understand clinical trials. People who are not from the pharmaceutical sciences find it especially hard to know whether a new drug will meet regulatory standards. This can lead to stock prices that do not reflect business prospects squarely.

Conservatism pays in the Biotechnology & Drugs Sector. The best interests of stock investors are not served by management teams who gloss over the weaknesses of their research molecules. Investments are best entrusted to executives with objective views of product trials.

Pharmaceutical trials are continuous. They continue even with marketed products. The industry relies on relatively high margins because setbacks during the development process are normal. All findings from each trial are not relevant for stock value. Steps in individual new product development should not affect long-term business appraisals.

This company from Rockville, MD has banked on a candidate product for insomnia. The molecule has shown promising results, but factual and balanced communication from the management has resulted in a slump for the stock. The price at the start of July 2008 is close to the 52-week low of $2.70, making the stock extraordinarily attractive.

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