A Clear Way to Profit from a Graying Population

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The Baby Boom generation, which includes everyone born from 1946 through 1964, is now entering retirement age (65) at a rate of 10,000 per day. That demographic wave is so big that in 2010, the U.S. Administration on Aging (AoA) predicted the elderly population in this country would double to about 71 million by 2030.

That presents a huge opportunity for bioscience investors. Here's why.

As people grow older, as a group, they get sicker. About 80% of older adults cope with at least one chronic condition - illnesses that need to be managed but can't be cured - and 50% struggle with two or more. Here are some of them:

  • Alzheimer's and other dementias
  • Arthritis
  • Balance and gait problems
  • Bladder conditions
  • Cardiovascular disease
  • Cerebrovascular disease
  • Chronic Obstructive Pulmonary Disease (COPD)
  • Depression
  • Diabetes
  • Eye disease (glaucoma, cataracts, macular degeneration)
  • High blood pressure
  • Kidney disease
  • Osteoporosis
  • Parkinson's disease
  • Prostatic hyperplasia (enlarged prostate)

Infectious diseases such as pneumonia, and injuries such as hip fractures from falling, also take a big toll on our older adults.

Naturally, the more seniors there are, the more demand there will be on the medical community for better and safer therapies to manage their health.

It's Already Happening

But that isn't the whole story. Not only are there more elders now than ever before, but they're living longer. According to the Centers for Disease Control and Prevention, life expectancy currently stands at 78.7 years for adults in the United States. Compare that to a century ago, when the average figure was 47.3 years, or a half-century ago, in 1964, when it was 70.3 years.

Thanks to advances in medicine and improved public sanitation, we've made huge strides in longevity. But the outlook isn't as rosy as the numbers suggest, because living longer means more years of dealing with those chronic conditions mentioned above.

All of this costs a lot of money. In 2010, older adults represented only 13% of the population, but accounted for 34% of total healthcare dollars spent. That's $1.3 trillion. And that's a heck of a market.

So as investors, where does all of this take us?

Obviously, with all this demand for better treatment, drugs that help manage chronic conditions associated with age will be on everyone's watch list. And they're already paying off.

Let's take a look at just one of these diseases: adult onset (type 2) diabetes.

Since the beginning of the year, MannKind Corp.'s (Nasdaq: MNKD) price per share (PPS) has risen from $5.31 to $9.70 (as I write this), an increase of more than 80%.

During that time, MNKD's new drug in development, Afrezza, an inhalable form of insulin for type 2 diabetes, received a positive recommendation from a U.S. Food and Drug Administration (FDA) advisory committee (AdCom), and then, a couple of months later, FDA approval. Predictably, both of these catalysts helped drive up PPS.

Immediately after the AdCom, PPS soared more than 100% in a single trading session.

And I suspect Afrezza won't be the last diabetes drug to deliver high profits to investors.

Opportunities Abound

In the coming months, several more new drugs will try to improve the lot of patients with diabetes, including two at opposite ends of the price spectrum...

The first, Evoke Pharma Inc. (Nasdaq: EVOK), will release data from a phase 3 trial of its experimental drug EVK-001, a potential treatment for women with recurrent diabetic gastroparesis. The data follows successful results from a previous phase 2 study of the drug.

Gastroparesis, a common side effect of diabetes, causes the stomach to take too long to empty its contents. Among its symptoms are nausea, vomiting, abdominal pain, bloating, lack of appetite, and weight loss. Up to 4% of the American population - more than 13 million people - suffer with it. A disproportionate number of them are older adults. That's a very big potential market.

Currently, EVOK is a micro cap, with a market capitalization of $42 million and a PPS in the $7 range. This stock could be a remarkable bargain for investors, but trading volume is typically low - an average of about 18,000 shares per day over three months, and currently only around 7,000. Low volume can limit buying/selling opportunities - you can't sell a stock if you can't find a buyer. Short percentage of the float is only around 7%, so the market has some confidence in the company.

The second company, GW Pharmaceuticals Plc. (Nasdaq ADR: GWPH), is a little pricier, with a PPS around $84 and a market cap of nearly $1.5 billion. Shares currently stand at about 950% of their value one year ago.

GWPH creates, develops, and commercializes substances derived from the marijuana plant to treat disease. One of its experimental products, GWP42004, has shown very positive clinical results in a phase 2a trial for the treatment of type 2 diabetes. The company is now doing a placebo-controlled, double-blind study of the drug in diabetic patients, which should be completed by the second half of next year. I would expect successful data to drive up stock value significantly, despite the currently high price tag.   

Wealth is there for the finding...

As I say, diabetes is only one example of the many age-associated conditions that will demand more and more attention from the medical research and development community over the coming decade.

There are many more golden opportunities for the investor who is willing to do a little research and find creative bioscience firms developing therapies in these areas.

And remember, these opportunities aren't limited to therapeutics. Long-term care, nursing care, in-home care, and hospice are all areas that should prove attractive to investors.

It's all just a Web search away.

About the Author

Ernie Tremblay has over 20 years' experience studying and writing about the latest developments in health, medicine, and related technologies. He understands the FDA approval process, the "hard science" behind these drugs, and the market demand for them, better than almost anyone else on earth. He has mastered the complex dynamics that determine whether a new drug will be a breakthrough winner - or just another casualty of the FDA approval process.

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