How You Made 53% in Two Months with This Biotech Stock

I call Repligen Corp. (Nasdaq: RGEN) a "pick and shovel" biotech stock because it doesn't research or develop pharmaceuticals. Instead, this Waltham, Mass.-based small-cap supplies the ingredients that dozens of Big Pharma firms and their blockbuster drugs need.

Because it's a supplier rather than a drugmaker, Repligen gives you the big upside potential of new drug development - but without the downside risks and long waiting times posed by the U.S. Food and Drug Administration (FDA) approval process.

Repligen banks on the fact that biotech and drug firms face huge overhead getting new drugs to market. Since 2003, the conventional wisdom has been that it takes 10 years and $1 billion to develop a new drug. Now, the Tufts Center for the Study of Drug Development - which came up with that original $1 billion estimate - recently updated that first report with a new cost estimate nearly three times higher: $2.9 billion.

Biotech StockThat's where Repligen comes in. The company, founded in 1981, supplies high-value ingredients the rest of the industry uses to get new drugs to market faster and with less overhead.

Repligen is a leading provider of a substance known as Protein A, which is used to produce many leading drugs. For instance, Protein A is used to separate and purify cancer fighters known as "monoclonal antibodies."

Drugs of this type are part of the promising area known as "biologics." It got this label because the compounds are derived from biological sources - such as cells and tissues - instead of being chemically synthesized.

Because of its business strategy, Repligen gets to work on some of the world's biggest drug-development programs.

Seven of the 10 best-selling drugs of 2013 were biologics, and more than 40% of drugs in the pipeline for future release fall into this category. Among many others, Repligen is a supplier for such leading drugs as Avastin, used to treat colon cancer; Herceptin, a treatment for breast cancer; and Humira, prescribed for rheumatoid arthritis and several other conditions.
Launched in 2003, Humira became the best-selling drug in the world last year.

And successes like that are what's driving Repligen stock forward so far so quickly - and what will keep its shares soaring.

Here's why they had an impressive first quarter...

Stellar Quarter for a Stellar Biotech Stock

[epom key="ddec3ef33420ef7c9964a4695c349764" redirect="" sourceid="" imported="false"]I first recommended the stock back in May 2013. Readers who invested at this time have since seen some mighty returned: gains of 342%.
Last week, Repligen stock jumped. This was due to stellar first-quarter sales earnings - and what looks like even better news going forward.

During the first quarter, Repligen grew sales by 45% with revenue reaching a record $20.8 million.

And for the full year, Repligen has raised sales guidance by $3 million to $78 million, even after accounting for an 8% negative impact posed by the strong dollar.

Net income suffered a bit as a result of a $1.1 million expense associated with an earlier product acquisition. That lowered earnings per share by about 30% from the year-ago period to 9 cents.

So, why was Wall Street so enamored with Repligen if earnings slipped?

Profit margins continue to rise - and that means the company's overall financial health is dramatically improving.

Gross profits rose by 59% during the quarter to $12.7 million, while gross profit margins hit 61.2%, up nearly 10% from a year ago

In other words, this is the kind of financial performance I expected when I suggested you acquire this winner.

After a big move like this, we could see the stock give up some of its impressive gains on the profit-taking of other investors. That often happens in a case like this.

But here's a much more important number to consider: Forecasts call for the biologics market to almost double in sales to roughly $240 billion by the end of this decade.

And that means there's plenty of growth potential for Repligen.

At Least 50% from Here

Repligen has a market cap of $1.29 billion.

It plans to boost earnings by 15% a year with a blend of organic expansion and acquisitions of complementary firms.

Based on that, I'm projecting gains of up to 50% over the next three years.

However, I actually think we could see more profits than that - because Repligen could become a takeover candidate.
We've already seen a lot of mergers and acquisitions in the biotech sector this year. And we could see gains of 60% to 75% if Repligen goes on the block.

Regardless, Repligen continues to play a unique role in the biopharmaceutical industry because it is a big driver in the success of dozens of drugs.

That means, at a minimum, you can think of Repligen as a classic growth firm that should continue beating the market over the next three years.

And with this play we just may get a kicker if an industry giant decides to scoop it up - and hand us even more outsized gains.

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About the Author

Michael A. Robinson is a 36-year Silicon Valley veteran and one of the top tech and biotech financial analysts working today. That's because, as a consultant, senior adviser, and board member for Silicon Valley venture capital firms, Michael enjoys privileged access to pioneering CEOs, scientists, and high-profile players. And he brings this entire world of Silicon Valley "insiders" right to you...

  • He was one of five people involved in early meetings for the $160 billion "cloud" computing phenomenon.
  • He was there as Lee Iacocca and Roger Smith, the CEOs of Chrysler and GM, led the robotics revolution that saved the U.S. automotive industry.
  • As cyber-security was becoming a focus of national security, Michael was with Dave DeWalt, the CEO of McAfee, right before Intel acquired his company for $7.8 billion.

This all means the entire world is constantly seeking Michael's insight.

In addition to being a regular guest and panelist on CNBC and Fox Business, he is also a Pulitzer Prize-nominated writer and reporter. His first book Overdrawn: The Bailout of American Savings warned people about the coming financial collapse - years before the word "bailout" became a household word.

Silicon Valley defense publications vie for his analysis. He's worked for Defense Media Network and Signal Magazine, as well as The New York Times, American Enterprise, and The Wall Street Journal.

And even with decades of experience, Michael believes there has never been a moment in time quite like this.

Right now, medical breakthroughs that once took years to develop are moving at a record speed. And that means we are going to see highly lucrative biotech investment opportunities come in fast and furious.

To help you navigate the historic opportunity in biotech, Michael launched the Bio-Tech Profit Alliance.

His other publications include: Strategic Tech Investor, The Nova-X Report, Bio-Technology Profit Alliance and Nexus-9 Network.

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