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Why This Stock (and Sector) Will Trounce All Others

Forget gold, forget oil, and forget the S&P 500.

If you want to make big money in the market today you have to look to biotech.

In fact, if you ignore this field, you're going to miss some of the market's biggest stock gains.

That's because what happened earlier this week is going to become the norm.

On Monday, of the top 25 Nasdaq advancing stocks, 12 were straight-up biotech plays and another was a small-cap healthcare concern.

Their one-day gains ranged from 8% to 47%. Not bad for a day's trade.

As someone who has tracked this field for more than 20 years, I have to say I'm not surprised that some parts of the bioscience industry are on fire while sectors like natural resources are in the tank.

Gold and silver have quickly fallen out of favor, in no small measure because global economic growth remains in serious doubt.

But biotech is benefiting from Rule No. 3 of my High Tech Wealth Strategy: It's riding unstoppable trends.

Really, it's as simple as this. The world keeps adding millions of new people every year — and none of us are getting any younger.

This odd combination of lots of new children and aging Baby Boomers is giving biotech and healthcare a one-two punch for long-term demand.

We're talking decades of growth…

Not only that, but the industry and the science behind it just keep getting better. They're targeting cancers, diabetes, brain disorders and a wide range of infectious diseases among many others.

No wonder Enanta Pharmaceuticals Inc. (NasdaqGS:ENTA) recently had such a great IPO.

With the biosciences making steady strides, shares of this small-cap are up nearly 50% from the offering price when the stock debuted on March 21.

Enanta has great science behind it and is aligned with Big Pharma. It also is focused on an infectious disease that affects more than 170 million people around the world.

Small Firm Finds Vaccine for Big Problem

Fact is, hepatitis is the leading cause of liver cancer and transplants among U.S. patients. Hepatitis C is of particular concern to doctors and federal health officials.

That's because it ranks as the nation's most common form of chronic blood-borne disease. And the real trouble with Hepatitis C (HCV) is that many don't even know they've been infected, often going undiagnosed for years.

In fact, the federal Centers for Disease Control warns that up to 70% of those who contract the condition have no symptoms or very mild ones. So, they have no reason to go to the doctor and get a blood test.

Health experts believe that about 3.2 million Americans carry HCV in their systems. They estimate the total price tag to the nation at up to $9 billion a year when the costs of hospital care, medicines and transplants are all added up.

Enanta is addressing a big market and is generating a lot of respect for its approach to fighting HCV, for which there is no vaccine. The company is pursuing what it says are four medically validated HCV targets.

It's using agents that tackle viral proteins head on and are known as direct-acting antivirals, or DAAs. Here Enanta is focused on disrupting three proteins critical for the development of HCV.

In the fourth approach, Enanta has an inhibitor that can thwart a key protein in the patient from helping the virus to replicate. The company says its system has "acceptable" side effects and low patient resistance to the compounds.

Promising Partnerships

Now you know how Enanta created the molecular technology behind a promising HCV treatment for the big drug firm AbbVie Inc. (NYSE: ABBV), which boasts a $70 billion market cap.

Known as ABT-450/r, the treatment seems headed for FDA approval because it has performed well in clinical trials to date. The drug is currently in several phase 2 and phase 3 trials.

Analysts note the market for HCV will be competitive, but ABT-450 could reach total global sales of about $3 billion, with Enanta getting $175 million in royalty payments.

At the same time, Enanta also is working on an earlier-stage HCV drug with Novartis AG (NYSE: NVS). With a market cap of $175 billion, Novartis is one of the world's largest pharmaceutical firms.

Enanta's work with these two giants is more than just good branding. It shows the firm has a novel approach that has a shot at getting its drugs to market.

Its access to deep pockets also gives investors confidence the firm won't dilute existing shareholders by taking on too much debt or by going to market with a secondary offering.

No doubt, those factors have kept the stock in an upward trend.

And when you add it all up, you see that Enanta has all the ingredients of biotech success: strong marketing partners, great science and unstoppable long-term health trends.

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About the Author

Michael A. Robinson is one of the top financial analysts working today. His book "Overdrawn: The Bailout of American Savings" was a prescient look at the anatomy of the nation's S&L crisis, long before the word "bailout" became part of our daily lexicon. He's a Pulitzer Prize-nominated writer and reporter, lauded by the Columbia Journalism Review for his aggressive style. His 30-year track record as a leading tech analyst has garnered him rave reviews, too. Today he is the editor of the monthly tech investing newsletter Nova-X Report as well as Radical Technology Profits, where he covers truly radical technologies – ones that have the power to sweep across the globe and change the very fabric of our lives – and profit opportunities they give rise to. He also explores "what's next" in the tech investing world at Strategic Tech Investor.

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  1. Jan | May 27, 2013

    As an aging baby boomer who is inspired when I read articles about pharmaceutical and biotech stocks targeting investors I have jumped on the " investing " bandwagon with these same stocks . ;-) . Hoping that my longevity and independence will carry me well into my golden years ( before having to face living in nursing home ) as a retired long term investor I am cashing in on these stocks as well as generations of investors younger than me . Bristol Myers ( BMY ) , Abbott Laboratories ( ABT ) , Abb-Vie ( recently a spin-off / split from ( ABT ) . to name a few . I figure why not benefit and make money from the same stocks of companies that may serve me health wise in my latter years ;-) .

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