This $6 Biotech Stock Is Opening the Door to True "Personalized Medicine"

I told you I'd be back "with a huge profit opportunity."

And I've found a $6 biotech stock that's riding a very powerful trend.

The company is a development-stage biotech firm that develops and markets diagnostic technologies that are used to screen for infectious diseases and monitor a number of cancers.

Its proprietary technology is likely to shake up the $50 billion in vitro diagnostics (IVD) market - and it's doing so in the portions of that market that are growing the fastest. In other words, it's following Rule No. 4 of my five-part strategy for building tech wealth - "Focus on Growth."

This technology puts us one step closer to true "personalized medicine" - the customization of treatment regimens and pharmaceuticals for each individual patient.

And when I saw a new report showing that a "knowledgeable outsider" has grabbed 15% of the company's outstanding shares, I knew I couldn't wait any longer to bring this story to you.

So let's take a closer look...

It's Personal

Stealth Profits Trader – update from D.R. Check your email or Reply STOP to opt out of textsThe company I want to recommend to you today, TrovaGene Inc. (Nasdaq: TROV), is a "molecular diagnostics" specialist.

The term refers to the marriage of molecular biology and medical testing. With molecular diagnostics, doctors and researchers can analyze biological markers in a person's genetic code and then diagnose and monitor infectious diseases, detect potential medical risks, and determine which treatments will best serve that patient.

And like I said, it's a technology that opens the door to personalized medicine, which began to take off after the cracking of the human genome.

TrovaGene's know-how is organized around both blood and urine tests. They can be used in infectious-disease screening, monitoring and research, oncology treatment, prenatal genetics, and transplant medicine.

TrovaGene's "precision-cancer monitoring" (PCM) technology can be used to detect and measure circulating tumor DNA (ctDNA) from cancer cells. CtDNA can serve as a potential "marker" of the cancer that remains after surgery and could be a way to predict which patients will experience a recurrence.

The San Diego-based company's tests provide data for genetic mutations related to pancreatic, colorectal, lung, and ovarian cancers, among others. And TrovaGene execs say they're protected by patents both issued and pending.

TrovaGene is still a development-stage firm, and so it's working to collaborate with larger biopharmaceutical companies. The resulting clinical studies will ignite revenue and earnings growth over the long haul.

If the company can execute, there's plenty of business to be had ...

When I referred previously to "in vitro diagnostics," I was talking about medical tests that take place outside the body - say, in a test tube.

According to ResearchandMarkets, the IVD market was worth $53.3 billion in 2013. And it's projected to hit $74.65 billion by 2020. Now, that's a compound annual growth rate (CAGR) of just 5.34%.

But portions of the IVD market - geographic slices like Asia and technological slices like molecular diagnostics - will grow much, much faster.

And TrovaGene is focusing its efforts on those high-growth subsets of the IVD market. So, this isn't a "pure" growth play, but one built on the fastest growing parts of a slow-and-steady market.

In other words, with TrovaGene, we get growth - but not volatility.

The Outsider Buying Up Shares of This Biotech Stock

With a stock that's down from its highs, there's no single better "Buy" indicator than insider buying.

And in cases where there is no insider buying, purchases by "knowledgeable outsiders" - such as successful activist investors or specialist hedge-fund managers - can sometimes serve as an acceptable "proxy" for corporate insiders.

That's why Bridger Management's pickup of 15% of TrovaGene's outstanding shares triggered my recommendation to you folks today. TrovaGene's big-hit potential no doubt attracted Bridger, a $2 billion hedge fund run by Roberto Mignone.

Mignone is definitely a "knowledgeable outsider" here, as he focuses a lot of his attention on healthcare-related stocks. In fact, half of Bridger is allocated to stocks in that sector.

According to the most recent U.S. Securities and Exchange Commission (SEC) filings, Bridger acquired about 263,300 shares of TrovaGene in late February. It purchased the shares in three transactions, at an average price of $5.36 per share.

With those transactions, Bridger now owns 2.85 million shares of the company - which is more than 15% of TrovaGene's shares outstanding.

Bridger has been invested in TrovaGene since late June 2013.

A Special Situation

As for TrovaGene, there are some interesting considerations - beyond the buying by Bridger.

For one thing, the in vitro diagnostics market is very closely held - with the Top 10 players controlling about 80% of the market.

As we said earlier, it's a big market - at more than $50 billion - albeit one with a modest overall (average) growth rate. And big companies that want to speed up their growth rates can do so by purchasing players who are catering to the faster-growing portions of the market, like TrovaGene is doing with molecular diagnostics.

In other words, a buyout is always a possibility - now or down the road.

In the near term, as a development-stage company - and a small one at that (with its $139.1 million "micro" capitalization) - TrovaGene won't be delivering big sales and profits. Indeed, the company just yesterday reported a fourth-quarter loss of 25 cents a share - which was wider than the Zacks consensus estimate of 22 cents.

I would like to have seen its losses meet forecasts, but it's not a huge miss.

The company spent more money in the fourth quarter to fuel its future growth, including higher R&D expenses. And that's a good move.

TrovaGene is showing significant results for its science across the board. The company is now part of 15 clinical collaborations, which is an extremely robust pipeline for a microcap biotech. These joint efforts are evaluating the efficiency of the company's PCM system.

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It's not unusual for a clinical stage biotech firm like this one to have a weak quarter or two as it invests in the next round of growth before sales ramp up.

We're picking up these shares a day after somewhat disappointing earnings results - meaning we're getting them at a discount. Even so, in the short term, we have to view this as a special situation: a high-risk/high-return investment.

So, while this is not a "trading service" - meaning I won't provide "Buy" and "Sell" orders on this or other stocks - I do want to give you some guidance on TrovaGene.

First off, I don't think you should pay more than $6.50 for your shares. Consider purchasing one-third of your intended position now. And then look to use "limit orders" to pick up the final two-thirds - the second third at 15% below your purchase price and the final third at 15% below that.

As of Friday, March 13, TrovaGene is trading at $6.02. If you picked it up now, your second tranche would be at $5.15, and your third tranche would come at $4.38.

Also, cap your total purchase to no more than 1% of your holdings.

Finally, don't chase the stock. If TrovaGene zooms, leave those other tranches unfilled. You don't want to overpay. And barring a major change in the company's prospects, plan on holding the stock for at least two or three years.

I think we can make gains of at least 40% to 70% in that time frame.

And if TrovaGene makes the jump from a "development" firm to a profitable operational venture, the gains could be much bigger.

We're Not Afraid to Make Bold Predictions. Not long ago, we predicted Apple Inc. (Nasdaq: AAPL) will reach a split-adjusted price of $1,000 a share by Labor Day 2016. Turns out, the stock is already ahead of our projections. But there's another leading tech company we've got our eyes on. This is our next big call. Here's the company that will double your money by 2018...

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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