Editor's Note: Today, we'd like to welcome Ernie Tremblay to Money Morning. He's been providing his bioscience research to our premium services for over a year now and we couldn't be more thrilled with the results, including a 457% gain on one of his recommendations. So here's how Ernie does it...
Traditional pharmaceutical blockbusters like Pfizer's Lipitor treat millions of patients at relatively low cost. It's a high-volume business model that has kept the pharmaceutical industry afloat for a long, long time. But over the past decade, out of necessity, a new model has taken the industry by storm.
As big moneymakers, like Lipitor, reach the "patent cliff," their intellectual rights protection are evaporating, and generic drug makers are taking over their markets.
Big Pharma needs fresh drugs to take the place of those they're losing. But replacing these products with new ones is expensive. Most experts agree that it takes about $800M in capitalized costs to develop a single new drug. And frankly, the "easier" medical riddles, like treating high LDL cholesterol, have mostly been solved. The remaining tough ones, like cancer and Alzheimer's, will drive costs even higher.
So how do the major pharmaceutical companies meet the challenge? By letting small, smart start-up biotechs do the R&D legwork on new drugs, then either making distribution deals with them or buying the small companies out.
biotech stock market
Article Index
The New Way to Make Big Money in Biotech
Here's what makes this new approach so lucrative for investors...
Double Your Money in No Time Flat
If you're looking to double your money, the biotech sector is one of the best hunting grounds that you'll find.
So far this year, the iShares NASDAQ Biotechnology Index (NASDAQ: IBB) has jumped 28.2%, more than double the 13.59% gain in the S&P 500. That's on top of the 31% IBB gained last year.
What's more, a lot of individual biotech stocks have actually doubled, tripled or more.
In fact, this sector is so hot I think I've found my next double...
Why This Stock (and Sector) Will Trounce All Others
If you want to make big money in the market today you have to look to the biotech sector.
Of the top 25 advancing Nasdaq stocks on Monday, 12 were biotech plays and another was a small-cap health-care concern.
Their one-day gains ranged from 8% to 47%. Not bad for a day's trade.
Here's one soaring young biotech that's a perfect example of this boom...
This Tiny Biotech Wants to Terminate Drug-Resistant "Super Bugs"
My Dad, Clarence "Rob" Robinson, has always been a very tough guy.
He played football in high school, and then again as a U.S. Marine. During a game at Camp Pendleton, an injury put his right knee in a cast. Later, while fighting in Vietnam, his left knee was wounded.
But he refused to let the injuries slow him down.
Now, however, as he approaches his 80th birthday, my Dad has to take action. Next month, he goes in for a knee replacement.
It's become a pretty common procedure, so I'm not worried about the surgery itself.
But I am a bit concerned about "Super Bugs."
You know what I'm talking about. Drug-resistant Super Bugs are afflicting hospitals, clinics and patients all across the country.
In fact, I'll wager that you know of a family member, friend or co-worker who's dealt with this scary - even terrifying - malady.
He played football in high school, and then again as a U.S. Marine. During a game at Camp Pendleton, an injury put his right knee in a cast. Later, while fighting in Vietnam, his left knee was wounded.
But he refused to let the injuries slow him down.
Now, however, as he approaches his 80th birthday, my Dad has to take action. Next month, he goes in for a knee replacement.
It's become a pretty common procedure, so I'm not worried about the surgery itself.
But I am a bit concerned about "Super Bugs."
You know what I'm talking about. Drug-resistant Super Bugs are afflicting hospitals, clinics and patients all across the country.
In fact, I'll wager that you know of a family member, friend or co-worker who's dealt with this scary - even terrifying - malady.
To continue reading, please click here…
Medical Miracle: Biotech Duo Is "Printing" New Organs
Thanks to a partnership between a global software firm and an early-stage biotech player, the day will soon come when anyone who needs a transplant will just "print" the needed tissue. Here's the idea...
5 Ways to Spot the Next Hot Biotech Stock
It's not enough to understand long- term trends, today's investors need to have the ability to move quickly, especially when it comes to biotech stocks.
But here is what you need to know about biotech stocks: none of them are created equal.
For all their potential, bio tech stocks remain among the most challenging for investors like you to identify, select and earn money on.
However, with a little bit of the right guidance you can narrow your list to the stocks with the highest likely upside.
In fact, I've developed a five- point checklist of what I look at when screening biotech stocks that I'd like to share with you.
It may not be a road map. The biotech sector just isn't that easy and "x" almost never marks the spot.
But it is a great place to start if you are serious about separating the pretenders from the contenders.
Five Steps for Successful Biotech Stock Investors
As you begin to break down a potential stock consider the following as it relates to your decision.
There's quite literally no way you can know everything, so stick to the parts of the sector you believe have the biggest potential.
For instance, I think some of the biggest innovations and profits will come from bio tech companies that link living systems with their digital counterparts.
So I tend to concentrate my biotech investments in companies that are exploring synthetic biology and computational bioinformatics.
To me it's a no brainer.
While there is no question that traditional bio tech will be big, over the next few years we will see the line blur very rapidly between what we need to live and how we actually live - aided by technology.
Admittedly, I have a rather selfish reason...
But here is what you need to know about biotech stocks: none of them are created equal.
For all their potential, bio tech stocks remain among the most challenging for investors like you to identify, select and earn money on.
However, with a little bit of the right guidance you can narrow your list to the stocks with the highest likely upside.
In fact, I've developed a five- point checklist of what I look at when screening biotech stocks that I'd like to share with you.
It may not be a road map. The biotech sector just isn't that easy and "x" almost never marks the spot.
But it is a great place to start if you are serious about separating the pretenders from the contenders.
Five Steps for Successful Biotech Stock Investors
As you begin to break down a potential stock consider the following as it relates to your decision.
1) Choose your niche.
Biotech is a big term and an even bigger sector. There are literally thousands of companies trying to make their move in everything from vaccines to nano-technology.There's quite literally no way you can know everything, so stick to the parts of the sector you believe have the biggest potential.
For instance, I think some of the biggest innovations and profits will come from bio tech companies that link living systems with their digital counterparts.
So I tend to concentrate my biotech investments in companies that are exploring synthetic biology and computational bioinformatics.
To me it's a no brainer.
While there is no question that traditional bio tech will be big, over the next few years we will see the line blur very rapidly between what we need to live and how we actually live - aided by technology.
Admittedly, I have a rather selfish reason...
To continue reading, please click here...
Six Biotech Stocks Riding the Baby Boomer Wave
The size and scope of the Baby Boom generation has opened up an abundance of health care opportunities --especially ground-breaking and game-changing biotech stocks.
As this "gray wave" matures the need for better treatments for the myriad health problems that often accompany old age only grows stronger.
And while no one has discovered a cure for Alzheimer's, cancer, Parkinson's or other ailments that come along with old age, several biotech companies are racing to cure a long list of diseases and disorders.
The prospects are certainly daunting, but the possibilities in the biotech field are literally endless-for patients and investors alike.
With that in mind, here are six biotech companies that are working on radical and revolutionary drugs.
Unlike scores of other biotech companies, Alexion boasts a strong growth trend and has plenty of cash to fund its research and development.
Most recently, the cutting-edge company received FDA and European Commission approval on its marquee drug called Soliris. Developed for the treatment of a blood disorder called atypical hemolytic uremic syndrome (aHUS), Soliris sales have been growing at a 45% compounded annual growth rate.
Biogen Idec Inc. (Nasdaq: BIIB) works in the worldwide discovery, development, manufacturing and marketing of therapies for the treatment of neurodegenerative diseases, hemophilia and autoimmune disorders. Its key product is AVONEX for the treatment of relapsing multiple sclerosis (MS).
The company continues to advance and improve therapies for MS which afflicts roughly 400,000 in the U.S. and 2.5 million worldwide. Every week, 200 people are diagnosed with the neurological disease in America. Its MS drug Tysabri, marketed in conjunction with Irish pharmaceutical company Elan (NYSE: ELN) had sales of $1.5 billion in 2011.
As this "gray wave" matures the need for better treatments for the myriad health problems that often accompany old age only grows stronger.
And while no one has discovered a cure for Alzheimer's, cancer, Parkinson's or other ailments that come along with old age, several biotech companies are racing to cure a long list of diseases and disorders.
The prospects are certainly daunting, but the possibilities in the biotech field are literally endless-for patients and investors alike.
With that in mind, here are six biotech companies that are working on radical and revolutionary drugs.
From A TO Z: Investing in Biotech Stocks
Alexion Pharmaceuticals (Nasdaq: ALXN) is a biotech company that engages in the innovation, development and commercialization of therapeutic products for treating patients with ultra-rare and severe disorders around the globe. The Connecticut-based business focuses on developing products for the treatment of diseases in hematology, nephrology, neurology, metabolic disorders, oncology and ophthalmology.Unlike scores of other biotech companies, Alexion boasts a strong growth trend and has plenty of cash to fund its research and development.
Most recently, the cutting-edge company received FDA and European Commission approval on its marquee drug called Soliris. Developed for the treatment of a blood disorder called atypical hemolytic uremic syndrome (aHUS), Soliris sales have been growing at a 45% compounded annual growth rate.
Biogen Idec Inc. (Nasdaq: BIIB) works in the worldwide discovery, development, manufacturing and marketing of therapies for the treatment of neurodegenerative diseases, hemophilia and autoimmune disorders. Its key product is AVONEX for the treatment of relapsing multiple sclerosis (MS).
The company continues to advance and improve therapies for MS which afflicts roughly 400,000 in the U.S. and 2.5 million worldwide. Every week, 200 people are diagnosed with the neurological disease in America. Its MS drug Tysabri, marketed in conjunction with Irish pharmaceutical company Elan (NYSE: ELN) had sales of $1.5 billion in 2011.
To continue, reading please click here...
Investing in Biotech Stocks: Why the "ASCO Effect" Rally Could Start Tomorrow
Get ready to profit from the "ASCO Effect."
Each June, the American Society of Clinical Oncology (ASCO) hosts its annual meeting - an event that's attended by 30,000 people and the scene of 4,000 presentations.
And each May, just ahead of this crucial gathering, a select group of oncology stocks takes investors on a pretty wild ride - almost like clockwork.
That's the "ASCO Effect."
The catalyst for this big run-up - in which some stocks double, triple or quadruple in price (or more) - is well-known. A few weeks ahead of the meeting, ASCO posts drug-research abstracts of some of the presenting companies on its Website; investors look at the clinical-trial results contained in the abstracts, and key on the most-promising players - igniting share rallies so torrid that they're remembered for years.
This year's ASCO annual meeting is scheduled for June 1-5 in Chicago.
But, according to the latest reports we've seen, the abstracts are due out at 6 p.m. (EDT) today (Wednesday).
If that deadline is met, you can bet that investors will be scouring those abstracts all night.
If you want an example of the ASCO Effect in action, just look at what happened with OXiGENE Inc. (Nasdaq: OXGN) shares just 12 months ago. As May opened last year, OXiGENE was a relatively unremarkable biotech stock. Indeed, the company was juggling a lot of problems.
OXiGENE faced questions about its management turnover and its cash position. Shareholders were worried about its cancer-drug pipeline. And the stock was trading at less than $2 a share.
In fact, OXiGENE shares had been one of the biotech sector's worst performers in 2010, and the company had to endure the ignominy of a reverse stock split in February 2011.
Then came the ASCO Effect.
Each June, the American Society of Clinical Oncology (ASCO) hosts its annual meeting - an event that's attended by 30,000 people and the scene of 4,000 presentations.
And each May, just ahead of this crucial gathering, a select group of oncology stocks takes investors on a pretty wild ride - almost like clockwork.
That's the "ASCO Effect."
The catalyst for this big run-up - in which some stocks double, triple or quadruple in price (or more) - is well-known. A few weeks ahead of the meeting, ASCO posts drug-research abstracts of some of the presenting companies on its Website; investors look at the clinical-trial results contained in the abstracts, and key on the most-promising players - igniting share rallies so torrid that they're remembered for years.
This year's ASCO annual meeting is scheduled for June 1-5 in Chicago.
But, according to the latest reports we've seen, the abstracts are due out at 6 p.m. (EDT) today (Wednesday).
If that deadline is met, you can bet that investors will be scouring those abstracts all night.
If you want an example of the ASCO Effect in action, just look at what happened with OXiGENE Inc. (Nasdaq: OXGN) shares just 12 months ago. As May opened last year, OXiGENE was a relatively unremarkable biotech stock. Indeed, the company was juggling a lot of problems.
OXiGENE faced questions about its management turnover and its cash position. Shareholders were worried about its cancer-drug pipeline. And the stock was trading at less than $2 a share.
In fact, OXiGENE shares had been one of the biotech sector's worst performers in 2010, and the company had to endure the ignominy of a reverse stock split in February 2011.
Then came the ASCO Effect.
To continue reading, please click here...
Biotech Stock ETFs: How to Ride the Surge in Biotech Mergers & Acquisitions
Innovations in biotechnology are evolving at the speed of light.
In fact, astonishing advancements in biotech have transformed the way we practice medicine. Leading-edge biotech products and breakthroughs are literally saving thousands of lives every day.
Needless to say, biotech stocks can be strong medicine for investors, too.
For instance, the Nasdaq Biotechnology Index rose 457% from the end of August 1998 to the end of February 2000. Going back even further to the early 1990s, biotech stocks have soared by 1,347%.
Think about it... for biotech investors every $10,000 invested turned into nearly $140,000.
The good news for investors is that after slumping during the recession, biotech stocks are making a comeback. In the first quarter of 2012 alone, the Nasdaq Biotech Index gained 18.2%
And conditions are setting up for even better gains in the future.
Here's why...
In fact, astonishing advancements in biotech have transformed the way we practice medicine. Leading-edge biotech products and breakthroughs are literally saving thousands of lives every day.
Needless to say, biotech stocks can be strong medicine for investors, too.
For instance, the Nasdaq Biotechnology Index rose 457% from the end of August 1998 to the end of February 2000. Going back even further to the early 1990s, biotech stocks have soared by 1,347%.
Think about it... for biotech investors every $10,000 invested turned into nearly $140,000.
The good news for investors is that after slumping during the recession, biotech stocks are making a comeback. In the first quarter of 2012 alone, the Nasdaq Biotech Index gained 18.2%
And conditions are setting up for even better gains in the future.
Here's why...
Click here to continue reading...
Investing in Biotech Stocks: The Latest Buyout Candidate
The biotechnology buyout binge continued this week, driving profits for those investing in biotech stocks.
The sector's latest M&A news picks up a story that began in April, when Human Genome Sciences (Nasdaq: HGSI), the U.S. pioneer of gene-based drug discovery, rebuffed a $2.6 billion bid from Britain's GlaxoSmithKline (NYSE ADR: GSK).
Human Genome argued the unsolicited bid did not reflect the company's inherent value. GSK adamantly insisted its bid, an 81% premium when settled upon on April 18, is full and fair.
The sector's latest M&A news picks up a story that began in April, when Human Genome Sciences (Nasdaq: HGSI), the U.S. pioneer of gene-based drug discovery, rebuffed a $2.6 billion bid from Britain's GlaxoSmithKline (NYSE ADR: GSK).
Human Genome argued the unsolicited bid did not reflect the company's inherent value. GSK adamantly insisted its bid, an 81% premium when settled upon on April 18, is full and fair.
UK-based GSK is not taking the rejection sitting down...
Investing in Biotech Stocks: The Buyout Binge Continues
The biotechnology buyout deals just keep coming, meaning those investing in biotech stocks have scored some juicy profits - with more on the way.
Watson Pharmaceuticals (NYSE: WPI) announced Wednesday it would buy competitor Actavis for $5.6 billion- the latest deal in an already-white-hot market for biotech buyouts.
In fact, get this: Although healthcare deals in the first four months of 2012 are down 32% on a year-over-year basis compared with the same period in 2011, biotech mergers-and-acquisition deals are up 38% so far this year.
And biotech merger mania is far from over.
AstraZeneca PLC (NYSE ADR: AZN) early Monday offered to pay $1.1 billion for Ardea Biosciences Inc. (Nasdaq: RDEA).
And Amylin Pharmaceuticals Inc. (Nasdaq: AMLN) - a San Diego-based diabetes drugmaker whose shares recently surged after allegedly spurning a $3.5 billion offer from Bristol-Myers Squibb Co. (NYSE: BMY) - appears to be seeking a buyer.
On Sunday, Reuters reported that Amylin has hired Credit Suisse AG (NYSE ADR: CS) and Goldman Sachs Group Inc. (NYSE: GS) as its financial advisers, and Skadden Arps as its legal adviser.
These deals have been going on all year.
Watson Pharmaceuticals (NYSE: WPI) announced Wednesday it would buy competitor Actavis for $5.6 billion- the latest deal in an already-white-hot market for biotech buyouts.
In fact, get this: Although healthcare deals in the first four months of 2012 are down 32% on a year-over-year basis compared with the same period in 2011, biotech mergers-and-acquisition deals are up 38% so far this year.
And biotech merger mania is far from over.
AstraZeneca PLC (NYSE ADR: AZN) early Monday offered to pay $1.1 billion for Ardea Biosciences Inc. (Nasdaq: RDEA).
And Amylin Pharmaceuticals Inc. (Nasdaq: AMLN) - a San Diego-based diabetes drugmaker whose shares recently surged after allegedly spurning a $3.5 billion offer from Bristol-Myers Squibb Co. (NYSE: BMY) - appears to be seeking a buyer.
On Sunday, Reuters reported that Amylin has hired Credit Suisse AG (NYSE ADR: CS) and Goldman Sachs Group Inc. (NYSE: GS) as its financial advisers, and Skadden Arps as its legal adviser.
These deals have been going on all year.
To continue reading, please click here...
Biotech Stocks: How to Invest in the Buyout Binge
Big drugmakers are scrambling.
Right now, some of their most-lucrative blockbuster drugs are coming "off patent" - meaning they face the loss of $170 billion in annual sales.
But I'm going to let you in on a secret that Wall Street investment pros hope the little guy never learns: The very same problem that has Big Pharma execs wringing their hands even as you read this is also creating one of the biggest profit opportunities we've seen in years.
To show you what I mean, allow me to tell you two quick stories.
Let me tell you: That reporting job brought me to a very quick understanding of just how challenging this business really is.
Wall Street and Big Pharma executives beat the drum about their successes - the new "miracle drugs" that treat or cure obesity, arthritis, depression and cancer. We hear about those achievements all the time.
What I found in my reporting, however, was that the failures dwarf the success stories.
The failure numbers are actually downright mind-numbing.
For every 1,000 "compounds" (drug candidates) that enter laboratory testing, only one will ever make it to human testing.
Indeed, once a company develops a drug, it's usually looking at about three-and-a-half years of testing in the lab before it can even apply to the U.S. Food and Drug Administration (FDA) for approval to begin testing in humans.
Of all the drug candidates that enter Phase I trials - the first of three phases that mark the path to FDA approval - only one in five ever makes it to market.
The bottom line, as I discovered, is this: It can take 10 to 12 years and $1 billion or more to develop a new drug.
For Big Pharma CEOs who are staring at eroding patent coverage and searching for replacement blockbusters, that's too much time and way too much risk.
They're not abandoning internal drug development. But they're also pursuing an alternative strategy: Sniff out the small players already developing the new potential blockbusters and either buy the drug, or buy the company outright.
That urgent multi-billion-dollar shopping spree is going on right now... boosted to the max by a need to keep boards and shareholders happy.
As Merck & Co. (NYSE: MRK) CEO Kenneth Frazier recently told an investor group: "My goal is to augment the pipeline. The way to augment is to find those assets that we can acquire."
That's easier said than done.
For one thing, Big Pharma/Big Biotech companies are fat with cash. That means there's a lot of competition in the search for new drugs or entire companies to buy. For another, there's a "scarcity of growth assets," as Goldman Sachs Group Inc. (NYSE: GS) said in a new report.
Although that supply/demand scenario is a tough one for Big Pharma, it's a terrific one for investors like us: It puts pressure on the suitors to buy whatever's available. And it means the prices will be high when they do.
And, as my second story demonstrates, those deals do happen.
In fact, our subscribers recently reaped a big payday from just that kind of deal.
Right now, some of their most-lucrative blockbuster drugs are coming "off patent" - meaning they face the loss of $170 billion in annual sales.
But I'm going to let you in on a secret that Wall Street investment pros hope the little guy never learns: The very same problem that has Big Pharma execs wringing their hands even as you read this is also creating one of the biggest profit opportunities we've seen in years.
To show you what I mean, allow me to tell you two quick stories.
The Secret Path to Biotech Profits
Late in my business journalism career, I spent three years covering the biotech sector.Let me tell you: That reporting job brought me to a very quick understanding of just how challenging this business really is.
Wall Street and Big Pharma executives beat the drum about their successes - the new "miracle drugs" that treat or cure obesity, arthritis, depression and cancer. We hear about those achievements all the time.
What I found in my reporting, however, was that the failures dwarf the success stories.
The failure numbers are actually downright mind-numbing.
For every 1,000 "compounds" (drug candidates) that enter laboratory testing, only one will ever make it to human testing.
Indeed, once a company develops a drug, it's usually looking at about three-and-a-half years of testing in the lab before it can even apply to the U.S. Food and Drug Administration (FDA) for approval to begin testing in humans.
Of all the drug candidates that enter Phase I trials - the first of three phases that mark the path to FDA approval - only one in five ever makes it to market.
The bottom line, as I discovered, is this: It can take 10 to 12 years and $1 billion or more to develop a new drug.
For Big Pharma CEOs who are staring at eroding patent coverage and searching for replacement blockbusters, that's too much time and way too much risk.
They're not abandoning internal drug development. But they're also pursuing an alternative strategy: Sniff out the small players already developing the new potential blockbusters and either buy the drug, or buy the company outright.
That urgent multi-billion-dollar shopping spree is going on right now... boosted to the max by a need to keep boards and shareholders happy.
As Merck & Co. (NYSE: MRK) CEO Kenneth Frazier recently told an investor group: "My goal is to augment the pipeline. The way to augment is to find those assets that we can acquire."
That's easier said than done.
For one thing, Big Pharma/Big Biotech companies are fat with cash. That means there's a lot of competition in the search for new drugs or entire companies to buy. For another, there's a "scarcity of growth assets," as Goldman Sachs Group Inc. (NYSE: GS) said in a new report.
Although that supply/demand scenario is a tough one for Big Pharma, it's a terrific one for investors like us: It puts pressure on the suitors to buy whatever's available. And it means the prices will be high when they do.
And, as my second story demonstrates, those deals do happen.
In fact, our subscribers recently reaped a big payday from just that kind of deal.
To continue reading, please click here...
Biotech Investing: Phase II is the Sweet Spot
I recently received a call from an investor relations representative who wanted to know if I'd be interested in hearing about a small biotech company with a drug candidate in Phase II trials.
Obviously, I accepted.
Phase II trials are my favorite time to get involved in a biotech company. I'll explain why in a moment. But first, a quick review of the phases of clinical trials...
Obviously, I accepted.
Phase II trials are my favorite time to get involved in a biotech company. I'll explain why in a moment. But first, a quick review of the phases of clinical trials...