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Searching for the Next Amgen

Why Biotechs are Back

Written by Brian Hicks
Posted November 30, 2007

Dear Wealth Daily reader:

October 15, 2007 might have been just another Monday to you, but for me, it marked the start of one of the greatest bull markets the 21st Century will experience.

You see, on that day, a woman named Kathleen Casey-Kirschling filed to receive her social security retirement benefits.

What's so important about that?

Kathleen was born on January 1, 1946.

She's officially the first baby-boomer to file for social security benefits.

Behind Kathleen is a line of 80 million more like her ready to collect their share of the government promised pie.

But this is more than just a conga-line of soon-to-be senior citizens looking to get paid. No, this event will have a paradigm-shifting effect on the nation... as well as your stock portfolio.

As the baby boomer generation rushes into old age like a colony of army ants, healthcare spending is expected to skyrocket. And all this spending represents a boom for drug and medical device developers and manufacturers.

Now, many of you know me as the guy on CNBC and Bloomberg who's constantly talking about Peak Oil, energy prices and how to make money off of it.

It remains true that energy is one of the greatest investment opportunities available to you. But in my former life as the editor of a letter called the Cutting Edge, I was labeled as "the original biotech bug." That's because I consider healthcare - specifically medical technology and biotechnology - to be the greatest investment opportunity of the century.

Take Intuitive Surgical (ISRG - NASDAQ), for example. This company makes the robotic da Vinci surgical systems for use in urologic, cardiothoracic, gynecologic, and general surgeries.

Sales at ISRG have gone from $26 million in 2000 to over $524 million today.

And its stock? Well, take a look for yourself...

chart

The stock is up 5,400% since the start of 2003!

And with baby boomers getting surgeries in record numbers, medical device companies like Intuitive Surgical are going to continue to do quite well.

But it won't just be companies that make surgical lasers and robots that'll profit from this trend. Drug companies stand to make some money as baby boomers get older and need more healthcare.

And that's why I'm so bullish on biotechs.

Take a look at some of the returns posted by biotech stocks:

Amgen...............+59,000%
Gilead Sciences....+3,500%
Biogen IDEC........+2,329%
Celgene..............+9,030%
IDEXX Labs.........+3,300%

I'm telling you... drugs are recession proof. They have no exposure to subprime and housing concerns. No matter what happens in the economy, people still buy medication. Period.

And that's why I'm writing to you today.

Like I said before, I think energy is one of the best investments around. So much so, I have an investment advisory dedicated soley to the sector, The $20 Trillion Report.

But I also have another investment advisory dedicated to the super-growth sectors of biotechnology and medical technology. That's called Quantum Confidential.

And we recently dipped our toe into a biotech stock we consider a blockbuster.

Buy Biotechs

For the past several months, I've scoured the entire biotech industry looking for the next Amgen or the next Genentech.

Here's what I've discovered: Anavex (AVXL - OTCBB).

The company has been trading on the bulletin boards since January 25, and if it is able to execute its business plan, even a small investment in this stock is going to be an absolute home run.

But it won't only be the investors that benefit from this one, because their business is in discovering and developing novel treatments for cancer and neurological diseases.

In fact, seven of their drug discoveries are currently working their way through the approval process right now after very promising early trials.

Anavex is a small company and a speculative play.

But it's our feeling that Anavex—over time—will end up on the right side of the ledger in a big way.

That's because Anavex's pipeline utilizes a fairly new and proprietary class of drugs that is very different from anything else on the market today.

Now, of course, it's all very technical and in the issues that follow we'll go into it in much more detail.

The short story, however, is this: The company's proprietary Sigmaceptor Technology Platform represents an area that has yet to be exploited by the big pharmaceutical companies.

That's true even though numerous scientific publications have exposed the enormous and versatile therapeutic benefits that this family of receptors represents. Those studies suggest that the novelty, efficacy and optimal safety profile of this new class of drugs has the potential to make a major market impact in the years to come.

So how big exactly is this market?

Well, given what this series of drugs will treat it's huge. It includes:

    • Alzheimer's Disease
    • Epilepsy
    • Depression
    • Colorectal Cancer
    • Prostate Cancer
    • Breast Cancer
    • Lung Cancer

In short, all of big ones. In fact, if the company is successful with all of its current trials it projects that it will eventually earn some $5.6 billion a year.

That means, using the conservative measure of 3.5x sales for pharmaceutical companies, Anavex would be rewarded with a $19.6 billion market cap.

In other words, we could be looking at a 10-bagger easily. Anavex is trading just shy of $4 a share. And I already got my Quantum Confidential members into the stock.

I have a lot more analysis on Anavex and biotechnology in my weekly service Quantum Confidential. If you're interested in these types of opportunities, I urge you to give QC a try.

Good investing,

sig

Brian Hicks

Buffett's Envy: 50% Annual Returns, Guaranteed