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The Best Biotech Stock for 2010

Grandpa's AMBER Alert Could Make You $1 Million

Written by Brian Hicks
Posted October 21, 2009

In my business of stock picking, one of the more successful and traditional strategies is to spot a crisis. . . then invest in the solution of that crisis.

I think I've spotted a crisis in recent news: senior citizens getting lost.

I'm serious. . .

Do a Google search for "Alzheimer's patient found" and see how many news stories are yielded in your search results.

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Just last Saturday, an 80-year-old man was found in the woods of Kansas after wandering off from his home on Friday.

So many elderly folks are getting lost that U.S. Senator Charles Schumer introduced legislation this week that would create a "Silver Alert System" to help locate missing adults afflicted with Alzheimer's and or other forms of impairment.

According to the report:

The National Silver Alert Act is modeled after the AMBER Alert system, which helps find missing children. The bill would "create a nationwide network for locating missing adults and senior citizens with Alzheimer's, dementia, and other mental impairments."

"When a person with Alzheimer's wanders from his or her home it can be a truly frightening time for that individual and their family and friends," Schumer said. "Statistics show that, with timely notification, the chances of finding a missing person are greatly increased."

More than 60 percent of those suffering from Alzheimer's either wander or get lost while suffering from it, according to the Alzheimer's Association. In addition, 50 percent of those are at risk for a serious illness or even death if they are not located within 24 hours.

"This bill will provide funding for states to set up Silver Alert systems to put more people on the lookout when an adult goes missing to make sure that more families are reunited with their loved ones in New York City and across the country," Schumer said.

The proposed legislation, which has already passed in the House of Representatives, would enable the Department of Justice to create a communications system for Silver Alerts. Along with providing support to Silver Alert programs already in existence, the bill would also "encourage states to develop additional Silver Alert plans."

The Silver Alert system comes on the heels of a recent report I wrote on the creation of a "National Alzheimer's Czar" at the federal level.

You might ask yourself why, all of a sudden, the Federal Government is so interested in Alzheimer's disease.

Look no further than the abundance of gray-haired individuals among the House and Senate.

A majority of Congress is comprised of senior citizens and baby boomers about to become senior citizens.

To say they have a vested interest in Alzheimer's research and treatment would be an understatement.

Within the next 12 to 24 months, Congress is going to throw billions upon billions of dollars at Alzheimer's disease.

On September 30, my favorite play on Alzheimer's — Anavex Life Sciences (AVXL) — selected FORENAP Pharma as the contract research organization (CRO) for Phase I clinical trials of ANAVEX 2-73, the company's lead Alzheimer's drug candidate.

FORENAP has been involved in pre-clinical and clinical research for 20 years and is renowned for its expertise in Central Nervous System (CNS) studies — including Alzheimer's disease.

This is a huge milestone for Anavex. . . and it couldn't come at a better time, as the government and media alike are focusing on this disease.

And who is paying for all this progress? Don't worry about it. . .

The company has been able to raise funding easily, which is telling in itself. I don't have to tell you how stingy market professionals are with their money. If they can't see a clear path to profits, they don't invest — period.

Yet Anavex has had no trouble whatsoever raising cash. Up to this point, the company has been able to finance its needs on an ongoing basis, just a little at a time.

But in the near future, I expect Anavex to announce a larger financing on the order of $5 or $10 million, in order to take it through the Phase I process and well into the next stage.

This news alone will show a big vote of confidence in the company. And it'll also prove it can carry itself beyond this critical juncture.

Even though it was the Alzheimer's drug that caught our eye, the company has several other compounds that are at least as promising. In fact, I wouldn't be surprised if one of these compounds leapfrogged the AD that I'm so excited about.

Fact is there are many good stories in the biotech space. But very few are good enough to actually attract the capital required to come to fruition.

In the biotech industry, the platform — or the depth of the business — matters most. Anavex is small company that has a big platform. . . and it is amazing for such a small, new company to have such depth.

What it means for us is that we could see the company surprise the market from any number of angles.

I continue to rate Anavex a strong buy at current levels. And I continue to hold on my long position.

Profitably yours,

Brian Hicks

P.S. My colleague, Steve Christ, has been writing about the brewing bull market in biotech for over a year now. Since then, his winning picks have meant big gains for Wealth Advisory subscribers.

In fact, he met with the CEO of a company yesterday that he says could completely change the way we think about vaccines — which sounds to me like he's found his next big winner. More on that from Steve in the next Wealth Daily. Meantime, to learn more about The Wealth Advisory, click here.

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