Institutional money has been pouring into the biotech sector, as biotech stocks enter the third quarter surprisingly strong.
Take the Rydex Biotech Fund, for example. In 2000, the fund had about $1.4 billion invested. Then, over the following eight years, biotech stocks floundered, stripping the Fund of about 95% of assets.
But over the last few weeks, assets have just about doubled in the Fund, as Wall Street comes back. They know the next biotech boom is upon us.
But the move comes as no surprise to us.
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, said Brian Hicks in November 2007.
Hicks, you may remember, has been calling for the return of biotechs since November 30, 2007, catching the biotech bull-run before it began.
How could you not see the boom coming?
Hicks knew that as the baby boomer generation rushes into old age, like a colony of army rats, healthcare spending is expected to skyrocket. And all this spending represents a boom for drug and medical device developers and manufacturers.
So the recent boom isn’t a big surprise.
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.
The stock is up about 4,500% 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.
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%
And There’s still time to Buy Biotech
After scouring the biotech industry looking for the next Amgen or the next Genentech… Hicks discovered 2008 favorite Anavex (AVXL.OB).
As we said on June 14:
More than 5.2 million Americans have Alzheimer’s disease. Another 7.7 million Americans will suffer with it by 2030, and another 16 million will suffer by 2050. And there’s a yearly price tag of $148 billion to treat these patients.
No one is quite sure what causes the disease that gradually robs sufferers of memory and the ability to care for one self. There’s no known cure, and current drugs are only temporary pain relievers.
So wouldn’t it be nice if the drug companies got it right?
Hopes are already mounting that an experimental drug from Elan and Wyeth can do the trick. If they can clear out deposits called amyloid plaque, or simply halt the production, they could help millions of patients, and potentially see annual sales of $13 billion.
But such theories of anti-amyloid could be based largely on “theory and hope,” says University of Southern California psychiatrist Lon Schneider (as quoted by Forbes). “None of the drugs have shown evidence of efficacy yet. Geneticist John Hardy, one of the first to finger amyloid as a suspect, puts the odds at 50-50 that one of the antiamyloid drugs will work.”
Plus, says the Forbes report, people that can function normally also have large amounts of amyloid-beta plaque, which casts doubt on whether the plaque is a cause, a consequence, or simply an indication of an aging brain.
While there’s some hope that Elan and Wyeth can help millions of sufferers, and in the end reap millions for shareholders, some drug developers are turning to the theory of oxidative stress, which damages and destroys cells and is believed to be a primary cause of Alzheimer’s disease.
According to PharmaLive.com, ‘Involvement of Oxidative Stress in Alzheimer’s Disease’ study leader Dr. Nunomura “pointed to extensive evidence of mechanistic and chronological links between oxidative stress and a number of key characteristics of the disease.”
The research also suggested that amyloid beta could be produced by the body as it tries to fight the disease, later turning into an accumulating toxic substance. In other words, there’s a belief that if amyloid was removed during early stages of the disease, it could do more harm.
Alzheimer’s Drug Stock: Anavex Life Sciences (AVXL.OB)
The company’s drug candidate, ANAVEX 1-41, uses sigma receptors to stand guard against oxidative stress and repair cells. And when AV-1-41 goes into Phase I trials, we fully expect the market to re-rate the company upwards to $10 to $12 a share.
The drug is already showing promise in early stages. And in some trials, the drug reportedly provided neurons with protection from oxidative stress, prevented amyloid beta from becoming toxic, and reduced memory deficit in animal tests.
We continue to rate Anavex stock as one of our favorite small cap investments for 2008-2009. And the fact that the stock hasn’t sold off – especially during the recent market turmoil – speaks volumes.
Better, we wouldn’t be shocked if Anavex was a buyout candidate.
One, the company is betting that compounds for Alzheimer’s disease based on its Sigmaceptor platforms will provide it with competitive advantages. Its Anavex 1-41 treatment has demonstrated that the compound “significantly” protects neurons by preventing oxidative stress, which can damage and destroy cells and is strongly believed to be a main cause of many neurodegenerative diseases.
In short, if drugs like Anavex’s can slow or prevent diseases like Alzheimer’s there’s no telling how many buyout offers would flood Anavex offices.
Plus, they’ve got another 11 sigma receptor compounds in pre-clinical development, three of which could soon file for investigational new drug applications this year alone. This includes treatments for epilepsy, colorectal cancer and other solid tumors.
Anavex 7-1037 (for colorectal cancers) preclinical trial treatments, for example, shows a 69% reduction (with minimal adverse effects) in tumor growth.
Two, big pharmaceutical companies may not continue overlooking companies with oxidative stress exposure. And three, the Alzheimer’s drug market could triple to $9 billion by 2017. Why wouldn’t big pharma want a piece of that?
Good Investing,
Ian L. Cooper
http://www.wealthdaily.com
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In case you missed our other investment opportunity highlights, here’s what we covered in Wealth Daily, Gold World, Energy and Capital, and your free blogs for the week of July 21, 2008.
Let’s Take Some Gains: 180% Lehman Put Gains… Bank it.
In the weeks preceding our options product launch, we’ve been issuing trades in this free blog. And to secure our hard-earned gains, we’re closing five of our positions today.
The Non-OPEC Oil Peak: He said it’s “imperative that governments acted urgently to reduce their dependency on oil…”
While the International Energy Agency’s oil supply forecast won’t be released until November 2008, there’s growing fear of a sharp downward revision in supplies. That means supply could be much tighter than previously thought, a nightmare scenario if proven true.
Pickens: Oil is Headed to $300 in 10 Years: Boone Heads to the Hill
In case you haven’t heard, T. Boone Pickens is a worried man when comes it comes to the energy situation these days. America, according the legendary oilman, is in a heap of trouble-and it’s only going to get worse.
Copper Mining Stocks: A Big Surprise in the Copper Market – Part 2
In Part 2 of our Argentinean copper mining stocks report, we’ll take a look at the rest of Coro’s copper mining prospects, which are numerous and conclude with specific details regarding my recommendation.
The Bakken Oil Field: Is it Too Late For You to Play the Bakken?
Over the last few weeks, I’ve been trying to wrap my head around the recent excitement over our domestic production. Whether the topic of drilling in ANWR or the outer continental shelf came up, people were getting excited. There are a few problems, however.
Domestic Oil and Gas Companies: The One Energy Stock You Must Own
What makes domestic oil production companies even more attractive as long-term investments are the oil and gas discoveries, and the fact that these explorations are more appealing, given geopolitical tension.
Renewable Energy in Germany: New Energy in Old East Germany
BERLIN, GERMANY: West Berlin wasn’t just the free half of this city during the Cold War; it was an island. All around the reunified capital today, there are reminders of East Germany’s economic past, and signs that Europe’s largest economy can do more to bring the East into the future.
Gold Price Forecast: Why Gold Could Spike to $1,200 by January
It’ll be 2009 when we see $1,200 to $1,300 gold. Here’s why.
Green Energy Investing: How To Follow the Green Money Trail
This article originally appeared in the Green Chip Review on July 17th, 2008 as an in-depth report on today’s green energy investments. With the current state of the energy market, and the looming boom in green energy, we felt readers of Wealth Daily could also profit from the information presented in this article. Enjoy.
Profit from American Depress
American Express posted a Q2 profit that fell 38%, well below Street forecasts, as consumer spending slowed and the number of loans that were written off increased beyond expectations.
Caution: High Risk Housing Trade Ahead
President Bush just dropped his opposition to a housing package that could bolster the economy. The House is expected to vote on it later this afternoon, and it could become law as early as this week. Reportedly, House Republicans do not have enough votes to prevent it from becoming law.
