Biotechnology Stock Boom

Written By Brian Hicks

Posted August 16, 2009

You know what they say about bull markets. . .

There’s always one somewhere.

But this one was a bit easier to find. We’ve been talking about it since November 30, 2007 — the day Brian Hicks presented his thesis on why biotechnology was the next big bull market.

The thesis was simple enough. . .

Kathleen Casey-Kirschling became the first Baby Boomer to file for Social Security benefits. And behind her were millions more. . .  which would soon trigger a seismic mega-trend in biotech stocks that continues well into today. . . 

And he was spot-on.

Now, it was only a matter of time before cash-rich pharmaceuticals sat up. . . and started taking notice.

And take notice they did. . .

In 2009 alone, we’ve seen more than 40 mergers and acquisitions in the health care sector alone. . . and the premiums have been mind-blowing. Bristol-Myers, for example, just offered to buy Medarex at a 90% premium.

Johnson & Johnson recently bought Cougar Biotechnology for under $1 billion. . . and bought an 18% stake in Elan. Roche bought the remainder of Genentech.

"The high price [GlaxoSmithKline] [paid] for such early-stage research underlines the current hunger among large pharmaceutical companies for promising biotech assets," mentioned Reuters after GlaxoSmithKline bought Sirtris Pharmaceuticals (SIRT.O) for $720 million in cash.

Even Carl Icahn was aware of the potential, boosting his take in Amylin Pharmaceuticals in recent months.

And companies like Human Genome Sciences (HGSI) are giving investors something to cheer about, too, skyrocketing some 600% after reporting positive trial results.

And we could go on, but the message is simple. . . 

There are plenty more pharmaceutical companies on the prowl for small biotech outfits with strong pipelines and drugs on the FDA watch list… especially now that behemoth pharmaceuticals on are the hunt for biotechs with potential, with ObamaCare breathing down their necks.

But don’t expect the flurry of deals to stop any time soon — especially as pharmaceuticals contend with waning pipelines. . . From what we’re hearing, we could see a buyout offer for Regeneron (REGN), Seattle Genetics (SGEN), Allergan (AGN), Shire (SHPGY). . . even Nektar Therapeutics (NKTR), according to Wall Street reports.

But these aren’t definite. It’s all speculation at this point, which makes these names a bit more volatile.

Or, for further exposure to the group, you can always buy the SPDR S&P Biotech (XBI) and Biotech HOLDRs (BBH).

The Biotech Boom Potential

Here’s a chart of the Biotech Index (BTK) we provided in a Biotech Stock article in April 2008:

 

BTKchart1081309

 Take a look at how well it’s done since then:

 

btkchart 2009

 

That’s an explosive rally. . . and it’s far from over.

As a group, biotech stocks have staged extraordinary runs since 1993. And if you were in the right names at the right times, you would have done even better.

Look at the explosiveness of BTK:

  • In 1995, the Index traded at $75. Three years later, it was up 160% to $195.

  • From 1998 to 2000, the Index ran 700%, from $100 to $800.

  • In 2000 alone, after pulling back, it ran 100% from January to mid-year.

  • It ran another 63% in 2001, from $300 to about $850.

  • And, after another pullback, the Index jetted 183% higher, from $300 to more than $850.

  • And just recently it ran from a low of about $650 to $900.

And we still believe, two years after Hicks’ thesis, that this could really be the start of something big. . . real big.

Stay tuned for more.

Good Investing,

Ian L. Cooper
http://www.wealthdaily.com

P.S. My buddy Steve Christ is just beginning to uncover opportunities to win big in biotech — including a company with a possible cure for spinal cord injuries. To learn more about how invest in these money-making opportunities, click here.

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