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Our Biotech Stock Pick

Written By Brian Hicks

Posted May 9, 2008

Editor’s Note:

Eight days into Pure Energy Trader’s latest recommendation, the team is up 25%, as it nails new all-time highs. But there’s still time to buy, the team tells me. Credit facility increases and it’s exposure to Bakken could easily send this $2.50 stock to $5 near-term.

Oh, and the team is buying oil at $73.

Today’s Wealth Daily

"[We] just plain missed on pharmaceuticals… we probably should have recognized the fact that some sort of group purchase might have made sense. But we didn’t do anything about it."

Those were the very words painfully uttered by Warren Buffett and Charlie Munger at a 1998 Berkshire Hathaway meeting.

And it’s almost guaranteed Buffett won’t miss the opportunity again… and neither should you.

These days, Buffett and even George Soros are investing big on biotech and healthcare technologies, betting on aging populations that’ll heavily rely on biotech drugs.

And they’re buying on the cheap because these companies won’t be cheap for much longer.

Even big pharma is aware of that.

"The high price [GlaxoSmithKline] it is paying 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.

Glaxo inked a $600 million collaboration agreement with Regulus Therapeutics, bringing it to the forefront of RNA technology.

Takeda Pharmaceutical is paying out $8.8 billion to buy Millennium Pharmaceuticals. And while the deal may weigh on short term stock prices and profits, it’s a great move long run. The buy gives Takeda a foot in the cancer drug market door, strengthening its pipeline.

And if Buffett, Soros, and big pharma are buying… so should you.

The Biotech Boom Potential

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.


BTK Chart


Look at the explosiveness of the group.

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.

Of course, after explosive, outrageous runs, we’ve seen our share of busts, too, with biotechs losing up to 50% of their value. But there’s no denying the run potential.

But the time has come for the next explosive leg up.

What’s to like about biotech these days? Buffett, Soros, and big pharma are buyers of biotech stocks these days.

Our Biotech Stock Pick… Why We’re Still Excited about Anavex Potential

Buffett and Soros aren’t buying Anavex. But the explosiveness of the stock is hard to overlook.

Anavex is developing the next generation of biotech drugs based on platforms based on sigma receptors.

And, as we’ve told you, it’ll be huge.

There’s already massive amounts of literature that supports sigma receptors as a potential way to treat… and in some cases prevent… of a whole range of diseases, including Alzheimer and epilepsy to breast and lung cancer.

In other words, we could be looking at a silver bullet in biotechnology. It’s like watching the work done on stem cells 10 to 15 years ago.

But what really gets us excited is recent news.

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 a drug 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, show a 69% reduction (with minimal adverse effects) in tumor growth.

Listen, we’ve spoken of Anavex now for months. They’re holding potential multi-billion dollar drugs. And it’s only a matter of time before the likes of Buffett, Soros and big pharma give this company the attention it deserves.

Buy. Hold. Sit tight. This is going to be a fun ride.

Good investing,

Ian L. Cooper