The Decade of Biotech: Two Hot Biotech Sectors and Eight Ways to Profit
by Marc Lichtenfeld, Healthcare Expert
Wednesday, April 28, 2010: Issue #1248
I expect the 2010s to be the “Decade of Biotech.”
In 2020, we’ll look back at the past 10 years in amazement at how many medical advances were achieved. And we’ll likely snicker at some of the prehistoric methods that are currently used, equating them to when doctors used to perform lobotomies on people with mental problems.
By 2020, there will be new drugs on the market and technologies developed that weren’t even dreamed about at the turn of the 21st century. New discoveries will extend life, or cure diseases that even the most forward-thinking scientists couldn’t have imagined just a short time ago.
And fortunes will be made as a result.
The question is: How do you grab your piece of the pie?
Blasting Tumors… Bagging Profits
If you’re lucky enough to own shares in a company with a revolutionary technology, you can make a staggering amount of money.
For example, in one of my services members recently pocketed 106% gains on half their position in Delcath Systems (Nasdaq: DCTH).
Delcath’s PHP System directly saturates the liver with up to 100 times the normal dose of chemotherapy, but then filters most of the toxic chemo out of the blood before it’s circulated throughout the system. This enables the chemo to blast cancerous tumors in the liver without poisoning the rest of the body.
The Phase III clinical trial results were outstanding, tripling the survival rate of the best alternative care.
So given this success, why did we sell half the position? The reason is two-fold: To take profits and eliminate all risk going forward. We’re playing with the house’s money now.
But assuming PHP is approved and sales are strong, it could change the lives of early investors who hang on long enough. The stock is already up 186% from where we recommended it.
There will be plenty of other stories like this over the coming years. The potential profits available make it incredibly exciting to get involved with companies like this.
But it also carries a much higher degree of risk.
So if you want to participate in the biotech boom, but with a little less risk, you need to follow the example of the folks from the 1800s…
From the California Gold Rush to the Biotech Profit Rush
During the California gold rush some 160 years ago, some people struck gold and became rich. But most people didn’t.
The difference between those who consistently made money and those who kept dreaming was a strategic one.
The people who sold supplies like picks, shovels and denim jeans made out like bandits. When Levi Strauss died in 1902, he was worth an estimated $6 million – or over $146 million in today’s dollars. It didn’t matter to Levi who struck gold as long as lots of people were trying.
And the same principle works in the biotech world, with companies that help biotech firms develop their drugs.
They’re called Contract Research Organizations (CROs) and assist in conducting various research functions – often for less money than the biotech companies can do for themselves.
- For example, Charles River Labs (NYSE: CRL) provides lab animals and support to companies doing pre-clinical work and early clinical trials. The company just announced the acquisition of WuXi Pharma Tech (NYSE: WX) in order to gain greater exposure to China.
- Two other well-known CROs are Covance (NYSE: CVD) and Pharmaceutical Product Development (Nasdaq: PPDI).
Prospecting for Profits in These Two Biotech Sectors
There are two other biotech sectors that are likely to be hot…
- Gene Research
I love the recommendation that my colleague, Matt Weinschenk, made a while back – Illumina (Nasdaq: ILMN). The company makes technology that analyzes people’s DNA. In fact, it recently announced that it had sequenced the DNA of an entire nuclear family.
Other companies in this line of work include Affymetrix (Nasdaq: AFFX) and Life Technologies (Nasdaq: LIFE)
- Biochemicals & Chemical Equipment
There are all kinds of companies that supply tools and services to the pharmaceuticals and biotech industry. Those that provide biochemicals, chemical agents and other tools necessary for research are a good place to hunt down profits.
Sigma-Aldrich (Nasdaq: SIAL), for example, sells over 30,000 antibodies, lines of stem cells and the chemicals to keep them alive.
Feel free to mention your favorite biotech stocks in the comments section below.
I’ll keep prospecting for biotech gold, but I’ve also added companies that will sell the tools that will help the biotech miners yell, “Eureka!”
Hoping your longs go up and your shorts go down.
Marc Lichtenfeld
Any investment contains risk. Please see our disclaimer.
6 Responses to “The Decade of Biotech: Two Hot Biotech Sectors and Eight Ways to Profit”
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Marc is a senior analyst at Investment U. His investment career started out at the trading desk of Carlin Equities in San Francisco, CA, where he executed dozens of trades each day for his clients.
The computer revolution, the Apple Phenomena….I was not a part of the ground floor. I was afraid of biotech stocks. NO MORE! I own Delcath, Dendreon and Sangamo (SGMO). I plan on acquiring others. This is indeed a gold rush (my statement proves it)! Beyond that, this is my opportunity to help, and biotech stocks return the favor. This is indeed a 10-year plan…for starters.
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Just ran across this bit of news: Charles River Labs (CRL, $41.56, +$2.07, +5.24%) joins Palm and Jacobs Engineering as stocks climbing alone on unconfirmed takeover chatter, which has propelled dozens of other stocks since the M&A environment picked up in recent weeks. Several well-known market rumor sites say the drug research and development company has been approached by a potential buyer. Charles River declined to comment on the rumors.
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Biotechs: Also liked recent action on International Stem Cell Corp, Neostem, Nanoviricles, Biotime, Combinatorix. There are plenty more, but what’s there future potential? Thanks for telling us all what you think of them.
Henri
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Check out ISIS—interesting business model [this biotech has been making plenty enuf money to keep going]
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Reverslogic now in stage 11 trials at cleveland clinic Any comments on the Biotech out of Calgary Alberta Canada?
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I own positions in two biotech cos., Vical and Xoma. Also own Pfizer, which pays a fair dividend, but has languished around $16-17 for several yrs. What do you think about the foregoing stocks?
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