My Super Bowl Is Next Week

Marc Lichtenfeld
by Marc Lichtenfeld, Chief Income Strategist, The Oxford Club
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A Note From the Editorial Director: Marc Lichtenfeld has been racking up the frequent flier miles lately. In the past few weeks, he's been through Austria, Liechtenstein and Switzerland. Then he reported on Portugal's rebounding economy from Lisbon.

And next week he travels to San Francisco for the J.P. Morgan Healthcare Conference. It's a can't-miss event for serious investors in biotech and other healthcare firms, and Marc is one of a small percentage of analysts to score an invite every year.

Perhaps he'll discover the next Celldex Therapeutics (Nasdaq: CLDX), which earned subscribers of Healthcare Profits Alert a tidy 420% gain in less than a year. He'll be reporting here next week on what he learns in Frisco, but his best insights will be reserved for his subscribers.

- Andrew Snyder


For me, the Super Bowl is next week. And it has nothing to do with the fact that my San Diego Chargers somehow sneaked into the NFL playoffs.

In fact, my Super Bowl has nothing to do with football.

You see, for a stock nerd like me, particularly one with an interest in healthcare, my Super Bowl refers to the J.P. Morgan Healthcare Conference in San Francisco.

Every January, a few hundred companies are invited to present to the roughly 8,000 fund managers, analysts and other invitees. It's a tougher ticket to get than the real Super Bowl. Even if you're a millionaire, you can't go on StubHub or call your broker and score a pass to get in.

You basically have to be a big customer or prospect of JPMorgan Chase & Co. (NYSE: JPM) to be invited.

Despite the fact that I do no investment banking or trading with JPMorgan, I have attended the conference every year since 2007.

Party Crashers

What makes it the Super Bowl of healthcare investing is that not only do the few hundred invited presenters and 8,000 invited guests show up in San Francisco, but so do hundreds of party-crashing companies and thousands of uninvited investors, analysts, executives, etc.

Because the conference is so important, companies that are not invited set up shop in hotel suites to meet with investors who are in town for the conference. And because there are so many such companies, uninvited investors show up to meet with these uninvited companies.

It means that the restaurants and hotels are swarming, mostly with men in suits, searching for the next great investment or looking to do a deal. I've seen deals get done standing in line at Starbucks and learned of many investment ideas over a beer or a burger.

In the past, I have met with executives of companies such as Nektar Therapeutics (Nasdaq: NKTR), Celldex Therapeutics (Nasdaq: CLDX) and Astex Pharmaceuticals (Nasdaq: ASTX) - stocks that generated triple-digit wins for subscribers of my Healthcare Profits Alert.

This year, I plan on sitting in on presentations not only of exciting small biotech companies, but of some of the larger dividend-paying pharmaceutical companies. I'm excited to hear what the CEOs have to say, and also to measure the buzz in the room, talk to other investors and see what opportunities still exist.

Dividend stocks have had a big run up and I want to hear more from Big Pharma on prospects for growth and - importantly - cash flow to grow the dividend.

I'll be watching the presentations of some of The Oxford Club's current healthcare recommendations.

A Full Dance Card

Every day is jam-packed with meetings with CEOs, presentations, and drinks and dinners with hedge fund managers.

The best part is that you never know who you're going to meet.

One year, I randomly sat next to a prominent hedge fund manager who invests primarily in biotech. We became fast friends, and he has become a great source of information for me.

Last year, the CEO of a competitor of one of my recommendations sat next to me. We chatted for a while, and my suspicions were confirmed that his company's technology was nowhere near ready to hit the market.

So what does this mean for you?

It means that next week, I'll pass along the hottest stories and trends emerging out of San Francisco. Other than the occasional big announcement by an important company, there is not a lot of media coverage of the conference. So I'll be your eyes on the inside.

The conference also fuels months or even years of ideas that I follow up on and write about in Investment U, The Oxford Communiqué, The Oxford Income Letter and Healthcare Profits Alert.

Importantly, it gives me access to information that is not readily available anywhere else. The company's presentations are usually accessible online. What is not available to the general public are the breakout sessions - the Q-and-A's between investors and management. These sessions are usually private.

This provides me with an inside track on management's comfort addressing certain topics and sometimes even the theater of a confrontation between a short seller and a CEO.

So all this means that as an IU reader, you'll have access to the goings on at the J.P. Morgan Healthcare Conference that will be tough to find anywhere else.

Watch this space next week.

Good investing,

Marc

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In Search of the Next Roche

When Marc is in San Fransisco next week, he may get another chance to meet up with executives from Roche Holdings (OTC: RHHBY), the pharma giant that he visited a few weeks ago at its Basel, Switzerland, headquarters.

Roche was added to the Oxford Trading Portfolio in November, and Marc led a group of Oxford Club Members for a boots-on-the-ground look. Alexander Green loves Roche, and he was very encouraged by what Marc reported from his visit.

Here's what Alex told Members about the company just this week:

"Roche is the world's largest biotech company with a broadly diversified product portfolio. In particular, it is the global leader in oncology drugs and in vitro diagnostic testing for early cancer detection. It is also a front-runner in the management of diabetes.

"The firm has treated more than 18 million patients. But it has identified unmet medical needs for 29 million cancer patients, 70 million patients with hepatitis C, 24 million with schizophrenia, 235 million with asthma and 346 million with diabetes.

"Just a few of its best-selling drugs include MabThera/Rituxan (for non-Hodgkin's lymphoma and rheumatoid arthritis), Herceptin (for breast and stomach cancer), Avastin (for colorectal, kidney and ovarian cancer), Pegasys (for hepatitis B and C) and Xeloda (for colorectal and breast cancer).

"And Roche recently launched Erivedge, a first-in-class pathway inhibitor for adults with advanced basal cell carcinoma, and Perjeta, a personalized medicine for patients with HER2-positive metastatic breast cancer. With such a dominant position, the company generated sales of nearly $52 billion over the last 12 months.

"The bottom line is plenty healthy too. In the most recent quarter, earnings soared 42% on an operating margin of 33%. The company is sitting on more than $8.3 billion in cash. And management is earning a massive 82% return on equity. These are astonishing numbers for a mega-company like this one. No wonder the stock is in a pronounced uptrend.

"My colleague Marc Lichtenfeld recently traveled to Basel with a group of Oxfordians and spent the day touring Roche's facilities with Karl Mahler, head of Investor Relations.

"Marc told me he was highly impressed with what he saw and sent me this research note:

We broke into groups that met with research scientists who discussed the various projects Roche is working on. Some of the diseases included Alzheimer's, schizophrenia and Fragile X syndrome - which is associated with autism.

My group met with Lothar Lindemann, who had created a drug for Fragile X. They know it expresses a protein called mGlu5. By inhibiting mGlu5, the scientists hope to prevent or reverse Fragile X.

In mice, Roche was able to show that treatment with the mGlu5 inhibitor called RO4917523 corrects learning and memory deficits, hyperreactivity to auditory stimuli and other symptoms. It is currently in clinical trials.

"This is just one promising area for Roche. As the world's leading biotech, the company has hundreds of molecules in various stages of clinical trials. It has perhaps the world's most promising drug pipeline...

"The company is likely to deliver solid growth and income in the months ahead. At the last shareholder meeting, Roche authorized its 25th dividend increase in the last 25 years.

"This is a stock that belongs in every Member's portfolio."

- Bob Keaveney with Alexander Green

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