Later this week I’ll be launching a weekly newsletter, Trending Profits, that is focused on the most profitable growth trends in the stock market.
There’s a lot that I’m going to cover every month. But there will be particular focus on the health care and biotech sectors.
I’m sure you’ve noticed that biotech has been crushing the market for five years running. And in this historic run there have been plenty of stocks that have knocked it out of the park. And plenty that have run afoul.
Catching a ride on those winners is not always easy. But there are a few simple strategies that investors can follow to raise their chances of success in the biotech space, while reducing risk.
By far the easiest strategy is to simply invest in established companies with products that are selling well right now, but which also have a solid pipeline of potential blockbusters.
It takes a little digging to uncover these stocks, but that is time well spent given the potential. And in Trending Profits this is one area that I plan to help my readers.
But let’s get back to the present, because one company is worth mentioning right now, given that it has a potential blockbuster drug entering Phase III trials.
That company is Celgene (NASDAQ: CELG), a $90 billion company with leading therapies for various forms of cancer. Prior to April 2014, Celgene’s drugs didn’t extend far beyond cancer treatment, with the exception of a few licensing deals and a treatment for psoriatic arthritis.
And they still don’t – at least not yet. But I expect this is going to change within the next couple of years, as the company has a potential blockbuster drug in the works.
Celgene’s newest developmental drug, GED-301, was acquired from a little-known Italian biotech company last year. The drug is a treatment for Crohn’s disease.
Crohn’s is a chronic gastrointestinal disease that is believed to be genetic, and for which there is no known cure. Treatments are aimed at controlling symptoms, and roughly two-thirds of people with the disease will require surgery at some point in their lives.
Treatment for Crohn’s is a big market, estimated at more than $4 billion worldwide. Current treatments not only don’t cure the disease, but they have to be injected. By contrast, GED-301 can be taken orally.
And in early studies the drug appears to be extremely effective.
According to Phase I trial data, GED-301 was given to 15 patients and 100% of them responded, with 47% of them achieving six-month remission after only seven days of treatment.
Phase II data was published in the March 19 issue of The New England Journal of Medicine, and is also encouraging. The trial enrolled 166 patients, and a statistically significant number of them achieved the primary endpoint of clinical remission.
Now the company is working up details on Phase III trials, which should ultimately show if this drug is going to be the huge success that many expect it to be.
The drug was acquired for a cool $2.75 billion – the highest acquisition price ever paid for a mid-development-stage asset. While the price of admission was considerable, the potential prize is even more so.
GED-301 might well be Celgene’s next blockbuster. If all goes well, it’s entirely possible that the drug could generate $2 billion in annual sales, on the conservative end. At the high end, $3 billion or more is on the table.
At that level of sales, the drug would absolutely dominate the global market for Crohn’s disease, and create a durable blockbuster drug that could add as much as 40% to sales.
Clearly there is some work to be done before this miracle pill hits drugstores. Phase II success doesn’t guarantee Phase III results, or a successful commercial launch.
But things are heading in the right direction. And given the breadth of Celgene’s total portfolio, which delivered EPS of $3.71 on $7.67 billion in revenue in 2014, a major setback in GED-301 wouldn’t mean the end of the road for Celgene.
Certainly investors would like to see GED-301 become the company’s next blockbuster and help drive shares higher. But if it doesn’t, investors won’t be left hanging. That’s exactly why diversified biotech companies like Celgene are among the safest investments you can make in the sector.
For more details on biotech stocks, and other massive growth markets, be sure to sign up for a free subscription to Trending Profits. I’ll be publishing this newsletter once a week, and the first issue is scheduled to launch this Thursday.
The Next Big Tech Breakthrough
3D printing is without question one of the most stunning technological achievements the world has ever seen. And it’s only just getting started. What do I mean? Well, in 2016 its next iteration is going to hit markets. And the Silicon Valley insiders who’ve seen it are blown away. One says, “It’s not only a game-changer, it’s going to rewrite the rules of the 3D printing industry.” And Computer World magazine says “Rival 3D printers will have to step up their game or be left behind.” Don’t be left behind – discover all the details behind 3D Gen2 right here.