The two stories that affected me most last week came from disparate sources. Clearly the debate over Obamacare grabbed not only my attention but virtually everyone else's. Then, Sunday night on Sixty Minutes there was a succession of stories I found very upsetting.
The first, concerning the launch of the last space shuttle, affected me in several ways - and much more profoundly than any story I can think of on that show, which I've been watching probably longer than many of you have been around.
Certainly the loss of jobs and the sorrow that so many felt watching that last shuttle go up had to affect you. But there was a transcending effect as well, a loss of something even deeper. Namely, America's hegemony in space. I do remember when I was a little boy, the day Sputnik went up, and how America seemed to come together in reacting to this event with a staunch determination to be the leader in space. Now we read about plans the Chinese have to launch a rocket to the moon. Go figure.
America's greatness - and I don't believe that we've lost it forever - has been tied to its technologies. And like so many other things, our technologies seem to have gotten lost in a complex bureaucratic morass which seems to affect all levels of life. Getting back to ObamaCare, you see the same loss of technology, although it's not as clear or as gut-wrenching as seeing that last space shuttle go up.
Twelve years ago, in my book Defying the Market, I wrote that the then-newly marketed Prozac was but a derivative of many drugs that had come earlier, and that many of its effects could not be clearly separated from placebos. I also said throughout the book that informational technology and ever-faster computers was no way to discover new drugs. I've made a number of incorrect predictions in my life; I wish this had been one of them. For now, 12 years later, most pharmaceutical companies have all but given up on psychopharmacological research. And the same can be said for research into antibiotics. Suddenly we see strains of intractable tuberculosis becoming frighteningly prevalent. We think drug companies are capable of doing more, but the money simply isn't there; unless you can find a drug that has acceptance across a wide range of people, very little attempt will be made to develop it.
The reason I'm thinking about pharmaceuticals is that whatever happens with ObamaCare, some effort will be made to find new drugs. And maybe we will wake up and realize that intuition, together with the plants that nature has given us, do contain many more miracles than we are aware of. It's not all gloom and doom, in other words; there are some companies out there that have risen to the call, and despite bureaucratic road blocks have come through.
We have recommended, for instance, Amylin Pharmaceuticals (AMLN) before. This company developed a drug for treatment of type 2 Diabetes, Exenatide (marketed as Byetta), the source of which came from intuition and nature, as it is derived from the saliva of the Gila monster.
Amylin had a devil of a time getting it through the FDA (for those of you who are interested we can send you our past research on this) and some of the objections from that regulatory agency were just unbelievable. But nevertheless, here Amylin stands, with a drug that may actually do a lot of people a tremendous amount of benefit. Amylin's problem has been a lack of money, though. But Bristol-Myers Squibb (BMY) has (presumably) come to the rescue, and has made a bid for Amylin. And we expect the bid to go higher. Although we're not arbitrageurs, we would buy Amylin below $25, as we expect the value of this drug to far exceed a bid in the low to mid-30's. And indeed, if Bristol-Myers is successful in acquiring Amylin, we would buy Bristol Myers (it's a current recommendation in our sister Income Performance publication).
Other spots of good news that we're looking at closely would be the few companies (and they're small ones) that are developing new antibiotics. One, Cubist Pharmaceuticals (CBST), is working in exactly that area, and with quite a bit of success. As a small company, it is like Amylin in being virtually certain to be taken over someday by a larger company.
Another small drug company which had also been hammered because of bureaucratic and accounting issues (the latter never amounting to anything) is Elan (ELN). This company has gotten off the floor and is now developing new drugs once again. One for Alzheimer's disease, though not a cure, is in Phase 3 trials. Along with a couple of large companies, Elan could really make a dent in this horrible disease.
Among major companies, we like Eli Lilly & Co. (LLY), for it, too, has a drug in Phase 3 for Alzheimer's.
Most of the drugs now being developed by most of the pharmaceutical companies marketing them are, it is sad to say, simple derivatives of existing drugs; change a molecule here and there, rename the drug, find some marketing scheme and presto - you have a new drug. The list here is unfortunately so long compared to the list of truly new drugs that we really can't go into it.
Getting back to Sixty Minutes once again, the second story that impressed me on the show was about sugar, and the fact that any sugar in your diet is a terrible negative, increasing the risk of heart disease and, yes, even cancer. Researchers in this area are deeply immersed in the project of determining just how negative exposure to sugar is. While we have no doubt that sugar is not something you should be consuming a lot of, here, too, we are somewhat amazed at the lack of experimental design. Yes, if you take honey, and just honey, it may be a negative; but is it a negative that offsets the positive(s)? These kinds of questions are seemingly not asked and not presented to the public.
Such fundamental failures in experimental design, plus another type of failure caused by unwillingness to spend on virtually anything other than marketing, are the reasons why we have such trouble developing something truly new. And it's also one reason why you can go to a doctor one year, for example, and be told to take selenium and vitamin E, and the next year be told: oops, instead of selenium take folic acid and vitamin D. This is a true story. And this is why in today's highly bureaucratic world, which affects physicians as much as it does researchers, it's critical to do your own health research on the internet. And that leads us to one more stock that remains on our short list: WebMD Health Corp. (WBMD).
From an investment standpoint, we expect all the companies mentioned here to be resistant to the ObamaCare situation, and likely to thrive regardless of the Supreme Court's decision.
Disclosure: Leeb Group, its officers, directors, shareholders, employees and affiliated entities and/or clients of such affiliated entities may currently maintain direct or indirect ownership positions in financial instruments (i.e., stocks, bonds, options, warrants, etc.) of companies or entities whose underlying exposure is in the companies mentioned in this article.