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Why Did Billionaire Investor John Pappajohn Invest $12 Million In Cancer Genetics?

|Includes: Cancer Genetics, Inc. (CGIX)

The human genome project has spawned a new generation of biotechs focused on diagnosing and treating cancer using genetic data in ways that allow scientists, laboratories, clinics, and hospitals to pinpoint the various subtypes of cancer more quickly and accurately than traditional methods such as pathology and morphology. Cancer diagnosis based on genetic analysis, extracting DNA from blood tissue, is a paradigm shift in healthcare. The end result is that healthcare providers can predict and recommend treatment programs that are far more accurate and effective than traditional methods, ultimately saving time, money and resources.

One can make a fortune following in the footsteps of wise and highly successful investors such as John Pappajohn, the billionaire investor who has made hundreds of millions investing early in biotechs that are at the front edge of new technologies. Cancer Genetics (OTCQB: CGIX) recently went public raising $7 million at less than a $50 million market cap. John Pappajohn believes that CGIX's genetically based cancer diagnostic products are so advanced that he sees a company whose future holds a billion dollar or greater market cap, if it is not bought out before then.

His analysis is based on several comparables, two of which I will mention here: Decode Genetics, in the same business as CGIX, with less than $5 million in revenue, was bought out by Amgen (NASDAQ: AMGN) for $415 million; Exact Sciences (NASDAQ: EXAS), with less than $5M in revenue, is trading at a $620 million market cap, over 150x sales. CGIX, with a little over $4 million in revenue, is trading at 11x sales. Few investors know the CGIX story. The stock is inefficient. Buy microcaps before they are efficient. That is how John Pappajohn made hundreds of millions of dollars.

Disclosure: The subject security is a client of RedChip Companies, Inc. RedChip Companies, Inc., employees and affiliates may have positions and affect transactions in the securities or options of the issuers mentioned herein. For full financial disclosures for all RedChip clients, please visit