Sometimes, the greatest opportunities are hiding in plain sight.
Yet, they’re ignored, or “left for dead” out of fear that a sector may be too speculative.
Biotech and pharmaceutical stocks are the perfect examples.
But only the foolish have ignored the rewards the sector has produced -- and will produce – for three key reasons.
Reason No. 1 – Mergers and Acquisitions
In 2017, biotech mergers soared 27%, reaching $332 billion in value. Bain & Co. analysts forecast that the soaring trend will extend through 2018.
Then, in just the first quarter of 2018, merger activity rose 16% year over year. Merger activity is likely to push production rates higher and raise industry profits. Celgene’s agreed takeover of Impact Biomedicines in a deal worth up to $7 billion, Takeda Pharmaceutical’s plan to buy TiGenix for $630 million, and a recent announcement that Sanofi will buy Ablynx for $4.8 billion got 2018 off to quite a start, according to Reuters.
Better yet, according to consultancy firm EY, we could see $200 billion worth of deals this year.
Reason No. 2 – Impressive New Innovation
Look at Fate Therapeutics (NASDAQ:FATE), for example, which The Cheap Investor recommended at $1.66 in August 2016. The stock just hit a high of $14.45 in early March 2018 for a potential return of 770%.
All thanks to the company’s news that a patient was treated in a Phase I study combining FATE-NK100 with either Herceptin or Erbitux (both monoclonal anti-body chemotherapies used in cancer treatment) to treat advanced solid tumors. While it’s still too early to judge potential success of the drug combination, analysts believe it holds significant promise in treating cancer. There’s hope the combination of the FATE-NK100 therapy with other monoclonal drugs could be quite effective.
Reason No. 3 – Our Aging Population
Right now, there are 65 million people over the age of 70 in the United States. As this number continues to grow, we’ll see a need for more medication and treatment options. That’s a significant amount of potential demand.
These three catalysts alone are contributing to a multi-year boom that’s not likely to fade any time soon. Keep an eye on this sector, as we’ll continue to do in The Cheap Investor.