Lessons in Biotech Investing... From a Game of Monopoly

Any successful biotech investor needs to understand the board game Monopoly...

To win a game of Monopoly, you buy properties and collect rent when other players land on them.

The most valuable high-rent districts in the game are Park Place and Boardwalk. As a kid, owning both properties gave you a big edge in your quest to win. It was just a matter of time before someone landed on them and had to pay you the big bucks.

Real-world investing might not seem like this classic game. But in the biotech sector, these same rules apply.

That's because of patents...

I know. It sounds dull. But you need to know a key lesson about patents to succeed in biotech investing... because if you're able to catch just one wild success in this sector, it could change your life.

Biotech isn't like the 10,000 smartphone patents that Apple, Google, and Samsung all fight about. In biotech, only two patents usually matter...

The first is known as the "method" patent. This is what a drug does or how it's used.

The second is the "chemistry" patent. This is how a drug is made.

With just these two patents, you have a monopoly. Thanks to patent law, no one else can make that drug. Instead, if another company wants to compete, it has to use different chemistry.

And that's where most investors leave it – they look for a company that owns a patent or two on the drug it's developing.

This is a major mistake that many biotech investors make... They're forgetting a third patent – the patent for a drug's target in the body.

These discovery, or "landscape," patents cover larger territory. We're talking "win the game" windfalls... when your rivals land on Park Place, then Boardwalk.

The perfect case of a landscape patent is in the new class of "immune therapies" for fighting cancer...

Cancer immunotherapy works by awakening your immune system to a cancerous tumor.

Normally, your body seeks out damaged cells. Then it either eats them or instructs them to commit suicide.

So an established tumor must have some way to "hide" from your immune system's surveillance. For example, some tumors hide by pretending to be a fetus using protein receptors known as "PD-1." Here's how I explained this in an April 2015 special report...

PD stands for "programmed death." When your immune system encounters PD-1, it knows that is healthy tissue and it should not attack. Fetuses are covered in PD-1. It's nature's way of making sure mom's immune system doesn't attack the "foreign" baby cells.

Cancerous cells make lots of PD-1 signaling proteins. They essentially use PD-1 to disguise their tumors as fetal tissue to keep the immune system at bay.

Here's why focusing on patents is so important in this case...

All of this was figured out in Japan and published in a top U.S. medical journal in 2001. It was foundational. Meanwhile at Harvard, scientists found a new potential drug target via the Human Genome Project.

To help figure out this new drug target, the Harvard researchers asked experts from Japan who knew about this same target, PD-1. In fact, the Japanese team cured cancer in mice using a specialized antibody against PD-1's counterpart.

So the Americans and the Japanese wrote a second paper together... And then Harvard claimed all the credit by applying for a patent. The U.S. Patent Office, none the wiser, issued the patent to Harvard.

Next, Harvard licensed this landscape patent on PD-1 and its uses to a dozen different Big Pharma firms. But they ran into one big problem...

Nothing can stop the claims of the inventors from Japan.

They filed their invention first. (It's almost like they didn't trust Harvard...) And go figure – their patent led to a multibillion-dollar windfall.

That's why our lesson today is so important... If you want to win in biotech investing, you'll need to have a monopoly on the landscape.

Drug giant Bristol-Myers Squibb (BMY) owns Japan's "landscape" patent on PD-1 globally. It owns the target. And in recent years, it has gone to court – successfully – to defend its monopoly.

However, as you know from my DailyWealth essay earlier this week, this is only one of the traits we look for in our Stansberry Venture Technology recommendations... Plus, as a rule, we're not interested in Big Pharma companies like Bristol-Myers.

We look for small-cap biotech stocks with the potential to surge 100%... 200%... or even 500%. So here's what you need to know:

PD-1 drugs have proven highly effective, and are FDA-approved to treat seven different cancers... plus, remarkably, any cancer if all else has failed.

In fact, the top medical journal in the world – the New England Journal of Medicine – had to send out a warning to doctors to be on the lookout for patients on a PD-1 drug being cured of cancer between visits!

But the importance of patents in cancer immunotherapies goes beyond PD-1.

Best-case scenario, these PD-1 drugs are helping 30%-40% of patients. This suggests that there could be ways to help the other 60%...

We've found more ways that cancer tricks your immune system...

And in Stansberry Venture Technology, we've recommended companies behind drugs that can reverse each one... "waking up" your immune system to fight the cancer.

All five are in mid-stage human clinical trials today. Notably, these five drugs are based on core discoveries about the key target in your body. That means each discovery yields a method of fighting cancer... and its own "landscape" patent.

By buying the five landscape patents, we control against any future trespassers – just like in Monopoly.

And when these five drugs have positive trial results or receive approval, we stand to make 100%, 200%, or much more as investment gains. We get a chance to make the big bucks... thanks to this lesson in biotech investing.

Good investing,

Dave Lashmet

Editor's note: The story in cancer treatment gets much bigger than these five drugs. Thanks to a new breakthrough, Dave believes a handful of stocks he's tracking could make up to 1,000% returns in the coming years... But you must get in now. That's why our publisher is offering Dave's entire portfolio of recommendations at a staggering 55% discount.

It's the lowest price we've ever offered for his research – and this deal ends soon. Get the details here.

Further Reading

Earlier this week, Dave explained how to predict which biotech stocks could be poised to soar by triple digits. Get the details right here.

"This is not what we'd expect to see at the end of a major bull market," Steve writes. "We should see euphoria – investors throwing caution to the wind, taking big (and even foolish) risks." This isn't happening today... but Steve urges investors not to be fearful and miss out on the big gains ahead. Learn more here.

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Breakthrough drugs can mean billions in revenue for pharmaceutical companies. And Dave says one drug will likely be a massive moneymaker for this biotech firm...

Market Notes


Today, we're looking at an athletics-apparel maker with a cult-like following...

Many Americans today are making healthier choices. Fewer and fewer people are smoking, and demand for healthier food options is on the rise... And according to the International Health, Racquet & Sportsclub Association, the U.S. health and fitness industry was worth $30 billion in 2018. Today's company is capitalizing on the growing trend...

Lululemon Athletica (LULU) is a $27 billion leader in the athletics-apparel market. According to the company, it started off as a design studio by day and yoga studio by night. Today, it has 460 locations that sell athletic apparel inspired by its yoga roots. And as more people jump on board the fitness trend, Lululemon keeps growing... In the latest quarter, it reported revenue up 22% year over year to $883 million, and earnings per share up 35%.

As you can see, LULU shares are up more than 240% in the past two years alone... And they recently hit a fresh all-time high. As people continue to demand high-quality, comfortable clothes for their workouts, this trend should keep going...