The Weekend Edition is pulled from the daily Stansberry Digest.
Twenty years ago, Stansberry Research founder Porter Stansberry hired me...
He wanted me to write about the economics of medicine for the everyday investor.
The goal was to track revolutions, not evolutions. That meant finding actionable information on new, world-changing drugs, not new hospital beds.
The first great drug we came across was a cancer drug called Gleevec. It worked miracles... but only for a vanishingly small number of cancer patients.
In fact, you needed a specific tragedy in your genetic code to get the defect that Gleevec could hit. If two clusters of your DNA split and rejoined in a special way, your body built a gene that didn't exist before, and it led to leukemia...
This was one of the first cancer genes ever discovered, and the pill landed right in its heart. Gleevec killed the cancer cells that made the target.
In the U.S. Food and Drug Administration's ("FDA") Phase II trials, the results were astonishing: 98% of people's cancers disappeared, meaning they had a "complete response" to the pill.
The FDA approved Gleevec based on the astonishing results.
But we passed on it. We never recommended subscribers invest in it. You see, despite the drug's promise, there was no buying opportunity back then...
The global pharmaceutical company Novartis (NVS) developed Gleevec.
Novartis was a $100 billion firm two decades ago, so investors had to balance the upside on a $1 billion (or more) blockbuster drug against the revenue of its other products.
This brings up an important point...
The world's largest drug firms are marketing machines as much as factories for innovation...
They must keep selling new drugs.
It typically takes about 10 years to develop a drug, and "patent protection" is 20 years... after which the drug then becomes a cheaper generic. So a drug company has roughly just 10 to 12 years to make back its return on investment.
That means if a Big Pharma company has two dozen drugs – like Novartis did at the time – then two or more will likely be coming off patent protection every year. That could mean a sudden 75% drop in revenue on that product line.
It's a complicated picture.
So instead, Porter and I focused on smaller pharmaceutical firms – the ones that were pure inventors.
That's because big firms need to buy up the smaller firms' new drugs... so they can always be selling branded products.
In short, there's an economy in new medicines...
In the U.S., all medicine – everything from hospital stays to ACE bandages – is a segment of the economy that accounts for $3.5 trillion per year. But globally, medicines alone are worth $1.3 trillion in annual sales. And the latest inventions are valuable.
You should know, I'm not a doctor. And of course, neither is Porter...
So when we started to look for innovative medicines, we looked at it from a different perspective, like we were patients.
We didn't think we'd get all these dreaded diseases. But we knew some folks did – or their families did – so we respected that.
It's a medical spin on one of Porter's pillars of Stansberry Research: What would we want from you if our positions were reversed?
As we looked for new medicines to invest in, we looked at what was best for patients...
And that led us to a truth about side effects that at the time was alien to most doctors and Wall Street... People don't like side effects.
Sounds trivial, right? But here's the economic impact... When you realize that patients are customers, you realize they make choices. And they will always choose the safer course.
Imagine a drug that's 25% effective, with minimal side effects. Then compare it with a drug that's 50% effective that comes with severe side effects. You'd try the safer drug first.
There's no reason not to at least try it, because there's no downside. That's how a 25% effective drug can win 100% of the market... and disrupt "traditional" medicine.
Keep in mind, companies still need to prove the effectiveness of their medicines in controlled clinical trials. We didn't like herbal medicines, or success by anecdote, or outright falsehoods (like stem-cell treatments).
With our early subscribers, we entered the ground floor of a new way of looking at medicine...
We looked for biotechnology drugs that could be vastly more effective and safer than any drug or treatment before...
For example, we picked Intuitive Surgical (ISRG) in March 2004 when it was an $18 stock. A little more than a year later, in April 2005, we booked a 124% return. Today, ISRG shares trade for roughly $566.
The big idea here was robotic-assisted surgery – plus, patents from the lone inventor who first imagined this concept. But these patents were more of a sketch than a device. The magic was in the engineering...
You see, engineering is what really drives biotech developments...
A core demand in our economy is reproducibility, or the ability to scale. You have a smartphone only because a billion people have smartphones. Otherwise, you'd be holding a Fabergé egg. Let me explain...
More than a hundred years ago, Russian Tsar Alexander III purchased the first of these fancy eggs from Fabergé, a jewelry firm founded in Saint Petersburg. It's said only as many as 69 eggs were created, and Alexander bought one each year.
They're now the ultimate luxury bauble. I'm not sure if one will hit the auction stand... But I figure they'd go for $20 million each today.
Meanwhile, for $1,000, you can buy the recently released iPhone 11 Pro Max from Apple (AAPL). It has front and rear cameras that capture hours of high-resolution video and can transmit pictures and video globally in real time.
Both a Fabergé egg and the smartphone are hand-held objects. They're colorful, even glistening. But one is ultimately static and unmoving. The other is all about movement, up to and including moving images.
Another way to put this is that the Fabergé egg is about what Fabergé, the company's founder, wants you to see...
The smartphone is about giving you choices, which you can change at will.
Overall, the annual market for Fabergé eggs is worth, well, nothing, because they're all in private hands. More than $500 billion worth of smartphones were sold around the world last year.
This is the value of craftsmanship versus engineering.
Twenty-first century medicine is like this, too...
Not a single advance in biotech is cut off from science and engineering. New chips, new software, and even new micro-fluidics shape what we can learn.
One of the trends we follow in my Stansberry Venture Technology financial advisory is artificial intelligence ("AI"), which has amazing potential in health care.
Consider cancer detection... Radiologists don't scan for brain tumors if you get an MRI for a stomachache. AI can.
This is a screening function by the machine itself – a radiologist will confirm what the AI finds. But this means early detection to stop a cancer before it becomes life-threatening. It's a fail-safe.
What to do when the worst happens...
The American Cancer Society foresees 600,000 deaths from cancer in the U.S. in 2019. But for almost all types of cancer, the age-adjusted death rates are slowly decreasing.
Overall, that's tremendous news. It reflects, in large part, more refined radiation therapy machines, better surgical techniques, and safer, more effective medicines. (We cover all these advances in Venture Technology.)
But some exceptions exist... The death rates for liver, pancreatic, and uterine cancers are still increasing. For liver cancer, it's driven by hepatitis, alcohol, and obesity. For uterine cancer, it's obesity and lack of screening.
Fortunately, Big Pharma companies Gilead Sciences (GILD) and Merck (MRK) now offer cures for hepatitis (at steep prices, mind you). And better screening for uterine cancer will follow, as MRIs with AI move from the research stage into general practice.
So the real outlier is pancreatic cancer. But there's light at the end of the tunnel... Earlier this month, in the leading science journal Nature, we learned that pancreatic cancer might be caused by an infection from a common fungus – the same one that causes dandruff and eczema.
So maybe anti-fungal medications can help with that.
As it happens, we're already tracking the first new class of anti-fungal drugs in Venture Technology. This is a developmental drug that completed its FDA Phase II mid-stage trials. And for fungal infections, it has a very high cure rate...
That's because it's new...
Fungi can evolve around the threat of an anti-fungal drug... just like bacteria can evolve around antibiotics, and fast-growing cancers evolve around targeted therapies like Gleevec.
Yes, that's right... The first drug that Porter and I thought was a revolution in cancer care – Novartis' Gleevec – turned out to be a temporary fix.
Research has since found that up to one-third of patients will not achieve "optimal response." In all these patients, their cancers surge back. We noted this recently while recommending another biotech company to Venture Technology subscribers in April 2018...
Novartis went on to make $12 billion globally on Gleevec. It's only recently run out of patent. The dark secret was that the target that Gleevec hit could mutate – so the effect did not last.
In order to cure cancer, you need to do one of two things...
- Remove it completely
- Convince your immune system to find it, destroy it, and keep it from coming back – as if it's a common cold.
The first method is well-known...
It takes good diagnostics and good surgical techniques. Ideally, this is minimally invasive surgery, not open surgery. That's the goal.
But a problem occurs if there are two, three, five, or seven sites of cancer. Or if it's a spread-out tumor. Or if it's around a critical organ... like your spinal cord.
Many advanced cancers simply can't be treated with surgery.
Finally, let me tell you about the second method...
It's brand-new. We only confirmed it last month, when a therapy we've been tracking for three years won a gold medal at a major medical society.
We've been tracking this all over the world – in San Diego... San Antonio... Washington... London... Milan... Turin... and Chicago. Plus, we'll keep tracking it in the years to come.
It's that powerful.
Indeed, it's already here – it's at the turning point, which is the best time for investors to get involved.
More than a quarter of all U.S. cancer patients will get this treatment in 2020. But no one else is reporting on this.
Seriously. We scoured the popular press... and literally nothing came up. Thousands of medical articles describe it, but no major or minor news outlet has picked it up yet.
That's why we think this research, in addition to being life-changing or life-saving for those with cancer, is so valuable to investors. You can learn more about it right here.
Regards,
Dave Lashmet
Editor's note: Dave believes the study of cancer has crossed an important threshold... For the first time in his career, he says it's reasonable to start talking about a cure. It still may be a few years away, but that's why now is the time to invest in the trend... Dave and his team just put together an urgent video presentation with all the details. Watch it right here.
