How to Make Money In the
"Clinical Window"
by Rob Fannon
July 12, 2006
On March 2, 1998, Amylin Pharmaceuticals received its death sentence.
As one of the most promising players in the drive to cure diabetes, Amylin had a lot going for it: Financial backing from health giant Johnson & Johnson… a drug that offered relief from a debilitating disease… and a stock price that had tripled in just over three years.
Then, on that day, Johnson & Johnson pulled their funding. J&J’s research department lost faith in Amylin’s drug. Funding of $25 million a year was pulled.
Soon after J&J’s decision, Amylin announced critical drug trial results for their now un-partnered drug. It showed signs of working, but the results were less than stellar. Wall Street hammered the company… sending the stock from $15 a share to less than a dollar.
Today - eight years later – Amylin is one of biotechnology’s shining stars.
The company stuck by its lead drug through negotiations with the FDA and fine-tuned its testing. R&D efforts never wavered and now Amylin is a $6 billion market cap company with a sure blockbuster diabetes drug. Not surprisingly, the stock has soared…
In fact, investors who studied the facts about Amylin after Wall Street’s overreaction and bought shares have made over 8,000%.
Amylin’s enormous rebound – and the chance to buy great drug companies cheaply - is something I call the “clinical window.”
I call it the “clinical window” because the opportunity to make giant gains in out of favor drug stocks aren’t available to us for very long… and it takes lot of due diligence to find these plays.
My friend Steve Sjuggerud calls these types of opportunities “left for dead” investments… stocks so unpopular that you’re embarrassed to even mention you own shares. Steve has written up the biotech sector in the past, and even mentioned the Biotech iShares (IBN) as broad way to play this theme…
But digging deep and finding clinical windows is my favorite way to invest in biotech. There’s just no other industry where data interpretation is so critical – and the results so amplified by Wall Street. In other words, you’ve got to know exactly what you’re doing here…
For example, in last six months, I’ve been researching a company building a franchise around infectious diseases like HIV and Hepatitis (a combined $10 billion market) that happens to be the perfect clinical window candidate.
One big player, Swiss giant Novartis, has spent over $8 billion trying to corner the Hepatitis C market – beginning with a partnership of this tiny Boston-based company.
In March, this company ran into a similar situation as Amylin. It had to alter the clinical trials of its lead drug. Shares were heavily sold, of course… but unlike Amylin, this company’s Big Pharma partner, Novartis, never wavered in support.
I watched the entire scenario unfold before me. I continued my research into the company and the situation at hand. I’ve visited the company in Boston to interview top executives and scientists.
I discovered the truth of the matter… that the market’s severe overreaction has created my next clinical window candidate.
Good investing,
Rob Fannon
Editor's note: Rob Fannon is a regular contributor to DailyWealth, a free investment newsletter focused on the world's best contrarian opportunities. We write with a simple belief in mind: You don't have to take big risks to make big money with your investments.
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