Dear Reader,
A lot of readers ask about biotech – how I pick my stocks.
In this 5-minute video I lay out my no-brainer 3-point system…
Since I’m not a scientist, I take an approach I call “blunt force logic.”
—Takeover Alert—
A.I. Drug Gets $4 Billion Takeover
On December 13, 2022, a Big Pharma giant quietly bought one AI-designed drug for $4 billion.
It’s the biggest deal for an AI-designed drug in history.
But very few people even know about it…yet.
And they don’t know that this tiny AI-biotech designed the drug.
Get the name of the stock here >>>
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For example, pharmaceuticals have three phases of testing.
In phase 1 you’re testing for safety in a very small population.
In phase 2 you’re testing for safety plus efficacy – you want to make sure the drug actually works.
In phase three you’re testing for substantial efficacy. And testing different dosing regimens against different subpopulations.
One of the things I do is try to avoid big, crazy risks. That’s the way I’m programmed. I hate risk.
In biotech, for every hundred drugs that start phase 1 trials, only 20 make it to phase 3 on average.
So I mostly avoid phase 1 investments. These are the highest risk. I only recommends them if I understand the team running the company and they have a terrific platform.
But for the most part successful biotech investing comes from avoiding the hype that comes around phase 1.
And we don’t want to be in early phase 2.
Our sweet spot is late phase 2, early phase 3.
By “late phase 2,” we mean we want to see results that have already been posted.
And I specifically seek out trials that are well-designed.
By avoiding phase 1 and a half, you get rid of most of the risk.
As you look to late phase 2, early phase 3 drugs, now we want to choose the companies attacking a big market that a pharma giant controls…
Here’s an example:
Say Pfizer has a big, powerful, dominant drug for Leukemia…
And there’s a tiny biotech working on a groundbreaking new Leukemia drug…
If Pfizer sees that this new drug is more effective and safer than their drug – what do you think they’re gonna do?
They are going to think, “gosh, we’re making $2 billion a year off our leukemia drug, and if this little biotech is making a better drug, they’ll take our business!
“So if we’re gonna protect our franchise, we gotta buy this tiny little biotech…
“If we don’t buy this tiny biotech set to beat our $2 billion a year drug, somebody else is gonna buy it and muscle their way onto our turf and attack our leukemia market.”
And when it comes to biotech investing the final ingredient we’re looking for is a strong strategic partner.
Because I’m not a scientist, when I find a small biotech with a phase 2 or 3 drug attacking a big, rich market, if a strategic partner has invested heavily in the company, that means they have sent their scientists in and seen the results first-hand.
Their investment is a vote of confidence in the science – that the potential is real, and not “fake science.” They’ve gone in and seen, “this is a good drug – this has a lot of potential.”
So this is the secret – my “blunt force logic” strategy for picking biotech winners:
- Avoid phase 1 and half of phase 2. Focus on late phase 2 and early phase 3 biotechs – that’s the sweet spot.
- Oncology is my specialty. Focus on small oncology biotechs attacking a very large market that an established big pharma giant already serves.
- Look for a strategic partner – a big, validating partner that has sent their scientists over and taken an up-close look and chosen to invest money.
Again, l I’m not a doctor or a scientist so I can’t go there and look at the molecules and say “this has a better inhibitor than the other one.”
So I rely on this simple, reliable 3-step system.
It’s not fancy, but it has delivered a 75% win-rate and 64% average gains per trade (wins and losses) for 6 years running.
To initially find these biotechs we like to use this calendar.
“The Buck Stops Here,”
P.S. I recorded this video about my favorite biotech play.
It’s an AI biotech selling for under $10 a share that looks poised to take off…
NVIDIA just partnered with them, and bought 7 million shares…
ARK Investment recently bought almost as many…
Bayer just signed a deal worth as much as $1.5 billion to have them develop new drugs…
