Did you miss the biotech boom?
It’s up 440% since the March 2009 and still setting new highs despite every correction that has hit stocks in the past few years.
Well, if you did or didn’t, you won’t want to miss this.
Although there are still some great biotech opportunities, the after-effects of the biotech boom are now being felt and creating some major follow on opportunities.
Here’s the biggest one we see that’s poised for a big run in the months and years ahead.
The Next Big Healthcare Boom
Earlier this week we talked about how the nominal costs of healthcare are exploding by 9-figure sums each year.
It’s probably the best mix of growth and and consistency an investor will find anywhere in the next few years.
But not all the extra healthcare spending will be distributed evenly.
We expect the biggest share of that money to be earned by the companies that successfully reduce inefficiency and costs in the healthcare market.
Of course, there are a number of different companies and healthcare sub-sectors focused on this. But only one of them is poised for exceptional growth.
Just look at the most wasteful places in healthcare. They’re probably not what you been led to believe they are.
The most commonly cited sources of excess healthcare spending are overuse of the emergency rooms, artificially inflated prices, lack of disease prevention, fraud, and hospital borne infections.
According to a comprehensive report from the U.S. Institute of Medicine, the combined costs from those problems are really a small fraction of total healthcare spending. They’re less than one tenth of total spending when all added up.
That same report exposes another problem that accounts for almost as much as all those problems put together. That is unnecessary services.
Unnecessary healthcare services account for more than $200 billion in total waste. And that number is only growing each year right along with healthcare spending.
Now, your editor realizes this is a problem that will never be eliminated completely. But with $200 billion a year at stake, there’s a big and profitable opportunity in it all. And right now that’s becoming clear.
The solution is better detection and knowing if a treatment will work before it’s even tried.
And the ability to do that is here today for a few conditions, but it’s going to be much bigger very quickly.
The Follow-On Biotech Boom
Over the last few years billions of dollars of venture capital has flowed into biotech.
BioWorld Snapshots reported the total venture capital raised in biotech was $5.5 billion in 2014. That was up 39% from the year before.
That’s a lot of money for tiny biotech startups. And it doesn’t even include the IPO market where billions of dollars was raised in the last few years.
And billions more will be raised again this year. Already more than $1 billion more raised for new biotech stocks in the last few weeks.
All of this money is starting to and will continue to pay off big. New drugs hitting the market and new therapies advancing their way the approval pipeline faster are going to have a big impact in the healthcare market.
Frankly, it’s an exciting time in biotech. And it will get more exciting as the money delivers more new drugs to market, biotech stocks continue to rise, more capital gets invested, and the cycle grows upon itself.
The real opportunity, however, we see in all this is molecular diagnostics.
It’s a simple premise really.
Molecular diagnostics is the process of using genetics to discover if a certain treatment will be effective.
That’s a huge advantage of the “try it, see if it works, and if it doesn’t try something else” of the past and largely current medical industry.
The repercussions of the growth of molecular diagnostics will be (and already is) absolutely massive and will only grow as newer, better, and more targeted biotech therapies reach the market.
When Science magazine named cancer immunotherapy its Breakthrough of the Year, it actually tipped off big things to come for molecular diagnostics:
The field hums with stories of lives extended: the woman with a grapefruit-size tumor in her lung from melanoma, alive and healthy 13 years later; the 6-year-old near death from leukemia, now in third grade and in remission; the man with metastatic kidney cancer whose disease continued fading away even after treatment stopped.
As the anecdotes coalesce into data, there's another layer, too, a sense of paradigms shifting. Immunotherapy marks an entirely different way of treating cancer—by targeting the immune system, not the tumor itself. Oncologists, a grounded-in-reality bunch, say a corner has been turned and we won't be going back.
Many of those therapies are tied into applied genetics. So molecular diagnostics will be critical to them being useful in the front lines of healthcare.
We’ll be getting much deeper into this in the next few days (I really believe it’s going to be big and this is going to be a breakout year for the entire molecular diagnostics sub-sector), but I want to leave you with this summation.
In the end, this set up is a simple one.
There are a lot of new drugs and treatments and there will be many, many more in the months and years ahead. Molecular diagnostics will be increasingly essential to making sure they’re used safely and effectively. And there’s a $200 billion a year (and rising) opportunity for them all.
Best of all, the markets love a simple story with big numbers.
This story set up combined with hundreds of billions of dollars in savings to be found doesn’t get much better.
If you missed out on biotech. Molecular diagnostics are where you’re going to want to have some money moving forward.