Imagine your spouse has cancer. A promising drug is in development. The trial results look good. And yet, the FDA pulls the plug on the treatment.
This is the reality facing Dena Battle. The drug in question “was a very effective treatment for kidney cancer patients, but it won’t be approved to treat kidney cancer.”
Dena and her husband have no choice but to wait. The FDA “changed the rules,” she said.
Paul Mampilly, editor of our FDA Trader, elaborates: “The FDA asked the company that makes it to use one standard to measure success — and then judged it on a completely different standard. That’s bureaucracy for you.”
“But I believe help is on the way.”
“I believe change is coming that could make 2015 the biggest year ever for biotech stocks,” says Paul — delivering on a blockbuster forecast we hinted at yesterday.
“We could see returns of 100% for biotechnology indexes and ETFs.” And far higher returns for Paul’s readers.
All it will take is a single catalyst, something no one else is talking about right now: “When it happens,” he promises, “everyone is going to pour into biotech stocks. And when they do, biotech stocks will go ballistic.”
“In 2015, I believe the new Republican Congress will enact legislation to gut the FDA of its current mandate,” Paul tells us.
“Under current rules,” he explains, “a drug company must prove a drug is both safe and effective. Effective in the FDA’s eyes, anyway. And there’s a lot of gray area there. The standards can change — and do all the time. It’s maddening for patients, doctors and drug companies.
The FDA’s standards date back to the 1960s. “That’s prehistoric,” says Paul, “when you compare it with what we know today about the human body, cellular biology and the human genome now. This new knowledge means that that the FDA has no clue how to determine if a drug is effective anymore. And the scientific gap between the FDA and new science is so large that they will never catch up.
“Worst of all, the FDA refuses to change, and because of that, hundreds of good drugs have been shelved. Millions of lives have ended, and millions of people suffer needlessly.”
But the pressure for change is building. This year, 153 citizens filed petitions appealing FDA decisions. That’s a record, and a 66% increase over last year’s figure.
Meanwhile in Congress, 152 bills were introduced in the last two years looking to change the way the FDA does its job.
“That’s why I’m so confident change is coming,” says Paul. “The snowball’s already rolling downhill, and I think change is inevitable. That will allow patients to get lifesaving drugs sooner. Doctors will have more choice in drugs when patients come looking for treatment.
“Biotech and drug companies are going to benefit in a big way too” — for three reasons…
- “First, the cost of developing a drug is going to plummet from over $2 billion, because companies won’t be spending money on useless testing
- “Second, the time required to develop a drug is going to shrink from 20 years to less than a few years
- “Third, more drugs will be approved, allowing biotech and drug companies to sell more drugs.
“When this legislation passes Congress,” says Paul, “I expect all biotech and drug stocks to spike.
“But the stocks of biotech companies stymied by the FDA’s obstinate insistence on prehistoric testing techniques are going to soar. The stock market value for these companies could go from, say, $40 million to $4 billion in less than a year.”
That includes the developer of the aforementioned kidney cancer drug, by the way.
The time to position yourself ahead of this landmark legislation is now. Follow this link to get started.
With only a few hours of trading remaining in 2014, the major U.S. stock indexes are all in the green, with small caps leading the way — the Russell 2000 up two-thirds of a percent, to 1,220. If that holds, the index will end the year at a record high.
The S&P 500 has a bit more heavy lifting to do if it’s to reach the same milestone. As we write, the index sits at 2,084 — seven points away from the record high set on Monday.
As matters stand now the S&P will have gained nearly 13% on the year… on top of the 30% it gained the year before.
“I think the S&P will tack on high single digit gains in the next 12 months,” says Jonas Elmerraji of our trading desk.
Oddly, he bases that projection in part on the market’s performance not this year… but the year before.
“2013 was a huge year for the S&P,” he explains. “It was significant enough that we can use it as an anchor point to forecast future years. By looking at past years with similarly huge gains, we can get an idea of how market participants have historically reacted two years later.
“Looking back since 1975, we’ve had a dozen years with better than 20% returns – and on average, the S&P’s return two years later was 9.88%.”
“Perhaps more telling, we’ve had only two instances where a big gain year was followed by a negative year two years later. Obviously, we’re working with a pretty small dataset, but the one-sidedness of the data makes them useful.
“After the run we’ve had in the last few years, it sure feels like we should have a down year at some point soon. But that’s the beauty of using the technicals — it takes the emotion out of our decision-making.”
Other factors go into Jonas’ outlook as well. We’ll share them as we get into the New Year…
Crude is sliding to yet another low last seen in May 2009. At last check, a barrel of West Texas Intermediate was down more than 2% on the day, to $52.94.
Sign of the times: Tomorrow, Ford will use the first-ever college football playoff games to launch an ad blitz for the new aluminum-body F-150 pickup. The ads will say much about how the switch from steel to aluminum makes the truck stronger and more durable. The part about better fuel economy? That won’t even be mentioned.
Once again, gold can’t hold the line on $1,200. As we write, the Midas metal is at $1,185 — near the very level where it ended the year 2013.
“Russia is now selling its oil only for physical gold,” says our Byron King with an item we want to get on the record before year-end.
Earlier this month, the establishment financial media (and certain “alternative” websites that ought to know better) ran wild with unsubstantiated claims that Russia was dumping its gold to shore up its sanctions-battered economy.
We duly ignored those stories. It turns out the dollar value of Russia’s foreign exchange reserves fell by $4.3 billion during the first week of December… which somehow got twisted into Russia dumping $4.3 billion in gold. Good grief…
And now we learn Russia is in fact adding to its gold stash by selling its oil only for metal.
“To be clear, Russian oil companies accept dollars for oil at the point of transaction,” Byron points out; “it’s not as if Russia demands gold bars on the barrel head.
“Still, after dollars are deposited, Russian banks immediately go out and buy physical gold. The idea is to convert dollars into gold as quickly as possible, to build up Russian reserves.”
How big are those reserves? The most recent figures from Russia’s central bank are as of the end of November. They reveal a steady ramp-up the first hints of the financial crisis in 2007… up to a record level today…
Which prompts Byron to pose this question: “What does Vladimir Putin know that you, as an investor, ought to understand as well?
“Putin majored in international law and business as an undergraduate, at Leningrad State University. Later, Putin received a Ph.D. from the prestigious St. Petersburg Mining Institute, the oldest technical university in Russia. Thus, his background includes law, business and mining. It’s becoming clear that Putin is putting his knowledge to work.
“At the end of the day, Putin’s goal is to create a working alternative to the dollar. He has said as much, and many people who work for Putin have said as much. When the time is right, Putin will present the world with a new Russian ruble, backed — in whole or in part — by gold.”
We don’t know when the time will be right… but we know you’ll want to have some gold in your portfolio mix whenever that is.
“The FBI: We never let facts get in the way of a good story.”
We figure that must be the agency’s motto in light of the latest developments in the Sony hack. When we left off the saga yesterday, FBI agents got a briefing from the security firm Norse — which presented extensive evidence pointing to a disgruntled ex-employee in league with hackers… and not the government of North Korea.
The FBI listened patiently to Norse’s case for three hours… thanked the people from Norse for their time… and then told Politico the meeting “did not improve the knowledge of the investigation.”
At least the media are wising up: The ombudsman at The New York Times says her employer dropped the ball. “What If North Korea Didn’t Hack Sony?” reads a headline from The Washington Post. More pointed is the Daily Beast: “FBI Won’t Stop Blaming North Korea for Sony Hack — Despite New Evidence.”
The way we figure it, the experts from Norse never stood a chance.
The most successful companies in the cybersecurity space appear to be the ones willing to toe the official line. As the intrepid blogger Marcy Wheeler pointed out yesterday, “the first security firm to back the North Korea claim was Mandiant, the firm that served as a surrogate for claims against China.” (The 5 began documenting Mandiant’s role in that regard nearly two years ago.)
“The cyberindustry,” Ms. Wheeler continued, “seems particularly prone to serving as a cut-out for both poorly analyzed intelligence and even propaganda.”
“I had not previously thought about the matter,” a reader writes after our take on North Korea yesterday, “but all of North Korea must be perpetually cold (as in NO heating anywhere) if Kim Jong Un still wears a double-breasted wool pea coat inside a bakery kitchen!”
“On the topic of seed exchanges being regulated to protect farmers against ‘agri-terrorism,'” a reader writes after Monday’s episode, “you might be interested in checking out the mobile application SeedShare, which is an effort to create a worldwide seed bank amongst private individuals.
“All shares between users are free, and the application is free. I created it as a public service after reading a news article (possibly in The 5) on the public library seed bank problem. ‘Crowdsourcing’ seed exchanges might favor the local farmer/gardener over the regulator.
“The app has just become live on the Google Play store for android devices, and it’s coming soon for iOS devices. Search SeedShare, or see here.”
The 5: Our humble e-letter as inspiration for a mobile app? Go figure… (Seriously, thanks for sharing.)
Happy New Year,
Dave Gonigam
The 5 Min. Forecast
P.S. The market’s closed tomorrow for New Year’s Day. The 5 returns on Friday.