- The one-two combo that might cure cancer
- Two keys to massive biotech gains
- China finally comes clean on its gold stash
- Signs of inflation, even in the government’s addled stats
- Dr. Doom gets his hot tub back… mayor behind the “incinerator from hell” indicted… another reason Canada’s pensions are such a success story… and more!
Perhaps it’ll take a one-two punch to achieve a cancer cure.
Our mailbag has been bulging this week with a debate over the ethics of turning a profit from curing cancer. Our position here at The 5 is there’s nothing wrong with “doing well by doing good.”
So as the weekend approaches, we cast our gaze toward one of the most promising approaches to curing cancer and not just treating it.
“Cancer needs nutrients to be provided via the bloodstream, as all cells do,” explains one of our biotech specialists, Ray Blanco.
Cancer cells have a means of signaling the body for new blood supplies called VEGF. “Overexpression of this signaling molecule makes the diseased cells multiply more rapidly,” says Ray.
So stopping VEGF is a good thing — unless the cancer cells switch to a different means of signaling through a protein called MET. That’s especially bad news… because MET is what helps a cancer spread from one part of the body to another.
That’s where the one-two punch comes in. Ray has his eye on a drug that can tackle both VEGF and MET. “It’s designed to shut down both of these bad actors in cancer survival and proliferation at the same time. That could make it a very valuable therapy for patients who have failed on other available options.”
The drug is already approved for one kind of cancer… and it’s in Phase 3 trials for another. “If the results are good,” says Ray, “the company will have good reason to believe the drug can work on still other types of cancers — everything ranging from lung and prostate to breast and thyroid cancer.
“And that could cause the big pharmaceutical companies to come knocking.”
Which brings us to the other catalyst that can propel a biotech stock in a matter of days or even hours.
Sure, FDA approval for a blockbuster drug — like a cancer cure — can be a rainmaker for shareholders. But so can a buyout.
As it happens, the small-cap biotech company working on that cancer cure also has a skin cancer treatment in the pipeline. It works in tandem with another drug produced by a Big Pharma firm — which has ponied up big money for the small company’s trials.
The economics for the Big Pharma company are such that it might simply buy out the small company once this skin cancer drug wins approval.
The recent history of biotech mergers and acquisitions has been hugely profitable for shareholders of the firms being bought out.
“For example,” Ray tells us, “Prosensa Holding soared by 63% on Nov. 24, 2014, when news broke it was being bought by BioMarin Pharmaceutical. If you began the day with a $5,000 stake in Prosensa, you had an extra $3,150 in your pocket by the time you sat down for dinner.
“Durata Therapeutics soared by 69% on Oct. 6, 2014, when it announced Actavis was buying it. But that’s nothing…
“Idenix Pharmaceuticals soared a staggering 229% on June 9, 2014, when it announced it was being bought by Merck. A $5,000 stake in Idenix would have ballooned into $16,450 — in just one day.
“Let me ask you, do you know of an easier way to make $11,450 in a single day — without breaking a serious law?”
Well, no. And the company Ray has in mind could well be bought out as soon as that skin cancer drug survives its “PDUFA date.”
As we explained yesterday, the FDA accelerates its review and sets a specific date to approve or deny a new drug in exchange for a fee from the company developing the drug. The date to watch with this small company’s skin cancer drug is Nov. 11. “If it’s approved — and so far there’s no reason for it not to be — the company will become an immediate buyout candidate.”
The time to act isn’t right before that “magic date,” though. It’s now… for reasons you’ll understand when you click here.
The few traders not already summering in the Hamptons are knocking off early today: The major U.S. stock indexes are little moved on light volume.
The big mover is the Nasdaq, powering higher into record territory at 5,192. But that’s mostly on the strength of Google — up 14% as we write after a monster earnings report.
The big economic number of the day is the consumer price index — up 0.3% in June, thanks in large part to rising rents.
The year-over-year change is now plus 0.1%. The “core” CPI, excluding food and energy, is up 1.8% year over year, slowly edging toward the Federal Reserve’s 2% inflation target.
As always, any resemblance to your own cost of living is purely coincidental. The real-world inflation rate as calculated by John Williams at Shadow Government Statistics clocks in at 7.7%, the highest all year.
The People’s Bank of China has finally updated the size of its gold stash.
As you might recall if you’re a longtime reader, China seldom discloses its gold reserves. Until today, the last time was on April 24, 2009 — when the total was 1,054 metric tons.
The new total is 1,658 metric tons — a 57% increase, and enough to overtake Russia as the world’s fifth-largest gold holder.
Still, the number is rather lower than an educated guess Bloomberg Industries made in late 2013. The talk then was that China had grown its stash to 2,710 metric tons.
So what gives? Our Jim Rickards weighed in on Twitter a little while ago…
It’s Jim’s longstanding hypothesis that China is building its gold reserves to guarantee a “seat at the table” whenever the global monetary system falls apart and the powers that be figure out how to revamp the system.
Key to that plan is to get the Chinese yuan accepted as part of the SDR — the “super currency” maintained by the International Monetary Fund. Jim’s convinced that will happen around October — with earthshaking consequences.
Look for more from Jim on China’s “big reveal” in today’s Daily Reckoning…
The news hasn’t exactly lit a fire under the Midas metal. Indeed, the bid is down more than 1%, to $1,132.
That’s beneath the low gold set last November. If it holds by day’s end, gold will be back to November 2009 levels.
Adding insult to injury for gold bugs… Nouriel Roubini’s got his hot tub back.
In September 2013, the New York City Building Department cracked down on the 50-something celebrity economist with a proclivity for young women and a hostility to yellow metal. He was ordered to remove a 10-person hot tub from the roof of his East Village penthouse. Seems he never got the required permits.
At the time, Roubini swore the hot tub would be rockin’ again within three months. In the event, it took nearly two years. The website Dealbreaker has the scoop: “Nouriel Roubini is nothing if not A Man Of His Word,” writes Bess Levin in a story accompanied by a couple of nonrisque photos snapped by someone — we know not who — last weekend.
Then again, he likely never had any doubt about the outcome. As Barstool Sports reminded us last December when he embarrassed himself on Twitter, “You don’t get the nickname Dr. Doom and have an entire Google Image cache chock-full of party pictures surrounded by [women] in miniskirts by worrying all the time.”
No worries…
“They love my beautiful mind,” Roubini told New York magazine years ago.
With the death last May of John Nash, the inspiration for the movie A Beautiful Mind, the remark seems even more crass than it was at the time…
And now a coda to the hard-luck tale of Harrisburg, Pennsylvania.
Harrisburg was our poster child for a forecast we issued four years ago — that “the mother of all financial bubbles” would make itself felt first on the local level. Government services you take for granted — police, fire, trash pickup — would become spotty or nonexistent. Indeed, the trash went unattended for months at a time in Harrisburg.
Now the man known as Harrisburg’s “mayor for life” — Stephen Reed was mayor from 1982-2010 — has been indicted on 499 criminal charges. Theft, corruption, bribery, stealing property, tampering with physical evidence… it’s all there. “His conduct is at the root of the fiscal issues that continue to plague the city of Harrisburg today,” says Pennsylvania Attorney General Kathleen Kane.
“Though he was power hungry and corrupt,” writes Jim Epstein at Reason, “Reed wasn’t out to line his own pockets. His failing was that he was willing to break the law in pursuit of his belief that cities should do more than create the conditions for businesses to thrive; they should act like thriving businesses.”
Thus it was he collected Wild West memorabilia in hopes of opening a museum. (It never did.) And it’s why he launched a trash incinerator project. (It led the city into receivership in December 2011.)
At least the trash is getting picked up again now…
“Dave, obviously, the Canadian who complained about your ‘Canadian Social Security’ presentation on Wednesday didn’t take the time to research the article, like I did, so please ignore.
“I hope when he contacts his political leaders he asks them why their pensions are three times the value of the average Canadian’s — now, that would be worth complaining about!
“Love reading The 5 — please keep up the great work.”
“Why are pension funds in Canada so healthy?” writes a reader with some interesting background on the story.
“Politicians with vision are so few that putting these two words in a sentence looks like a paradox. Last month, Jacques Parizeau, ex-Quebec premier and ex-finance minister, died at age 84. We owe the CPP’s success this to him.
“With his Ph.D. from the London School of Economics in pocket, as early as 1965, he got the idea to create ‘La caisse de depot et placement du Quebec,’ an independent financial institution with the mission to invest contributions from government employees and citizens. The incredible success of the idea generated, at first, defiance and jealousy across Canada, until politicians started to think that what is good for Johnny can be good for Bobby!
“La caisse de depot et placement du Quebec became a model copied everywhere (unfortunately, mostly in Canada), and this is why, for example, the Ontario Teachers’ Pension Plan manages C$130 billion. So realigning the Canada pension funds on Parizeau’s idea was a no-brainer for these fund managers and decision makers.
“Another good idea from Parizeau in the ’80s was ‘Le regime d’epargne-actions.’ Concluding that Quebecers were investing too much in bonds and not enough in the job-creating economy and the corporate world and to stimulate corporate growth and shareholding, he created ‘le regime’ — summarized as when you buy shares of corporations that have their head office in Quebec, you get a 30% income tax credit.
“It is because of this innovation that today you have multinational corporations like Bombardier and CGI that benefitted from massive capital infusion from citizens.”
The 5: Thanks for the history lesson. It only reinforces our position that Americans would do well to piggyback on the Canada Pension Plan.
Have a good weekend,
Dave Gonigam
The 5 Min. Forecast
P.S. “I think we’ve enjoyed a pretty good five months!” says Ray Blanco, whose biotech expertise we drew on earlier in today’s episode.
“Over the past five months, we’ve either fully or partially closed 17 positions, for an average gain of 49%. We have 11 open positions, and as of the last market closing, we’re up an average of 48%. Nine of the 11 positions are in positive territory, six are double-digit gainers and one is up triple digits.”
But the biggest gains are yet to come. Check this out.
