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Biotech Blast-off

It’s no secret that Big Pharma is facing some big problems. For years the companies have relied on steady revenue and income streams from their blockbuster drugs. These drugs have limited, patent-protected lifespan though. Once the drugs go “off patent” the generic drug makers become overnight competitors and Big Pharma’s big margins get pinched.

This is something we’ve been covering for a while. We only witnessed the initial corrective actions though.

In “The Only Way to Make a Fortune in Healthcare” we looked at the recent surge in mergers and acquisitions among the Big Pharma companies:

We’re seeing everything thing from multi-billion dollar mega –mergers to development deals with small biotech outfits. Merck is merging with Schering-Plough. Pfizer is taking over Wyeth. Roche has signed a merger deal with Genentech. Those are just three of the largest deals. There are dozens of other deals being cut with small biotech companies. And there will be many, many more in the months ahead. It’s the only way they can survive.

In order to get this boom really going the big money has to start moving into the small biotech companies too. Lately, it looks like the big money managers are starting to take action.

In just the past few weeks, quite a few biotech companies have been able to raise more cash (see table below). They need this cash to pay for clinical trials, more research, and everything else needed to develop new drugs.



Given the situation, this is just the start of a trend. Big Pharma companies are loaded with cash and they’ll be cutting development deals. The big money sees the opportunity in biotech as well. Everything is there for a big run in biotech stocks.

The best part about biotech is the sky is the limit. This is one of the few sectors where a stock can go from pennies to $10 or $20 per share on a single announcement. Then, as it advances a key drug through different stages, they can run higher for a long time. Once a few discoveries are made and a few people strike it big, you can bet a lot more money will follow.

Biotech is not the only sector attracting big money though. There is one other and it could have even more potential.


http://seekingalpha.com/article/137943-where-the-big-money-is-betting-big