| December 20, 2013 | | | | |  | | | The Thinning of the Biotech Herd | | | - A sobering story to close out our week of 2014 forecasts...
- Don't freak out… we're going to use the words "death panels"... but only out of necessity...
- Plus, Stephen Petranek on the cancer that can run in the family (his own father was diagnosed with it)... the investible treatments that are being produced… and how they could transform your health while fattening your wallet...
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| | | | | | | The Most Important 86 Seconds of Your Day 86 seconds. That's all we're asking of your time. In just 86 seconds, you'll discover the most improbable niche market we've ever found... and whether it's right for you. Click here to see if this niche market is right for you! | | | | | | | | Addison Wiggin, reluctantly kicking off the weekend with a gloomy but true story...
 "I have 30 pills left… about seven weeks' worth," said Patricia Thompson.
'Why is this happening?' and it just all seems so unfair."
We apologize in advance if this isn't your ideal way to start your weekend. Ms. Thompson has leukemia, which, fortunately, is in remission. As for the 30 pills she has left, however… they're Sprycel, her cancer drug.
Bristol-Myers Squibb produces the drug… and it costs over $100,000 per year. Medicare covers it, but even still, Ms. Thompson has to pay nearly $10,000 out of pocket. Naturally, she feels as though she's choosing between death and bankruptcy. It's a sobering story that, sadly, depicts a trend ongoing in the U.S. health care system. And it's set to only get worse.
"Cancer drug prices have doubled in the past decade, from an average of $5,000 per month to more than $10,000," reports ABC's Richard Besser.
"Eleven of the 12 cancer drugs the Food and Drug Administration approved for fighting cancer in 2012 were priced at more than $100,000 per year, double the average annual household income, according to a report by the Journal of National Cancer Institute."
Why cancer drug costs have risen so much we're unsure. But allow us to connect the dots between the trajectory of cancer drug prices… and another trend we've been monitoring for nearly two years. In 1970, health care spending took up 6.2% of the federal budget. By 1990, that percentage doubled. By 2011, it doubled again; today, 24.3% of federal spending is devoted to health care.
| Today, 24.3% of federal spending is devoted to health care. | "That's a doubling every 20 years or so," we wrote in late 2011. "Assuming you're 55 now, health care spending will eat up half the federal budget by the time you're 75."
Except it won't, we gently suggested: Something in the system is going to break long before that happens. And most likely to break is end-of-life care -- maybe as early as 2014.
OK, don't freak out… we don't mean to start a controversy by mentioning "death panels" here. But sometime soon, the "whatever it takes" approach to the final year of life will come to an end. At some point, the costs can no longer be pushed off to future generations.
Spending during the final year of life amounts to 27.4% of Medicare's budget, according to a 2001 study published in Health Affairs. That percentage is probably higher now… especially with a proliferation of expensive treatments that, by law, Medicare is required to cover.
The poster child in this regard is a firm called Dendreon Corp., maker of a treatment for metastatic prostate cancer called Provenge. Shares traded for $3 each in early 2009. By the time Provenge won FDA approval in April 2010, the price had spiked well over $50.
There's a small hiccup, though. A course of treatment costs $93,000… and it only buys the patient an average four more months of poor-quality life. If that's what the super-wealthy want to spend on their own care, fine. But in March 2011, the feds decided Provenge was a perfectly rational expense to foist onto the dead-broke Medicare trust fund. On the other hand, they didn't have much choice.
| "Medicare is prohibited from considering price when deciding whether to pay for a new treatment." | "Medicare is prohibited from considering price," reported The Associated Press, "when deciding whether to pay for a new treatment."
What Medicare can do, however, is drag its feet when reimbursing doctors. That fact lead Dendreon to revise its sales forecast in August 2011, only five months after Medicare gave Provenge its blessing. The stock crashed 67% in a day. Today, it's below the $3 it fetched in early 2009.
So goes this week's final forecast… (are you tingling with anticipation? OK good)... we hereby forecast that 2014 will be the year Wall Street starts to sniff out future Dendreons. The biotech herd is about to be thinned, and it won't be pretty.
The biotech sector was on fire throughout 2013. One of the big biotech ETFs, BBH, is up more than 60% year to date -- crushing the S&P 500, which is up "only" 27%. Many individual names have doubled investors' money, or more. Those investors will be looking to take profits sooner, rather than later.
We believe the right biotech plays still have the potential to revolutionize medicine and make early investors very wealthy. But from here on, revolutionary won't be enough; "cost-effective" will be the watchword. Starting in 2014, you'll need to be much more selective. You can't be in just any name; you need to be in the right names.
Luckily, we have our own Stephen Petranek to help us navigate the murky waters we just editorialized. In today's episode of The Daily Reckoning, Stephen zeroes in on a one particular type of cancer. And delves into the disease statistics and the implications for treatments in the market that presents investment opportunities. Read on… | | | | | | | | | Write These THREE Words Down and Legally Opt out of Obamacare Forever As bad as the Affordable Care Act will be… there's something much worse just over the horizon.
But these THREE simple words could open the door to the best health care on the planet.
Take back control of your health care… never register on an "exchange"... and save $10,500 by forever bypassing the "Obamacare tax"! Click here to find out how to access these three words. | | | | | | | | The Daily Reckoning Presents…
| | | | For the Chance to Beat Mother Nature... | | | | by Stephen Petranek | | | My father had prostate cancer. He was diagnosed with it when he was in his early 70s. It turns out that any man that age in the United States has a 1 in 8 chance of going to his doctor and getting that bad report. My father's cancer may have metastasized before his death, but neither he nor his children knew whether it had, mostly because Dad actually lived the mythology that swirls around prostate cancer — no need to panic, because it grows so slowly that something else will get you first. Yes, something else got my father many years later — massive strokes at age 88. He had a nonaggressive form of prostate cancer.
Most men think that prostate cancer is like my father's — not really a big C, more like a small c. But thinking that prostate cancer is relatively benign can be dangerous. Yet strangely enough, the opposite — overreacting — can be dangerous as well. Far too many men have gone tumbling headlong into surgery and radiation, often out of fear and a need to maintain some control over lives that seem suddenly out of control, only to end up with a diminished quality of life and perhaps a shorter one as well. The phenomenon has given rise to a new term surrounding prostate cancer — "overtreatment. "
People understandably react severely to the word cancer, and no end of money gets spent on the last six months of life for those with a cancer. The American penchant to aggressively treat cancers no matter what the cost, combined with our willingness to pay more for pharmaceuticals than people anywhere else on the planet, has opened a world of opportunity for small biotech companies.
Of the more than 30 biotech companies that had initial public offerings this year, the majority are focused on cancer drugs. The reason is obvious — people who are dying or think they might die too soon will gladly spend whatever they are charged for a chance to beat Mother Nature for just a year or two longer.
Biotechs focused on cancer are easier to finance and more likely to demand a high price when they go public, because no matter how much it costs to develop a cancer drug, and even if it works only a little bit better than another similar drug, patients will demand it and physicians will prescribe it. It doesn't take long for a young drug company to make back its development costs if it can charge patients $300 for one day's dose.
Make no mistake — I don't think researchers and scientists trying to find cancer cures are looking for a personal golden egg. I am convinced they are devoted to the cause and often desperately want to help people suffering.
| "The idea that 3D printing is a gimmick, suitable only for hobbyists, looks ever less likely" | I was deeply touched a couple of months ago when I interviewed Dr. Matthew Ellis at The Washington University School of Medicine in St. Louis, where he conducts research on breast cancer. He pleaded with me to focus on reporting that would convince the money guys at NIH and the National Cancer Institute to spend more of their scarce resources on late-stage cancer therapies. "We already know what to do with early-stage cancers," he said. "We struggle a lot more with advanced disease." He felt late-stage cancer patients were being ignored.
Ellis is right. Late-stage cancers deserve more attention than they are getting, and drugs that significantly prolong life for late-stage cancer patients are much more likely to result in windows that open research into actual cures.
There's at least one late-stage prostate cancer treatment in development that offers new hope for extending life. Drugs that can offer late-stage cancer patients any hope at all are rare, and as Dr. Ellis says, "Treating metastatic cancer is a huge challenge. But it's not a hopeless endeavor. Most people are not actually cured, but that doesn't mean we shouldn't try. Some actually are cured."
To get a grasp on what is worth worrying about when it comes to prostate cancer, and to try to understand the threat as rationally as possible, let's look at some statistics. First of all, yes, I have a higher risk of getting prostate cancer because my father had it, and you do too if your father had it. The risk is about double. As much as 10% of prostate cancer cases are directly caused by inherited mutations in genes passed down family trees. But interestingly enough, I would have a much higher probability of getting the disease if my brother had prostate cancer (so far, he doesn't).
A large study in Sweden showed that the more close relatives you have with prostate cancer, the more likely you are to get it. In families with two or more cases, the risk of getting prostate cancer by age 80 rises to almost 1 in 3. And the risk escalates to ridiculous levels if more than one brother has it. In the Swedish study, men with three brothers who had been diagnosed with prostate cancer had about a 70% chance of getting it.
The linkage is not just among men. Sisters and mothers count too. In a study in Iowa, 9.6% of the men surveyed with prostate cancer had a family history of breast cancers in women. And vice-versa: Women in families with frequent cases of prostate cancer are much more likely to get breast cancer. The BRCA2 gene, identified as a major cause of breast cancer when a woman inherits a mutated version of it, is clearly linked to prostate cancer too. The parallels between breast cancer and prostate cancer are remarkable. | | | | | | |
| 3 Lies About Retirement… Most People Believe! This controversial new video presentation spits in the face of everything you've probably been told about retirement… Watch it now and discover 3 lies about retirement most people believe, one little-known way to an independent and wealthy retirement, the shocking reason mainstream media's kept this hidden from you, plus much more! | | | | | | | | Studies of twins suggest that each male has a group of genes susceptible to causing prostate cancer if they mutate. The mutations do not have to be inherited — so-called somatic mutations that occur spontaneously in the body cause far more prostate cancers than inherited gene mutations. One study suggests the risk of getting prostate cancer from bad genetics is as high as 40%. And if you are younger than 55 and get prostate cancer, which is very rare, almost half the time it is from genetic causes.
The most recent research indicates that multiple genes are involved in many cases of prostate cancer. A study published in the journal Nature last month honed in on 127 genes along a narrow band of human DNA that seem to be involved in almost all cancers. The study suggests that the likely total number of genes that cause cancers, out of 30,000 genes in a human, may not be more than 400.
But genes aren't where you should focus your attention. If there is one clear relationship between the male body and prostate cancer, it is a remarkably simple one — the older you get, the more likely you are to have prostate cancer. It cannot be overstated that this is a disease of aging.
Up until age 40, for example, your chance of being diagnosed with prostate cancer is a mere 1 in 10,000. That drops to less than 1 in 50 by age 50, and at age 60, you're looking at a 1 in 15 chance. The risk doubles again in 10 years to 1 in 8 at age 70. Although all cancer risks increase with aging, the relationship between aging and prostate cancer is especially noticeable. (Of course, there's a relationship between aging and gene mutations — the older you get, the less effective each cell becomes in its ability to replicate itself accurately and to repair genetic damage.) The average age of diagnosis for prostate cancer is 67.
Trying to prevent prostate cancer with specific nutrition and supplements, other than eating lots of vegetables and fruits, can be tricky. Vegetables seem to help keep men from getting the aggressive version of prostate cancer. Obese men get the aggressive version more often than fit men, and exercise seems to help prevent the disease.
| Well, treatments for prostate cancer are numerous, competitive and only likely to get more competitive. | Now that you know some facts about it… you're probably wondering, what's the investment angle? Well, treatments for prostate cancer are numerous, competitive and only likely to get more competitive. There are vaccines, chemotherapies, radiation treatments, castrations (surgical and chemical), hormone therapies, cryosurgeries, plain-old cut-that-gland-out-of-there surgeries and at least 24 different drugs on the market.
Like breast cancer, prostate cancer is so common that it attracts attention from the medical community and investors alike. About 240,000 men will be diagnosed with prostate cancer this year, and about 30,000 men will die from it.
Among cancers, prostate is the second-leading cause of death in men after lung cancer. There are at least 2.5 million men alive who know they have it at this moment. To give you some example of the money being spent on this disease — about $12 billion annually — you have only to look at a tried and true chemotherapy called Taxotere, developed by global pharmaceutical giant Sanofi. Before it lost patent protection in 2010, Taxotere created sales for Sanofi of $3 billion a year.
In the last two years, the FDA has approved five different drugs that extend the lives of men with metastatic prostate cancer. One of the latest and greatest is Johnson & Johnson's Zytiga, which was approved by the FDA in 2011 as a third-line drug to treat people who have taken Taxotere or its generic version, docetaxel, without good results.
(Second- or third-line drugs are not the drugs of first choice to treat a disease. Doctors follow orderly procedures, which are developed by trial and error for treating major diseases like cancer. Radiation, for example, might be a first-line treatment. Docetaxel, a chemotherapy, would be a second-line treatment if radiation is ineffective. Zytiga used to be a third-line treatment.)
A year ago, the FDA approved Zytiga, which can be taken as a pill, as a second-line treatment for men who had not received chemotherapy. That boosted its sales to what will probably be more than $1.6 billion in 2013, putting it well into the top 100 best-selling drugs in the United States. But Zytiga has a new and powerful competitor… which I think presents an even better investment opportunity. If this competitor's drug is approved by the FDA, the company's sales could jump by nearly 50%.
We'll be writing about this drug and the rest of the biotech space throughout the year. Stay tuned for details.
Regards,
Stephen Petranek
for The Daily Reckoning | | | | | | | | |  Stephen Petranek was the editor-in-chief of The Miami Herald's prestigious Sunday magazine, Tropic, as well covering a wide range of topics for Time Inc.'s Life magazine. He is now the editor for Breakthrough Technology Alert. | | | | | | | | | BE SURE TO ADD dr@dailyreckoning.com to your address book.
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