The biotech sector has been one of the best performers, which is in large part due to how biotech stocks are maturing. One prime example is Medivation Inc (NASDAQ:MDVN).
A decade or two ago, most biotechs were still on the fringes of institutional medicine.
Doctors are a conservative lot in general. Before they start recommending a new drug to patients, they want plenty of evidence that it is no worse than what they have been using and potentially better. Each therapy needs to be time-tested before put in use and then studied long term after a new drug is on the market.
In the “old days” — before imported cars were fashionable, and the U.S. only had three automakers — Buicks were considered “doctors’ cars” because they were nice but not flashy. Granted, a lot has changed since then, but doctors have essentially remained the same.
On the other hand, pharmaceutical companies have been increasingly aggressive over that same time period, getting new drugs into the testing pipeline and expanding their offerings. Medicine has become big business, and as new drug discoveries generate huge sales, a new market was born and new players flooded in.
Also during the same period, technology advanced significantly. Now researchers can see things they could never have imagined two decades ago. The level of understanding researchers have in biology, microscopy, chemistry, biochemistry, etc. is an order of magnitude greater now that the computers and equipment that researchers run are an order of magnitude faster.
All the advancement has changed the biotech sector considerably. What the early biotech stocks were working on seemed either Quixotic or futuristic fantasy at the time, but now that everyone has a seat at the tech table, the work biotech stocks are doing is much more accepted at every level of society.
MDVN is the latest iteration of the new breed of biotech stocks that are changing the medical landscape. Medivation searches the rare and serious disease spaces for drugs that are ready for development for human testing in 12-18 months.
In essence, MDVN is a biotech head-hunting firm, but instead of looking for biotech research talent, Medivation is looking for the most talented drugs it can find to get into human trials.
Bear in mind, drug trial is the riskiest and costliest aspect of the drug pipeline. Trials take years and costs tens of millions of dollars.
Here is MDVN’s straightforward three-part strategy:
- Build a portfolio of four to six product candidates that have the potential to be in clinical development within 12 to 18 months after acquisition.
- Develop those product candidates as rapidly and efficiently as possible; and
- Consider partnering or selling successful programs to large pharmaceutical, biotechnology or medical device companies for late-stage clinical studies and commercialization.
Medivation’s simple strategy has been working exceedingly well. In the past year MDVN stock is up 88%. In the past five years it’s up almost 2,200%. Yes, that’s 2,200% in the past five years.
What’s more — Medivation isn’t a flash in the pan. MDVN has established itself as a go-to company for big pharma to shop from. Medivation curates quality technologies in key strategic sectors, which saves big firms from all the legwork. Therefore, big pharma can get just what it wants without having to buy a small biotech for one drug it wants and sell off or bury the rest of the small biotech’s efforts and staff.
MDVN’s margins are huge and continue to rise faster than the industry average. Medivation’s return on equity outpaces the industry average and the S&P 500 average. Net operating cash flow is also far above industry averages. No wonder 11 of 14 analysts rate MDVN stock a “buy,” even after its stunning long-term run.
The point is, if you think the biotech sector is not only the present but the future of healthcare, then pick up some MDVN — it’s the future of the future.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
