In April 2010, Chief Income Strategist Marc Lichtenfeld made a bold prediction: He declared the 2010s the “Decade of Biotech.”
To prove his point, he picked out seven promising companies from the coming “biotech profit rush.”
He anticipated that over the decade from 2010 to 2020, their technology would provide investors with historic opportunities…
I expect the 2010s to be the “Decade of Biotech.”
In 2020, we’ll look back at the past 10 years in amazement at how many medical advances were achieved. And we’ll likely snicker at some of the prehistoric methods that are currently used, equating them to when doctors used to perform lobotomies on people with mental problems.
By 2020, there will be new drugs on the market and technologies developed that weren’t even dreamed about at the turn of the 21st century.
New discoveries will extend life, or cure diseases that even the most forward-thinking scientists couldn’t have imagined just a short time ago.
And fortunes will be made as a result.
Now that these businesses have had time to mature, let’s check back in and see what Marc’s former favorite up-and-comers are up to now.
Charles River Labs (NYSE: CRL)
This company was one of Marc’s favorite pick-and-shovel plays from spring 2010. It supplied other healthcare companies with lab animals and clinical support.
(A pick-and-shovel company creates a product or service that makes developments in a hot industry possible. During the California Gold Rush, these were the companies that made picks and shovels – and Levis.
Regardless of which prospects make it big, pick-and-shovel companies profit by helping them grow.)
Charles River Labs is a contract research organization (CRO), or a company that provides outsourced medical research. These companies are strong pick-and-shovel plays for healthcare investors.
Since the time of Marc’s prediction, Charles River Labs’ stock price has soared 326%. Its market cap has climbed to $6.8 billion in less than 10 years.
Meanwhile, acquisitions have built its operations in China and in toxicology.
Covance was another pick-and-shovel company of the biotechnology sector. It also provided emerging healthcare companies with outsourced research.
In fact, it was so successful that it was acquired by LabCorp (NYSE: LH) in 2014. Its final value was $106.42 per share.
Investors saw a 26.52% gain after the acquisition announcement.
Investors in any stock will usually be glad to hear news of an acquisition or merger. However, biotech stocks tend to respond with some of the most remarkable leaps.
Pharmaceutical Product Development
Shareholders of this CRO also benefited from an acquisition. This time, the offer came from The Carlyle Group (Nasdaq: CG) and Hellman & Friedman just one year after Marc featured Pharmaceutical Product Development it in his column.
This $3.8 billion deal was a near 30% premium. Shareholders saw 25% immediate gains after the announcement.
In July 2011, some analysts even argued that the company had the potential to become “the perfect stock.” Since then, it has begun operations in Japan and China.
Its 2010 spinoff Furiex Pharmaceuticals more than doubled after developing a drug for irritable bowel syndrome. Furiex was acquired by pharmaceutical giant Actavis four years later.
Illumina (Nasdaq: ILMN), Affymetrix and Life Technologies
In 2010, Marc was tracking these three biotechs as their sector began to heat up.
Since then, Illumina has posted an 804% gain. In 2014, Life Technologies was acquired by Thermo Fisher Scientific Inc. (NYSE: TMO).
Thermo Fisher then scooped up Affymetrix for $1.3 billion in 2016.
As you can see, positive trial findings are far from the only good news a biotech investor can receive.
Sigma-Aldrich was another pick-and-shovel play. It provided antibodies, stem cells and chemicals to other companies.
Now it manufactures almost 300,000 different products as a subsidiary of Merck (NYSE: MRK). The acquisition, announced in fall 2014, took more than a year to complete.
At $17 billion, it was the biggest purchase in Merck’s history – and Merck has been operating since 1891.
A Profitable Decade
Some investors celebrated gains of 26% after their companies got acquired. Others watched a steady 804% 10-year rise.
Either way, investors in each of Marc’s biotech favorites from 2010 stood chances to profit.
These investors learned firsthand the power that informed investing in early-stage biotech companies has to transform our portfolios and our health.
This sector is a strong choice for both short-term and long-term investors. While you’re setting your long-term investing priorities, do yourself a favor and consider pick-and-shovel biotech plays.
After all, you might just strike gold along the way.