WINDSOR, ON / ACCESSWIRE / August 13, 2015 / The Wealthy Biotech Trader (or "WBT"), an investment newsletter focused on showing everyday investors new opportunities in rapidly growing, little-known, biotech, pharma and healthcare stocks making news and subsequent market moves, today alerts investors to some alarming news out of China.
On Tuesday, The People's Bank of China devalued the Chinese Renminbi in a surprise move that shocked global financial markets purportedly aimed at propping up Chinese exports, one of the primary drivers of their financial furnace. This is on the heels of a 30%+ correction on the Shanghai Stock Index in only two months which looks like it has further to go. And although these two events are not imminent doom for the global economy just yet, it's something that needs to be watched closely as China is now the world’s second largest economy. The third and final nail in the coffin, we're predicting, will be the bursting of the Chinese real estate bubble; there are literally hundreds of "ghost cities" built throughout China which are entire cities of brand new stores, commercial spaces and homes/condos that are vacant-they were built in anticipation of demand but may prove to be quite foolish and make the U.S.' real estate crash of 2008 seem like a walk in the park.
China has only been a free market economy for roughly 30 years and does not know what a recession looks or feels like. This could be quite a shock for most Chinese and undoubtedly would spread to the other large financial centers throughout the world.
Without getting too deep into how they would import a fraction of the almost 1 million Buicks each year they currently do, or how the imports of luxury handbags that adorn the shoulders of China's nouveau rich would come to a screeching halt, the main concern of the global economy is whether or not China will have the means or desire to continue purchasing U.S. treasuries-if they don't bonds would crash and interest rates would rise causing a shock to the financial markets undoubtedly creating a recession.
But we digress. Our staff at Wealthy Biotech trader feels that defensive stocks in the healthcare sector (healthcare providers, pharma, biotech and medical devices) are a haven for investors weary of all the potential landmines dotting the headlines. During the market crash from the fall of 2007 to the spring of 2009 the Dow Industrial index fell (NYSE: IYY) an astounding 55% but the index of companies in the Healthcare Index (NYSE: IYH) only fell roughly 35%. What's more is that the healthcare companies have outperformed the Dow Industrials during the recent six-year bull market run by a staggering 40%. Healthcare stocks posted these outsized returns all while having relatively the same volatility (risk/ standard deviation) of the Dow Index which, in our books, is the third marker of superiority. This is a sample of a broad index; many healthcare companies during the "great recession" even made gains such as Illumina Inc., which cranked out a 15% return in the worst economic downturn since the great depression.
Long story short: we feel the underlying fundamentals of a GLOBAL aging population with increased environmental health threats paired with advances in medicine and procedures show healthcare having a 20+ year secular bull market ON TOP of the one in the rear view mirror, somewhat) regardless of the global economy.
A company that WBT has been watching closely is PositiveID (OTCQB: PSID). PSID has been meeting milestones, beating revenue projections and just executing in a very impressive way. PSID is a medical device company developing the Firefly Dx, a handheld device which is essentially a "lab in the hand," which, when fully developed, could test anyone or anything for contamination or disease ranging from Ebola, to E.coli, to influenza, to MRSA. The Firefly is being designed to test for any of these pathogens, from the palm of the user's hand, within 20 minutes. Traditionally if one wanted to test a person, an item or even food for contamination they would have to take a sample to a lab, which in and of itself puts the sample at risk for contamination not to mention takes a minimum of four hours to provide results and is very expensive.
To our knowledge this is a one of kind product which would address a somewhat untapped $27 billion market (or segments thereof). The breadth of usage of the Firefly Dx can be very broad as it can be used in humanitarian/homeland defense to guard against spreading of pathogens such as Ebola, or in hospitals to test equipment etc. for devastating pathogens such as MRSA before spreading, or in any food processing facility to perform frequent checks on produce/meats to prevent recalls and other PR disasters for these companies.
This company is development stage, and may not be lower risk/more defensive as some of the other Companies mentioned but has very serious potential upside as it only trades at $0.025 at an overall market value of roughly $7 million. Once commercialized, even if the Firefly Dx garnered a small amount of market penetration, we feel the Company could be worth 10 – 100X what it's trading at now, based on industry price to sales multiples. We will delve deeper into PSID's business plan/model/strategy in future updates.
Any news released by the Company in the near-term regarding the Firefly Dx unit approaching commercialization or news of any collaboration with large players in their area could be a potential catalyst for the stock.
Another company that fits the bill of a healthcare/biotech that could benefit from a growing market for advanced cancer therapies and attract investment capital in good time and bad is Oncothyreon Inc. (NASDAQ: ONTY). ONTY is a development stage biotech company that is developing drugs and treatments for several types of cancer including, but not limited to, ovarian and breast cancer. The research for these two cancers is well funded and represent one of the largest drug market segments in terms of dollar value. The chart on this name looks absolutely primed to take-off on any good news.
Another interesting name is a company mentioned on www.TheStreet.com as one of the top 5 healthcare stocks under $10 set to soar is Lion Biotechnologies Inc. (NASDAQ: LBIO). LBIO focuses on developing and commercializing cancer immunotherapy products that harness the power of a patient's immune system to eradicate cancer cells. Immunotherapy is virtually the hottest sub-sector in biotech currently and many licensing deals witch big pharma companies are being done with much smaller companies. One of the most recent deals broke a record at about $1 billion. Historical support for this name looks to be firmly in the $6 area, which could be a potential entry point for traders playing this from the technical side, but a break through that level on any sort of strong volume should have investors abandoning that trade.
Another very interesting play in this space could only be described as a futuristic type of company called Organovo Holdings Inc. (NYSE: ONVO). ONVO is an early commercial stage company that focuses on developing and commercializing functional human tissues that could be employed in drug discovery and development, biological research, and as therapeutic implants for the treatment of damaged or degenerating tissues and organs. They have a deal with Pharma giant Merck & Co. Inc. (NYSE: MRK) which has them supplying these 3D human tissues to test drugs on which could more accurately reflect toxicity a drug has on humans compared to the traditional testing using animal models (its more humane as well). We like to call these plays "pick and shovel" plays as they're providing supplies and equipment for these biotech companies, a less risky business model if you will.
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