I was a pioneer in the Internet. One of the things I did was to be the first person to recruit people to be in clinical trials for drugs.
My company would get paid $100 for everyone that we recruited into the trial. If it was a diabetes trial, we would go to diabetes forums and ask for volunteers. It was easy money!
But it really showed me that the cost of creating a new drug was monstrous. They wouuld have to recruit thousands of people for their clinical trials.
I though that we were ripping off the company charging them $100 per person. I found out later that they were laughing all the way to the bank since they would have paid tens times more!
There has been a major transformation in the healthcare system over the last 20 years and that transformation is accelerating.
In the old days, big drug companies, like Merck or Bristol-Meyers would spend billions of dollars every years to develop drugs. They would also spend years to develop new drugs.
Of course, most of their efforts were failures and no drug would result from their efforts.
Starting about 20 years ago, big drug companies started to effectively outsource their drug development to biotech companies. 20 years ago, Amgen was about the only biotech company with a product earning money. All other biotech companies were speculative and were still struggling to create new drugs.
But Big Pharma realized that it was cheaper to buy the rights to a drug developed by a biotech and develop it themselves. Sometimes it was cheaper to just buy the whole biotech company!
This has led to cycles of innovation and buying of rights and companies by the big drug companies.
The chart above shows the price action of a biotech ETF, XBI, You can see it is breaking out right now. So I think this is a good time to be a buyer of the biotech sector and XBI in particular. My first objective is 100.
This is a good way to play the coming bull market.
A better way would be to buy a call on the ETF. Options are pretty cheap so I would look to buy a long dated option.
An even better way to play this market is to buy the hottest most powerful biotech stocks. Biotech stocks are very volatile and can double quickly.
I get all my specific biotech picks from Options University’s Ian Cooper who puts out a fantastic newsletter on Biotech. I would highly recommend subscribing to it.
You can get more information by clicking here.