The real opportunity for “almost economic” investment in dreams is finally beginning to emerge.
Will eradicate degenerative diseases of the nervous system as an example: I do not know if you noticed but the “Dream Corner”, whose values a year ago swelled to dimensions above and beyond the 5 or maximum 10 percent devoted to it in the investment portfolio, is hardly seen today in the portfolio (CGEN as one example). But investing in dreams, a favorite subject of ours, has never taken into account accepted economic criteria, certainly not since technology began to star on Wall Street, in the first biotechnology revolution in the early 1980s.
Now, for the first time to the best of our memory, one can find quite a few dream companies that are valued at less than the cash in their coffers and that since the period when they traveled in space, 2019-20, today have progressed significantly towards realization. Because the dream, probably in the medical field or in chips, is still alive and well, then for those who think so, a lot of opportunities are created.
We ‘love’ 2 dream areas, the chip field and the medical field, especially dreams about eradicating diseases that originate in the nerve center of the brain (like Alzheimer’s, Parkinson’s, ALS, anorexia and other such terrible diseases that have no, yet, cure). We have talked enough about the chips and today we will talk about the CNS diseases that as a result of the repair create dreamy investment opportunities in values we have not seen before since the beginning of the medical biotechnology revolution in the early 1980s.
We track for years some stocks that represent the field like Elector (NYSE: ALEC), Cerevel Therapeutics (NYSE: CERE), Cyclerion Therapeutics (NYSE: CYCN), Turning Point Therapeutics (NYSE: TPTX) and more. The first three try to develop a response to neurodegenerative diseases of the type Alzheimer’s, Parkinson’s, ALS, anorexia and others while the fourth tries to decipher the effect of genes, which are activated by the CNS, on the development of cancerous diseases.
At highs between 2019 and 2021, the stock reached $ 43, 50, 25 and $ 142 respectively but recently landed at $ 7.5, $ 12, 46 cents and $ 24 respectively. TPTX By the way, two weeks after landing in May this year on $ 24 jumped to $ 74 as a result of its purchase, at a price of $ 76 per share, by pharmaceutical giant Bristol Mayer (NYSE: BMY). Nothing bad happened to the dreams themselves, all four companies even Show impressive progress, but the “herd behavior” of investors, the one that brought stocks to record prices is that also pulls down and everything, must be added, with the encouragement of commentators and analysts in both directions.
You know our policy because we repeat it over and over again. You have decided, after checking in person, to buy a dream stock at an average price of X and it rises to X2 and above, sold a share. Experience shows that dream stocks, on their way to success or failure, behave with insane frenzy. If the stock goes down and nothing that led to the decision to enter the corner does not change (and all the information needed for that is available online) add a little or leave the position. As long as the dream, in your opinion (not in the media’s opinion), has not changed, stay, if something happens and for you the dream is damaged, addicted without thinking about the price. The investor who decides to allocate a corner to dreams in the investment portfolio must know this and this, by and large, is also true in ordinary investments. Once, for example, you are convinced that the central bank is facing a series of interest rate hikes reduce the weight of bonds in the portfolio.
We will focus later on the Elector company but we will start with an explanation of the CNS niche. The central nervous system (CNS) is part of the nervous system and consists of the brain, spinal cord and several other functions such as vision and smell. It is a smart communication system, with enormous complexity that processes all the information that comes to it and then transmits instructions to the various body parts. The system is the main computer and processor that operates the person.
In the second chapter of Genesis it is written that God created man, “dust from the earth, and breathed into his nostrils the breath of life.” The soul of life that God inflated in the form he created from the dust was probably, in today’s terms, a wonderful operating system, a kind of supercomputer that includes cloud technologies, IoT, AI and other technologies that man has not yet reached. Of companies engaged in solving the way of working of this amazing system and we have also heard warnings in this regard from some people engaged in the field, religious people usually. “The CNS system,” they warn, “operates through the intellectual property of God, its patent portfolio that with the advancement of the technology revolution, entrepreneurs, hi-techists and scientists are beginning to come closer to understanding the way the system works. The system is the heart of the act of creation and the human attempt to decipher its secrets will upset the one who dwells in the heavens who may treat this progress as patent theft and it is known what happens when God is angry, flood, 10 plagues and more.
So there is indeed a danger in eradicating all those terrible diseases but when we asked a professor of neurology, a member of an open team at the medical equipment giant Medtronics and a Jew wearing a kippah, why, despite the danger, he is a research partner trying to eradicate Parkinson’s disease he smiled, ” “It was sent. He sees everything and if he has not acted so far, he may hope that we will improve the product that was developed nearly 6,000 years ago.” Our ultra-Orthodox friend will not receive such an explanation but we will return to Wall Street.
The system is prone to various disorders and can be damaged by the development of trauma, infections, degeneration, structural defects that develop (especially with age), tumors, circulatory disorders and autoimmune disorders that are neurological disorders of immune system damage and can affect memory and ability to perform daily actions. Over the last few decades an increase in nervous system disorders has been seen as a result of phenomena like an increase in the incidence of mental illness, unhealthy lifestyle, lack of awareness, even climate change but mainly because of the growing elderly population.
In addition to these, the advances leading the technology revolution in the fields of medical equipment and prevention and the success in the treatment of patients at later stages and in the treatment of situations that have not been addressed so far lead to the expansion and increase in demand for services. Medical research firm iHealthcareAnalyist predicts that the global market for therapeutic drugs in the central nervous system, which in 2017 rolled $ 41.3 billion and in 2020 116.2 will reach, by 2027, 154 billion with a growth rate of about 9% per year. According to the World Health Organization (WHO), the disorders affect more than 1 billion people worldwide.
Many companies operate in the field when most of the activity is done by large medical companies such as Biogen (NYSE: BIIB), Eli Lilly (NYSE: LLY), Roche (NYSE: RHHBY), Mark (NYSE: MRK), Pfizer (NYSE: PFE), Astra Zenka (NYSE: AZN), GlaxoSmithKline (NYSE: GSK), Takada (NYSE: TAK) Japanese who acquired the British “CNS intern” Shire PLC, Novartis (NYSE: NVS), Johnson & G. Wenson (NYSE: JNJ), BioMarin (NYSE: BMRN), Dr. Reddy’s (NYSE: RDY) and Teva (NYSE: TEVA). The issue is rapidly evolving in China and India. Investing in specific projects in the field promoted by young companies such as, GSK has invested $ 700 million in ALEC to participate with the company in opening 2 vaccines one against dementia and the other against Parkinson’s and Alzheimer’s.
Due to technological advances and rising demand, especially in the last decade, companies specializing in the field have been founded, some public, like all the companies in our corner and over 100 others alongside a growing number of new startups like the Swiss company Avrion Therapeutics founded in 2020 after 10 years of research In the kindergartens that conducted 2 prestigious research institutions, Brain Mind Institute and Bertarelli Foundation (the founders of the Israeli InterPharm) together with the Swiss Federal Institute of Technology Lausanne
Where is the opportunity? Eradication of nerve center diseases like eradication of various cancers or eradication of heart disease is a challenge for humanity, no less a study of the space system. Elector (NYSE: ALEC) is certainly a representative example. The company was founded in 2013 by the Israeli Dr. Aharon Rosenthal, who before that, in 2001, founded Rinat Neuroscience, which following an agreement with Genatech (where he previously worked), developed antibody-based vaccines. In 2008, Pfizer acquired Rinat At $ 500 million and is currently an independent biotechnology division under Pfizer.
ALEC was issued in early 2019 at a price of $ 19 per share and raised, through senior underwriters Morgan Stanley, Bank of America, Barclays and Cowen $ 240 million. The company was then valued at one and a half billion dollars (more than the current doubling of its value) on the basis of the net dream. Trading opened at $ 22 per share and in February 2020 the stock reached a price of $ 35. During 2020 it dropped to $ 9 per share and from there climbed, last summer, to 43 due to the agreement signed with GSK that with a contribution of $ 700 million entered as a partner in two projects carried out by the company, only to deteriorate to May 7.5 and has since risen to 9 this week. Today, the company is traded at an estimate that is 12% lower than the cash in its coffers !! And she’s not the only one.
What does the company do (what is the dream)? The company is developing treatments for the immune system to cure neurodegeneration and cancer. The company discovers and develops immunological modular therapies for Alzheimer’s disease, Parkinson’s, dementia, ALS and other degenerative disorders. They define their mission, “to develop therapies that strengthen the immune system to cure neurodegeneration and other diseases.” This is a company that focuses on understanding the immune system and developing vaccines accordingly. The company does not yet have an FDA-approved drug but since the IPO it has had drugs that have progressed to the second and third (final) trial phase. That is, the company is progressing even better than expected in its IPO presentation. Anyone who has the patience to go over the 10K (annual report to the Authority) of 2021 will come to two conclusions. The first is that it is a huge accumulation of dreams, and the second that it is definitely a candidate for acquisition. The stock reached a peak (crazy in our opinion) last summer following the agreement with GSK and a wave of hot recommendations that accompanied it but the current amendment brought the stock back from space. 4 giant companies “compete” in the company’s operations, Biogen, Eli Lilly, Merck and Roche Holding. Some of these companies, especially Eugene, which is still fighting for the approval of the Alzheimer’s drug, are, according to analysts, potential buyers.
Each of the companies mentioned in the article and many dozens more in the field have recently landed from space. True, none of them should have gone into space in the first place but they went up because of the dreams and at a historic low for them even though the dreams are still there, even progressing significantly so the declines, for those interested in economic dreams, create many buying opportunities.
And as usual, as an alternative to a grueling journey of checking individual companies and closely monitoring them there are the baskets. Biotechnology Baskets, the XBI that represents the companies in the S&P index and the NBI that represents the companies on the Nasdaq.
* The above should not be construed as a recommendation for performing operations and / or investment advice and / or investment marketing and / or advice of any kind. The information presented is for information only and is not a substitute for advice that takes into account the data and needs of each person. Whoever uses the above information – does so at his own discretion and sole responsibility. The authors may hold some of the papers mentioned above.