Killing the Superbug: “Owning this stock is like holding a winning lottery ticket” (Skousen)

By Travis Johnson, Stock Gumshoe, November 15, 2010

Mark Skousen, who is one of those Ph.D-type doctors (economics) and thankfully doesn’t always insist on being called Dr. Skousen (yes, we’re looking at you Dr. Leeb), is pitching a health care stock today as a teaser for his Forecasts and Strategies newsletter.

And like some folks we’ve heard from in the past, he’s teasing a “superbug” killer — a stock with a drug that can wipe out a particularly nasty variety of cooties: MRSA.

You’ve probably heard of MRSA (Methicillin-resistant Staphylococcus aureus), which is basically an antibiotic-resistant staph infection. Antibiotic resistance has turned into a major health care issue after years of overprescribing (and antibioitic-laced meats, etc.), and this particular strain of infection that’s resistant to the standard antibiotics is becoming a bigger and bigger public health issue because it can spread pretty quickly, particularly through hospitals, and the typical nasty skin infection can turn into something far worse. I’ve had MRSA infections myself, as have our kids (child care centers are another place where they spread easily), and I can certainly verify that it’s an extremely nasty and painful skin infection even when it doesn’t turn into a critical systemic infection (though I can also tell you that the powerful antibiotics we were given to fight these infections worked just fine for us … for now, at least … but they were definitely newer, more expensive non-generic drugs).

But can fighting MRSA make you rich? Well, this teaser tells us, “Yes!” Let’s look at some of the details from the ad and see if we can figure out which MRSA-fighting stock this is:

“I’ve just uncovered the most exciting investment opportunity I’ve seen in more than 30 years as a professional economist, bestselling author and editor of one of the nation’s most successful investment letters.

“I stumbled on it by accident when my research staff and I began looking into unusual trading activity in a little-known pharmaceutical firm that is treating one of the world’s fastest-growing pandemics.

“The virus is called MRSA (pronounced MUHR-sah). You may already be familiar with it.”

OK, so that’s more evidence that Skousen is a doctor of economics, not medicine —
MRSA is a bacterial infection, not a virus. But we’re told that one particular company is already saving lives in this fight:

“MRSA is insidious, killing tens of thousands of healthy Americans each year. (And millions more around the globe.) However, a little-known pharmaceutical company is now saving these lives and raking in hundreds of millions of dollars in the process.”

He goes on to say that the “hot new drug” will soon b “flying off pharmacy shelves” … and that you probably haven’t heard of the company but …

“… a cadre of the world’s richest and most sophisticated investors are already piling into this stock. Why? Because this is the closest thing to a ‘can’t-lose’ investment I’ve ever seen.”

We get some more clues about the company behind this drug:

“… cutting-edge drug maker is a key player in acute care, a sector of the health industry that is immune to troubles in the broad economy.”

And …

“In fact, even though this is a publicly traded company, 100% of the firm’s outstanding shares are currently in the hands of the world’s richest, most powerful investors.”

100%, eh? That’s pretty unusual. And Skousen also tells us that he sees three catalysts on the horizon that will drive the shares higher:

“1. The company will announce blockbuster growth in sales and profits that exceeds Wall Street’s most optimistic estimates. (You may not realize it, but huge earnings surprises like these are the primary cause of huge short-term gains. This news will drive the stock up to the first level.

“2. The drug maker will announce both refinements to its existing MRSA-killer and successful FDA trials of other drugs in its existing pipeline. These announcements will blast the stock to the next level.

“3. Following these announcements, several pharmaceutical giants will slug it out in a bidding war to acquire the company outright. This last development — coming on the heels of the first two — will drive the stock into the stratosphere, allowing you to pocket profits of up to $416,000.”

He tells us that he’s confident in these events happening because he has “cultivated high level contacts in business and government,” and he sounds pretty confident that this “new class of antibiotics” is the only solution to the MRSA crisis. As he puts it …

“… one pharmaceutical firm holds the solution. It patented prescription knocks MRSA dead. Own this small-cap stock and you could make buckets of money in the weeks ahead.”

So who is it? Well, I scoured through the letter and came up with a few more clues to feed into the mighty, mighty Thinkolator — and these couple paragraphs have a couple more specifics for us …

“… this pharmaceutical firm is already one of the 100 Fastest-Growing Companies in the U.S. But it has hit a homerun with its patented antibiotic, one of the few FDA approved drugs for use against a stubborn superbug.

“This has been the most successful launch of an antibiotic in U.S. medical history. But the company is hardly resting on its laurels.

“Its sole focus is the development and commercialization of other anti-infective products for use by hospitals and other acute care facilities. It’s a narrow focus, but one with incredible commercial possibilities.”

And that’s enough — to match those clues, this must be Cubist Pharmaceuticals (CBST)

Cubist is an established pharmaceutical company, with a strong salesforce and one product of note: an intravenous antibioitic called Cubicin that is used in treating MRSA as well as other complex infections. And they are on Fortune’s 100 fastest growing companies list (they’re number 31 this year), thanks to Cubicin sales. And yes, Cubicin was the most successful antibiotic release in history (that’s in terms of sales — I imagine most people would consider penicillin to have been a “more successful” release when it went into widespread use, particularly in World War II).

Cubicin has been approved for several years, driving some nice revenue and earnings growth for Cubist, though it’s arguably still a second-line drug in most infection cases (it’s quite a bit more expensive than the old standbys like Vancomycin, though it is still growing and taking market share). More concerning for Cubist lately has been a patent challenge from Teva Pharmaceuticals — CBST apparently has a key patent expiration in 2016, but it looks like Teva is fighting the patent and filing to get approval for a generic version much sooner. I have no idea what’s happening with this, I haven’t dug into the details, but from what I can tell the trial is still expected to begin in April of next year — Cubist still says that they expect Cubicin sales to reach the $1 billion level and more, so it seems likely that there’s some fear of either this lawsuit or the patent expiration (2016 or 2019, depending on which patents you consider most important) keeping the shares somewhat depressed.

Cubist clearly knows that they’re perhaps overly dependent on one drug in a competitive environment (there are also other new MRSA-fighters either already approved or on the verge of being released, with Teflaro from Forest Labs as just one newly approved example), so they’ve been building up their pipeline — they gave up on one of their acute care drugs that failed in trials earlier, but bought out another biotech last year (Calixa Therapeutics) and have some Phase II trials underway on those newly acquired antibiotic compounds.

So … it looks like the question is whether the new compounds in development will help to buttress their product portfolio before Cubicin’s patent expiration, and whether you think the patent and their exclusivity will hold up for the next 5-10 years as Cubicin sales continue to grow. The company is certainly reasonably priced right now, with revenues up 13% year over year in the last quarter and similar earnings growth to go along with a trailing PE of 14 and a forward PE of 13. They seem to have plenty of cash, especially with a recent convertible note offering that will help them repay older debt and invest more in their pipeline, and they have apparently also been making partnership deals to put their salesforce to work selling drugs from other companies — not a huge deal, but perhaps encouraging that they’re thinking about diversifying revenue.

Cubist has a reasonably informative website, including investor fact sheets and presentations that are up to date with their current earnings info, so that’s a good place to start if you’re curious.

And to go beyond that, you’ll have to know more about Cubist than I do — all I know is that I’m quite confident that this is the stock Skousen is touting, and that it’s a pretty big company for a biotech and small for a pharmaceutical firm (market cap around $1 billion), and it is definitely extremely dependent on one drug … though it is a heckuva drug. If you think that sounds either appealing or frightening, let us know with a comment below.


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28 Comments on "Killing the Superbug: “Owning this stock is like holding a winning lottery ticket” (Skousen)"

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robertson
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robertson
November 15, 2010 3:35 pm

good job, again. thank youl

Bart
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Bart
November 15, 2010 8:27 pm

I’ve tried several Skouson products over the years, including Forecasts and Strategies. It’s not a bad publication for general investing, but in my opinion it is difficult to make any money with it. That’s true of another of his publications. I think he’s good about getting you in the market , but not out. His warnings are fairly cryptic so good luck with that. Of course, in hindsight he’ll crow about how prescient his ‘warning’ was.

kenneth
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kenneth
November 15, 2010 11:11 pm

I also got the tease this weekend and came up with the same company as you. The other company that has a promising drug is private. Also, this is a "one drug" company with a pipleline.

Charles
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Charles
November 16, 2010 8:32 am

I tried Forecasts and Strategies but quit when he missed a dividend cut in one of his recommendations.

The stock took a dive, it was no big deal for him. It’ll happen again.

Should he waste his precious time on such things. Might interfere with those bj’s for the scum of the earth

John G
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John G
November 16, 2010 11:46 pm

I was trading in & out of Cubist (CBST) back in July & August 2007, when it was in the $22.00 to $24.00 range, and then again in March of "09, when it dropped to $14.00. I'm pretty sure that Cubicin was their main drug,way back then
John G.

jeff
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jeff
November 21, 2010 1:25 pm

yes I was in back then too.

mglaz964
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mglaz964
November 28, 2010 3:10 pm

I got Mark Scousen's sensational come on about a biotech company with a MRSA drug that can make you over $416,000. Baffling where he comes up with $416m. Okay, so Cubist is worth owning but how does he get away with putting out such sensationalist claims??

bobbobwhite
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bobbobwhite
December 1, 2010 1:53 pm

After reading the article I found 5 companies in 5 minutes in a Google search of MRSA.

Guest
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Guest
December 7, 2010 10:29 am
Cubist sounds like the likely candidate. But until they resolve the patent infringement against Teva (possible trial date of Apr 25, 2011), they're somewhat speculative. If they win; their stock will likely soar even higher. If not; time to sell. Why? Because most of their revenue is from one drug: Cubicin. Which is the drug that Cubist has been banked on and the drug that's the basis of the infringement suit. If Teva is allowed to re-continue making the generic version then Cubist has lost it's golden goose. Have you looked at Theravance Inc. (THRX). They partnered with Astellas Pharma… Read more »
Henri
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Henri
January 9, 2011 7:57 am

Got the teaser today, tried to find the candidate myself. Didn't succeed, but stumbled across biota holdings, which trades on ASX. Similar profile, different drugs, much smaller cap and interesting technical setup just now (7.1.2011, recent breakout from basing pattern). On the other hand Cubist is technically uninteresting, so I wouldn't bet a dime on it just now. It may belong in a watch list, not into a portfolio at present.[polldaddy 4360795 http://answers.polldaddy.com/poll/4360795/ polldaddy]

Ray
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Ray
January 9, 2011 7:50 pm

Often a new drug will take several years to "catch on" and perhaps this Cubicin is primed for more use just in time for a patent trial or expiration.

Arny Handelman
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Arny Handelman
January 10, 2011 3:18 pm
Sure the idea of a new drug to solve a growing crisis like MRSA is exciting. But it’s like venture capital investing: you invest in several, and several fail. Hopefully, a few winners occur to compensate for your many losses and even give you a profit. How do you pick a winner? If a co. has a next new great drug, insiders drive up the price of the stock. Then challenges come along like the Teva lawsuit. Horrible side effects could suddenly emerge, as in Vicodin. The most sensible way to look at this sector is with an ETF or… Read more »
Drj
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Drj
February 20, 2011 7:38 am

Trius symbol TSRX has the MRSA killer.

Jimbo
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Jimbo
March 28, 2011 6:28 pm

Anywho,……Speaking of savin lives……Would you share your knowledge and gut on any of the following……………….Micromet(MITI),…Sentry Petroleum(SPLM),…Weikang(WKBT),….New Energy(NENE),….last but not least—Net Savings(CXLT). Most appriciated. Jimbo

Sharon
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Sharon
March 30, 2011 3:55 pm

TSRX has the best shot at it, as they are targeting deep tissue, such as lung tissue. It's in phase 3, but I don't see any insider buying for quite awhile. It's still buy rated.

Steve
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Steve
March 30, 2011 4:57 pm

There is a public traded company that offers a product with effective kill rates for MRSA,
H1N1, and many other "bugs". Has (24) hour residual effect and non-toxic.
This product was sent to Haiti for water purification!
We have used this product in our home for (2) years with great satisfaction.
There is ton of information on this company – check out PURE BIOSCIENCE (PURE)

Adam
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Adam
April 7, 2011 5:45 pm
IBM and the Institute of Bioengineering and Nanotechnology have discovered new types of polymers which seek out and destroy antibiotic-resistant bacteria and infectious diseases such as Methicillin-resistant Staphylococcus aureus (MRSA).

According to IBM, the MRSA breakthrough applies the same principles used in semiconductor manufacturing. The polymers are nanostructures physically attracted to the infected cells like a magnet. This allows them to selectively get rid of stubborn bacteria without damage to the healthy cells surrounding them. The nanostructures are also physically able to break through the bacterial cell wall preventing the bacteria from spreading and building up drug resistance. Tested in China,… Read more »
BIGG
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BIGG
May 27, 2011 1:32 pm

What about TSRX

boskom
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boskom
December 1, 2016 4:26 am

Hi Bigg. What is the full name of TSRX?

bnor
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bnor
May 27, 2011 5:56 pm
This from 5/26/11: BOSTON (MarketWatch) — Shares of Cambridge, Mass.-based Cubist Pharmaceuticals were up 6% in morning trading Thursday amid speculation that the company was engaged in merger talks. Earlier this week, the U.K. newspaper The Telegraph, citing unnamed sources, said that Anglo-Irish drugmaker Shire PLC SHPGY approached Cubist a month ago with a takoever offer of $44.50 a share, or about $2 billion, and the two are now engaged in merger talks. The newspaper added other possible suitors include the U.K.'s AstraZeneca PLC AZN, Israel's Teva Pharmaceutical Industries TEVA, and Johnson & Johnson JNJ. Cubist's lead product is the… Read more »
kayo
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kayo
May 28, 2011 10:31 pm

Sodium Chlorite when converted to chlorine dioxide kills MRSA

metal
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January 22, 2012 11:39 am

Thank you for every other fantastic article. The place else may anybody get that kind of info in such an ideal way of writing? I’ve a presentation next week, and I’m on the look for such information.

dunnydame
Irregular
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dunnydame
February 26, 2016 7:41 pm
Today I received (yet another) spiel today about how Mark Skousen’s oft-touted Elite “SS-4 Income Stream” could make me America’s next millionaire. Of course I went to my favorite stock sleuth and happened to also reread this one from the past. Was curious as to how Skousen’s CBST tip had worked out since then. I just hope some of you hung onto your shares long enough (I didn’t even buy any, sigh.) “Merck to Acquire Cubist Pharmaceuticals for $102 Per Share in Cash Acquisition Augments Merck’s Strong Foundation and Opportunity for Growth in Hospital Acute Care Market Monday, December 8,… Read more »
Malcolm
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Malcolm
November 16, 2010 3:09 pm

Charles, who are the "scum of the earth?" and to what are you objecting – other than that Skouson missed notifying of a coming dividend cut?

tommie2u
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tommie2u
December 1, 2010 6:13 pm

me too.. and searched out the same Cubist recommendation from Google sources == not overly impressed with Scousen's manner in playing up this stock. I too wondered where on earth he came up with the $416,000… Cubist may be a good stock to hold but its run up may be behind it already…

B Polus
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B Polus
December 7, 2010 6:42 pm

2000 shares @ $ 20.80 x 10 Bagger = $ 416,000.00

Jesse Roberts
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Jesse Roberts
February 28, 2011 9:35 am

"Horrible side effects could suddenly emerge, as in Vicodin" Did you mean Vioxx??

Ventureshadow
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Ventureshadow
May 29, 2011 9:41 pm

chlorine and chlorine dioxide kill everything.

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