Today I decided to sit down for a while with a teaser ad from Dr. Mark Skousen’s Forecasts & Strategies ($50/year) — this letter is actually from his publisher, Roger Michalski, but it focuses on an idea of Skousen’s that he calls “American X”.

So what is this secret “American X” company? It’s apparently got a cure for rheumatoid arthritis, which is arguably the most lucrative disease in the market right now. Here’s a little bit from the ad:

“… no one knows what causes it.

“Yet, the company I’m recommending today knows how to kill it.

“It’s a blockbuster breakthrough that could turn every drug prescribed within this $40 billion goldmine into useless garbage.

“Own shares today in this company…

“And tomorrow you might feel as if you bought the next winning Powerball Lottery ticket.”

Who wouldn’t love to hold the winning Powerball ticket, right? So what else do we learn about this “lottery ticket” idea?

“… this company — a biotech company in the mountains of Switzerland…

“Is fully capable of making you rich, no matter which direction the economy or the investment markets are headed.

“Provided, of course, you get in before the Wall Street lemmings.”

How exciting! “getting in early”…. “lottery ticket” … a mysterious location… this teaser ad is already covering most of the bases. What else?

“… there are many different RA drugs currently on the market…

“Because not every RA patient responds the same to any given one.

“So, doctors and patients frequently try different drugs to find the one that seems to work best for them…

“Which is why pharmaceutical companies and their shareholders have been getting rich off the $40 billion RA market.

“But this scattershot approach — throwing mud on the wall to see what sticks, so to speak — is getting old. Bottom line:

“This small company Mark’s recommending could put an end to RA…

“And deprive the world’s biggest and wealthiest pharmaceutical companies of tens of billions of dollars.”

So we get to “stick it” to big pharma, too? Man, where do I sign up?

Skousen illustrates the potential of this new drug by mentioning some current blockbusters — Humira, Enbrel and Remicade are all RA drugs, and Humira is by far the highest-revenue drug in the world at $20 billion last year (Enbrel and Remicade are in the $6-7 billion neighborhood, comfortably in the list of the top ten blockbuster drugs for 2018).

And he says this new drug uses some different mechanism — unlike that crop, it doesn’t “deactivate your immune system” entirely. More from the ad:

“What this company has developed is a biologic that directly attacks the inflammation within your joints.

“This leaves your immune system untouched and unharmed, allowing it to continue fending off diseases and infections.”

This anti-rheumatoid arthritis drug is apparently code-named “Raptor”, and it’s been in Phase 1 and 2 clinical trials without serious side effects.

What else do we get by way of clues?

First, we get some bad news…

“This Swiss company is not a publicly-traded company… it’s privately owned.

“You can, however, buy all the shares you want in the American biotech company that owns exclusive rights to Raptor.

“Much as if they were the company that invented it!”

Ah, there we go — so there’s a US company involved. Which one?

“… it needed a partner.

“A partner with deep, deep pockets to fund Raptor’s continuing research and development.

“And to ultimately market it worldwide.

“After a long search, the Swiss company partnered with the publicly-traded American company that I call ‘American X’….

“Neither the Swiss company or American X have revealed the financial details of their partnership.

“But they have stated that American X will receive exclusive commercial rights to Raptor.”

And we get a quote from the CEO of the “small Swiss company” …

“We believe that combining our extensive experience with targeted therapies with American X’s world‐leading immunology expertise and clinical capabilities will optimize Raptor’s development pathway and progress.”

This is also apparently a bigger story — “Raptor” apparently targets angiogenesis, so it is also maybe useful for fighting cancer and inflammatory bowel disease… so Skousen extrapolates that to say that if it goes after all these diseases, the total sales could be over $350 billion (and after throwing that number around, says that if they get “only” 15% of the market they’d see $52 billion in new revenues).

Which is certainly a big number, even if it is mostly made up. What other clues do we get about this US partner?

“American X is not a small company.

“It’s not a thinly-financed biotech, a day away from shutting down if its ‘one and only’ product fails.

“Nor is it likely its shares will suffer a catastrophic meltdown if the stock market corrects or completely tanks.

“Or if we have another recession, which will undoubtedly happen sooner or later.

“American X is Practically Bullet-Proof!”

OK, so I know I’m not alone in finding the “Bullet-Proof” adjective particularly compelling this month.

What else?

“It currently has over 40 FDA-approved products on the market, and over 90 in development!

“Annual sales in 2017 was roughly $52 billion.”

And a little sum-up about this company’s history over the past decade:

“the biggest earner, with $52 billion in sales and a 10-year gain of 283% — nearly double that of Roche — was, of course, American X.

“So it wouldn’t be unreasonable to assume that if American X doubles its revenue…

“Its share price could just as easily double as well!

“Or triple, or quadruple!

“Imagine that — growth, value and impressive safety — all in one company!

“And the icing on the cake: American X pays an annual dividend of nearly 4%!”

So it certainly sounds exciting to refer to this as “American X” rather than to lead off with “this is the biggest drug company in the country” … after all, people rarely think they’re going to get rich by buying the biggest companies, the folks who get enticed by investment newsletter pitches are often looking to get rich quick on penny stocks.

But yes, this “American X” is indeed the big fella, Pfizer (PFE), which sits just below diversified giant Johnson & Johnson (JNJ) as the second largest pharmaceutical company in the world (Roche, Novartis and Merck are all similar in size, with market caps near $200 billion, but after that it drops off a bit to the slightly smaller goliaths).

And yes, Pfizer is the exclusive commercial partner for Philogen on Dekavil, which is the RA-targeting drug that Skousen teases here (Pfizer is trialing Dekavil in both RA and IBD, both in Phase 2 trials at the moment… there don’t seem to be any cancer trials in the works). And they do pay a big dividend that’s approaching 4%. And yes, if they got revenue of $52 billion from Dekavil at some uncertain point in the future, that would be twice their current revenue.

Will Dekavil become a blockbuster drug someday? I don’t know… it’s certainly possible, there’s clearly a market for drugs that can effectively treat rheumatoid arthritis, and they do believe it will be better-tolerated than Humira, but it’s still pretty early yet. We don’t have Phase 2 results yet, and Pfizer and Philogen are not the only people eying that huge and lucrative RA market… and I have no idea what the competition might be.

Big pharmaceutical companies are always in a complicated dance of managing the life cycle of their drugs from discovery or acquisition through clinical trials and marketing and, finally, through declining sales as drugs lose patent protection and get generic competition and Pfizer’s no different — they also have two other drugs that treat RA, Enbrel and Xeljanz (Enbrel is declining as they see biosimilar competition coming, but its still huge… Xeljanz is newer and smaller), so if they do end up with a great new RA drug in a few years it will to some degree replacing revenue they’re currently getting from other drugs for RA (as well as for other declining blockbusters like Viagra).

Dekavil has not recently been top-of-mind for Pfizer investors, it didn’t rate a mention in Pfizer’s J.P. Morgan conference presentation a few weeks ago, or in the third quarter earnings presentation, but perhaps it will come up tomorrow morning in the quarterly conference call. It won’t be moving the stock price for Pfizer anytime soon, but perhaps it will have an impact in several years if it makes it through clinical trials with flying colors.

Personally, I can’t pretend to be an expert on a pharmaceutical company with 40 different products in different phases of commercial adoption, so for a mature company like this I’d just rely on the financials and any huge, high-profile product breakthroughs or patent expirations… which really means relying on analysts if you’re not interested in really digging into the reports from these large and complex companies. Pfizer has had some downgrades recently because of fears of their “patent cliff” (the UBS analyst was quoted by CNBC on this in downgrading the stock to “neutral”: “”Xeljanz, Ibrance, Xtandi, Eliquis and Tafamidis totalling $20 billion of sales (about 30 percent of total revenue in 2015) all lose patent protection from 2025 to 2029”), though the stock had a good year last year and certainly has lots of possible replacements in the pipeline. 2025 is probably a little too early to hope for anything from Dekavil, but you never know.

If you don’t want to figure out which of their drugs will be strongest, you can just stick with the financial results — and on that front, Pfizer is the ultimate mega-cap boring pharma stock. They are expected to earn $3 a share this year, growing to $3.15 by 2020, so that’s average earnings growth of 2.5% a year. Not super sexy, but perhaps keeping up with inflation.

The dividend is currently 36 cents a share per quarter, so $1.44/year for a 3.6% yield… and it has been growing more quickly than earnings recently (it was $1.36 last year, so that’s almost 6% dividend growth). The balance sheet is very solid, they carry a bit of debt but it’s small compared to their massive market cap, and they can easily service it even as they buy back shares. To me, this looks like a solid, blue chip dividend company that’s arguably a little overpriced given the lack of growth… but it’s cheaper than a lot of big pharma stocks, and I could probably be talked into paying 13X earnings for a flat business in exchange for that steady dividend and the hope of future blockbusters.

It’s certainly not going to double revenues within the next couple years, though, so get that out of your head. If you want to look forward to a huge blockbuster from Dekavil in rheumatoid arthritis that blows Humira’s $20 billion in sales out of the water, you’ll likely have to wait a bit longer — since Phase II trials just started last year, the earliest we could be thinking about Pfizer even applying for marketing approval is probably 2023 or so, and that assumes that things go relatively well and the Phase II and Phase III trials are faster than average. Maybe it will be a breakthrough eventually, and maybe Pfizer has a dozen other mega-blockbusters in its hip pocket, but all indications I see are that it will probably be a fairly slow-moving stock. If that appeals to you, I won’t try to talk you out of it.

It’s your money, though, so it’s not my opinion (or Mark Skousen’s) that matters — it’s yours… so whaddya think? Excited about the possibilities of Dekavil? Think Pfizer is an underrated giant? Worry about that patent cliff, or see other skeletons in the clost? Let us know with a comment below… thanks for reading!