Eifrig’s “#1 Biotech Stock” and Four Teased Healthcare Plays

What's being teased by Retirement Millionaire?

Dr. David Eifrig has usually one of the more sober pitchmen at Stansberry (odd choice of words for a guy who owns a winery, I guess), and his Retirement Millionaire newsletter (usually sold at $49/yr, renews at $199) is probably his most conservative product — offering up “retirement living” lifestyle advice as well as what are usually, I’m told, relatively low-risk investments.  Sometimes his teaser pitches get just about as juiced up as anyone else, but the actual recommendations I’ve looked at have always been far more conservative… like Microsoft as a blockchain play, or NXP Semiconductor as a
“death of cash” idea.  The ads were goofy (Fedcoin is coming!  The US Government is erasing serial numbers!  The end of American money as we know it!), but the ideas were rational and profitable real companies.

And I haven’t dug into at one of his ads in years, so his promise of a “free” biotech play (and some “back door” ideas) caught my eye — shall we have a look?

I’m probably not going to be able to give you any great insights here, just to warn you up front… biotech is not an area where I have any deep understanding of the science… but we can at least chew through the hints, see what “secrets” we can reveal, and give those folks who took AP Chemistry a chance to chime in with their opinions.   Ready?

“A Groundbreaking Scientific Announcement Led a Former Vice President at Goldman Sachs, a Duke Fellow in Molecular Biology, and Medical Doctor, to Come Forward With a Fast-Moving Opportunity Today

“#1 Biotech Stock

“Learn the name and ticker symbol right now, NO Strings Attached!”

That’s a pretty easy one to narrow down even if they didn’t actually reveal the name… the “interviewer” in the presentation, Tom Mustin, gets readers intrigued with these words:

“There’s no better way to turn a profit than to look to one of biotech’s biggest suppliers…

“An industry leader Dr. David Eifrig says powers scientific discoveries like Texas powers oil.

“Their products are used in laboratories all over the world. From classrooms to high-level research labs.

“And as science continues to boom over the next year… Dr. David Eifrig says ONE company stands to profit more than any other, at the center of it all.”

And then, toward the end of the “interview,” they do indeed spill the beans — that “#1 Biotech,” which Eifrig says is the “perfect business to own pre- and post-COVID,” is Thermo Fisher Scientific (TMO).

Why is it perfect? Well, they do cite some example’s of TMO’s work, including facilitating vaccine distribution, developing rapid COVID testing, supporting hundreds of other companies in COVID treatments and vaccines. Essentially, they’re teasing this as buying into one of the foundational companies of the biotech sector, a supplier who will benefit as science continues to more forward in ways that remain unimaginable… the stock is up 964% in the past decade, we’re told, but Eifrig also says that “there’s a good chance this company is gearing up for their best decade ever.”

TMO is a huge company now, with a market cap of about $180 billion, so it’s definitely not going to provide sexy biotech returns, doubling overnight on some big piece of exciting news… but they certainly had a great year in 2020, with shockingly strong revenue growth of 24% and earnings growth of 72% for the year, their best year in decades… and particularly amazing for a year in which hospital procedures were way down and a lot of healthcare companies had a real dip in revenues — which I guess is a benefit for being more of a lab supplier than a real health care supplier.

And TMO is certainly in that “blue chip” category — it’s been a fantastic company for decades, and became a blowout spectacular company last year, and they probably won’t ever have another year as fantastic as 2020 on the growth front… but they are widely expected to grow again this year, with analysts forecasting earnings growth of about 13%, followed by some fairly flat years in 2022 and 2023. At the current price of $464, the shares are valued at about 21X forward earnings, which is pretty much exactly “average” for an S&P 500 company right now.

So… fantastic year last year, probably another good year this year, if you want to buy it at this price you probably have to have at least a little inkling of belief that the analysts are lowballing the numbers for the next couple years, since you probably wouldn’t want to pay 21X peak earnings for a company that’s plateauing. I’m not particularly excited about getting into TMO at this price, but it is a great company and I will confess that I’ve looked at it a couple other times over the past decade and also chose not to buy at that time, for the same reason (kinda expensive), and in retrospect that was a mistake. Sometimes, if you’ve got a good handle on a real stable blue-chip supplier in a growth industry you’re better off just building your position and staying on for the ride — the best companies rarely get really cheap, and typically can grow far more than you imagine.
What do you think of Thermo Fisher? x

But that ‘secret’ stock was revealed in the presentation — how about the ones he didn’t reveal? He did have to hold back some exciting teases, after all, it’s still all about enticing you to sign up.

And the main “secret” bit is a “backdoor” play…

“Learn The ‘Backdoor’ to a Potential 800% Biotech Winner….

“Eli Lilly is trading for around $200 per share. So, instead of getting in that way… I have a way for you to get in for far less – with the potential for faster, bigger gains too.

“You see, I’ve discovered a ‘backdoor’ into this company… with the potential for an 800% profit each the next five years.”

They say this has something to do with “startups,” and what that appears to mean is that Dr. Eifrig thinks you should buy two of the companies with whom Eli Lilly has recently made collaboration deals. Here are the hints for the first one:

“… the first opportunity lined up in November of 2020 when Eli Lilly announced an exclusive license agreement deal — dispatching one tiny biotech startup $2.7 billion in cash.

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“Then, Vanguard and BlackRock – two of the biggest funds in the world – bought up millions of dollars’ worth of shares in December 2020.

“With all the attention, this startup won’t be trading for $10 a share for long. I believe it’s best to get into this one before their next scheduled earnings report coming soon.”

That’s almost certainly Precision BioSciences (DTIL), a small genomic editing company. They have a proprietary gene correction platform called ARCUS, they’re working primarily on cancer treatments, and you can see their corporate presentation deck here. They are just beginning their first Phase 1 trials, most of their pipeline is still preclinical, but they are beginning dosing right about now, they will be presenting some interim results from other programs at ASCO next month (that’s the biggest oncology conference), and there could certainly be news from thsoe trial sat any time, and they seem to believe they’ll have a pretty news-heavy year.

Of course, whether the news is good or bad… nobody knows. Eli Lilly did partner with them in November in a deal that could be worth up to $2.7 billion or so, depending on what happens years down the line with milestone payments (the up front commitment was $135 million), and it could even go higher than that if a few hit drugs come out of the deal and generate lots of royalty payments (and, of course, could be much lower if milestones are not reached for any of the drugs in the deal).

It’s a $500 million company with lots of extremely early-stage products. Yes, it could go up 800% if they get a steady drumbeat of successful results from their early-stage clinical trials… and it could lose 80% with a couple weak press releases. I’ll leave you to your research on that one, I’d need a couple hours just to understand the investor presentation.
Any understanding of what's going on at Precision BioSciences? Help us out by sharing your opinion...x

And what’s the second one? Apparently it’s even more exciting…

“Unlock a Potential 1,000% “Backdoor” Gain”

“In December 2020, another startup company joined up with Eli Lilly. This speedy startup is world-renowned for its FDA authorized COVID-19 treatment.

“And it led to a monster debut on the stock exchange, the biggest year for biotech in Canadian history since 2014… when this company shot up 205% overnight.

“This company reached a high of $72 per share, but it’s trading back down around $30 as of early April. It’ll likely shoot back up to its debut price providing investors a potential 140% gain in a matter of months.

“That means you could more than DOUBLE your money in a very short time.”

They’ve got some star connections and funders…

“… the fight against the pandemic won them millions in funding from the likes of Bill & Melinda Gates; and Peter Thiel, famous PayPal investor, is a board member.”

That one, sez the Thinkolator, is almost certainly AbCellera (ABCL), which went public late last year — and yes, AbCellera has now developed two COVID-19 antibody treatments with Eli Lilly. And yes, Peter Thiel did invest in the company last year, and joined the Board of Directors just before ABCL went public. Thiel has backed a bunch of smaller biotechs over the years, including several antibody discovery platforms.

ABCL is another of the AI-powered “drug discovery” platforms that we’ve looked at a few times (most recently here) — here’s how they describe themselves:

“AbCellera is a technology company that searches, decodes, and analyzes natural immune systems to find antibodies that its partners can develop into drugs to prevent and treat disease. AbCellera’s full-stack, AI-powered drug discovery platform integrates modern technologies from engineering, microfluidics, single-cell analysis, high-throughput genomics, machine learning, and hyper-scale data science. AbCellera partners with drug developers of all sizes, from large pharmaceutical to small biotechnology companies, empowering them to move quickly, reduce costs, and tackle the toughest problems in drug development.”

The investor presentation is here, should you wish to dig deeper. They think of themselves as a technology company, and like a lot of the drug discovery firms they have at least some partnership connections to pretty much all the big pharmaceutical companies.

And while there’s not much of a steady state or predictable revenue stream, as far as I can tell, they did surge immediately to profitability in the first quarter, with $202 million in revenue consisting almost entirely ($172 million) of royalties from their initial COVID-19 antibody drug. I have no idea how to predict what might happen with royalties on an antibody treatment as we come hesitantly out of the pandemic in the US (and as it rages in some other places), I could easily see them having anywhere from $300 million to $1 billion in revenue this year depending on how that program goes, including their second COVID antibody, and depending on how the pandemic proceeds and whether demand for treatment drugs shoots much higher or falls off a cliff. Lots of unknowns.

Analysts are penciling in $360 million in revenue and 60 cents in earnings per share this year, which would be pretty impressive for even an $8 billion biotech software company that should have high margins eventually and had essentially no revenue a year ago… but those same analysts are also penciling in a 50%+ drop in revenues in 2022, since there isn’t necessarily an “emergency” royalty drug candidate up next to keep the growth going. If you’re not dealing with emergency use authorizations, drug development and approval takes a lot longer.

Your guess is better than mine on this one, I’ll bet. I’d be more interested if they had some steady state subscription revenue for their software to provide a floor, that would be easier for me to model out (and I confess to being a little dissuaded by the fact that I didn’t see a single mention of money — revenue, earnings, margins, anything — in their investor presentation), but it is encouraging that they have a lot of partners and the technology sounds cool and useful. And right now, at least, they’re making money.
Is this revenue going to stick for ABCL? See great things ahead? Let us know...x

Any other ideas pitched? Indeed, we get one more…

“But I believe there’s ONE company standing in the center of it all poised to rake in the lion’s share of profits as this new wave in health care really opens.

“And COVID-19 has been pushing this company’s sales higher and higher… their online health visits are up 600%. And prescription deliveries are up 1,000%. There’s also been a four-fold increase on in-store sales.”

Sounds impressive, no? What other clues do we get about this profit monster? They’re apparently opening up “health shops”, which means it’s probably one of the pharmacy chains…

“With more than 200 specialized health and wellness locations in the U.S. already, with the goal of having 1,500 more up and running by the end of 2021.

“These new health shops will totally re-vamp how you visit the doctor. You’ll simply walk in, see a doctor or health care specialist, leave with a prescription (if needed), and have a follow up visit online. Without ever having to wait weeks or months to get an appointment. And essentially saving you money.”

And some financials to spice it up a little…

“Profits soared because of all this growth up to almost $3 billion, close to a 55% increase year over year.

“What’s great is their CEO optimistically calls his company ‘recession-resistant.’ I agree.”

So what’s that? Well, it must have been a recommendation and a special report that Dr. Eifrig put together sometime last year, because that data is mostly from their June quarter… and that quote from the CEO could be from either of their first couple conference calls last year… but this is almost certainly CVS Health (CVS), the pharmacy chain and pharmacy benefit manager/managed care company (with the managed care/health insurance part coming from their acquisition of Aetna a couple years ago).

Now that the pandemic surge in revenue has passed things look a little bit less rosy, those 55% growth numbers and $3 billion in profits were from the June quarter last year, the recent pace is a much more typical 4% revenue growth/10% earnings growth story. And while the stock has surged this year, it’s still pretty rationally valued for a slow-growth blue chip retailer and insurance company — CVS right now is at about 12X earnings and pays a 2.5% dividend yield, with earnings growth that analysts predict will be in the range of 8% or so for the next couple years.

Perfectly reasonable valuation — they are competing like crazy with Amazon and souped-up convenience stores and online pharmacies, but in-person pharmacy visits are still pretty sticky and they are indeed building up what they call “HealthHUBS” to provide a more convenient all-in-one service (doctor’s visit, testing, pharmacy). I don’t know if it will work, and the stock has been on fire in the past few months so it’s certainly possible that it will have a dip at some point, but from a quick glance it looks like a pretty reasonable and conservative investment even at $90 — there’s a good chance that their business will see some decline and disruption as e-commerce continues to take a bite and as health insurance evolves, but they’re huge (market cap of $118 billion, revenue of $270 billion), so they will have a meaningful say in how the industry evolves, and probably have a fighting chance to stay relevant. It’s hard to be confident when you’re going up against Amazon… but Amazon doesn’t automatically win 100% market share in everything.
Too boring? Just right? What say ye about CVS?x

And yes, there’s even more…

“The next opportunity I’m going to tell you about was once called ‘The Most Hated Business in U.S. History’ by Wall Street analysts. But this umbrella company happens to own one of my favorite brands of all time.

“As a trained ophthalmologist, I’ve always considered this the brand in eye care – and I still always reach for their products, even now.

“In 2015, this biotech giant was worth $90 billion. Six months, a CEO scandal broke, and they ultimately lost 90% of their value.

“Famous investor Bill Ackman, their biggest investor, lost $4 billion. The stock crashed from its hey-day high of $275.

“Let me be clear, this company did everything wrong leading up to their collapse, even exposing the dark side of the pharmaceutical industry.

“But a lot of times, the best values in the market happen to be the most unloved stocks. However, in August of 2020 I was excited to hear… this brand of eye care announced its ‘break up’ with their parent company!”

OK, so if you were paying attention to the markets five years ago you probably know this one (or, like me, lost money on it thanks to Bill Ackman’s hubris)… but just to get a few more clues out there:

“Today, this is NOT the same company. They’ve undergone a major overhaul selling off businesses, firing executives, and paying off debt.

“Looking ahead, eye care is expected to be almost a $195 billion market in five years…. this stellar eye care company is poised for huge profits… already up 50% in the first half of 2021.

“Here at Stansberry Research, we’ve been watching this eye care company since 2013 – and readers already had the chance to rake in a 42% gain in just five months!

“I’m thrilled this company is back in the game. Given enough time, this company could pass its former per share high of $275.

“That would be more than a 500% gain from where the stock is today.”

So yes, that’s all in reference to the hated old Valeant/Biovail, famous for a series of acquisitions that built it into a giant, rolling up specialty pharmaceutical companies and jacking up their drug prices… and yes, one of the companies they bought along the way was Bausch & Lomb, which might be the one brand from Valeant’s stable that escaped the blowup with a decent reputation. Which is probably why they renamed the whole company Bausch Health in 2018 — a name it still carries (the ticker is BHC).

And yes, Bausch Health is going to spin off Bausch + Lomb, which will focus on vision, eye care, consumer products and ophthalmology drugs. That’s about 40% of BHC revenues at this point, and they’ve begun to break out the two main divisions in their earnings, but the spinoff hasn’t actually happened yet — BHC expects adjusted EBITDA for the full year of about $3.5 billion and revenue of $8.7 billion, so the business is pretty large and generates decent cash flow and might well get a higher valuation once the steady B+L business is a little easier to understand — don’t let the company’s small market cap of $11 billion fool you, though, this is a massively indebted company still, with long-term debt of about $24 billion. They covered the details of the spinoff at a healthcare conference last Fall, but the timing is not yet final.

I know a lot less about the Bausch + Lomb brand than Dr. Eifrig does, I’m sure, and spinoffs do tend to be compelling opportunities if they give a solid brand some independence and a fresh start, but the division of the company’s debt will have a big influence on the valuation and I haven’t scoured those financials in any way to form an opinion — I will say that it’s a relatively slow-growth company, revenue has been pretty stagnant for four years and the accounting washout from Valeant and all those acquisitions and debt are still fairly complicated, so if there is a hiding growth darling inside this “hated” company maybe it will delight. I’ll pass, personally, but we’ll see what the company looks like once the actual spinoff gets finalized.
I still get hives thinking about Valeant... is Bausch + Lomb worth the baggage? x

So there you have it … some biotech and health care ideas, including a couple biotech hopefuls and a couple longtime titans… anything sound appealing? Let us know with a comment below.  Thanks for reading!

P.S. I based my comments at the top about Retirement Millionaire in general on the info our readers have shared with us… if you’ve ever subscribed to Eifrig’s Retirement Millionaire, please do click here to share your experience with your fellow investors.  Thanks!

Disclaimer: Of the companies mentioned above, I own shares of Amaz