On Thursday, for the second time in six weeks, the shares of one of our “Million Dollar Tech Portfolio” holdings gained more than 16% in a single session. (The first time that occurred was back on March 13.)
Further, the stock is now up more than 53% since I sent you that portfolio on March 6.
Really, this company’s stock is just crushing everything in its path. Since March 6, the Standard & Poor’s 500 Index is down 0.14%.
This all just underscores what I told you when I first introduced “The Million Dollar Tech Portfolio”: If you want to make life-changing gains through your stock portfolio, you simply must invest in technology.
I hope you invested in shares of this company when I first recommended them. But if you didn’t, you may be wondering if it’s not too late to buy shares…
If I still see more upside ahead…
A Backend Biotech
The answer is yes.
If you haven’t figured it out already, our biotech “pick and shovel” play is what recently gave you folks one of those days that many investors only dream about.
I call Repligen Corp. (Nasdaq: RGEN) a “pick and shovel” play because it doesn’t research or develop pharmaceuticals. Instead, this Waltham, Mass.-based small-cap supplies the ingredients that dozens of Big Pharma firms and their blockbuster drugs need.
Because it’s a supplier rather than a drugmaker, Repligen gives you the big-upside potential of new drug development – but without the downside risks and long waiting times posed by the U.S. Food and Drug Administration (FDA) approval process.
Repligen banks on the fact that biotech and drug firms face huge overhead getting new drugs to market.
Since 2003, the conventional wisdom has been that it takes 10 years and $1 billion to develop a new drug. Now, the Tufts Center for the Study of Drug Development – which came up with that original $1 billion estimate – recently updated that first report with a new cost estimate nearly three times higher: $2.9 billion.
That’s where Repligen comes in. The company, founded in 1981, supplies high-value ingredients the rest of the industry uses to get new drugs to market faster and with less overhead.
Repligen is a leading provider of a substance known as Protein A, which is used to produce many leading drugs. For instance, Protein A is used to separate and purify cancer fighters known as “monoclonal antibodies.”
Drugs of this type are part of the promising area known as “biologics.” It got this label because the compounds are derived from biological sources – such as cells and tissues – instead of being chemically synthesized.
Because of its business strategy, Repligen gets to work on some of the world’s biggest drug-development programs.
Seven of the 10 best-selling drugs of 2013 were biologics, and more than 40% of drugs in the pipeline for future release fall into this category. Among many others, Repligen is a supplier for such leading drugs as Avastin, used to treat colon cancer; Herceptin, a treatment for breast cancer; and Humira, prescribed for rheumatoid arthritis and several other conditions.
Launched in 2003, Humira became the best-selling drug in the world last year.
And successes like that are what’s driving Repligen forward so far so quickly – and that will keep its shares soaring.
Longtime Strategic Tech Investor members are doing even better with their shares of Repligen. I first recommended the stock to them back in May 2013.
They’ve got gains of 342%.
Last week’s jump was due to stellar first-quarter sales earnings – and what looks like even better news going forward.
During the first quarter, Repligen grew sales by 45% with revenue reaching a record $20.8 million.
And for the full year, Repligen has raised sales guidance by $3 million to $78 million, even after accounting for an 8% negative impact posed by the strong dollar.
Net income suffered a bit as a result of a $1.1 million expense associated with an earlier product acquisition. That lowered earnings per share by about 30% from the year-ago period to 9 cents.
So, why was Wall Street so enamored with Repligen if earnings slipped?
Profit margins continue to rise – and that means the company’s overall financial health is dramatically improving.
Gross profits rose by 59% during the quarter to $12.7 million, while gross profit margins hit 61.2%, up nearly 10% from a year ago
In other words, this is the kind of financial performance I expected when I suggested you acquire this winner.
After a big move like this, we could see the stock give up some of its impressive gains on the profit-taking of other investors. That often happens in a case like this.
But here’s a much more important number to consider: Forecasts call for the biologics market to almost double in sales to roughly $240 billion by the end of this decade.
And that means there’s plenty of growth potential for Repligen.
At Least 50% From Here
Repligen opened today at $38.95 and has a market cap of $1.29 billion.
It plans to boost earnings by 15% a year with a blend of organic expansion and acquisitions of complementary firms.
Based on that, I’m projecting gains of up to 50% over the next three years.
However, I actually think we could see more profits than that — because Repligen could become a takeover candidate.
We’ve already seen a lot of mergers and acquisitions in the biotech sector this year. And we could see gains of 60% to 75% if Repligen goes on the block.
Regardless, Repligen continues to play a unique role in the biopharmaceutical industry because it is a big driver in the success of dozens of drugs.
That means, at a minimum, you can think of Repligen as a classic growth firm that should continue beating the market over the next three years.
And with this play we just may get a kicker if an industry giant decides to scoop it up – and hand us even more outsized gains.
Of course, Repligen is just one member of “The Million Dollar Tech Portfolio.” I’m going to have a full rundown of what’s going on in that for you on Friday.
I’ll see you then.
[Editor’s Note: Did you invest in Repligen when Michael put it in “The Million Dollar Tech Portfolio”? Or are you sitting on even bigger gains? Let us know by posting a comment below.]
- Strategic Tech Investor: The Million Dollar Tech Portfolio.
- Strategic Tech Investor: Starting Today, I’m on a Mission for You.
- Strategic Tech Investor: This Tiny Biotech Will Double Your Money in No Time Flat.
- Strategic Tech Investor: The Top Three Moves to Make in This $811.8 Billion Market.
- Strategic Tech Investor: Tech Wealth Rule No. 4: In Growth We Trust.