Here’s a brain-bender for you.
Immunalysis Corp., a unit of diagnostic player Alere Inc. (NYSE: ALR), said last week that its supersensitive new test for detecting the opioid painkiller fentanyl received U.S. Food and Drug Administration (FDA) clearance for use by labs, hospitals, and doctors’ offices.
And this new development tells me – yet again – that the market for marijuana-based pain medicines is well into an uptrend that can’t be stopped.
If that seems like an exercise in “A + B = C“ logic, so be it.
I’m going to show you why my logic is right on target.
And I’m going to show you a turnaround candidate that I believe will be a hefty beneficiary of this paradigm shift in “America’s War on Pain.”
A Story I’m Pained to Share
Let’s start with this FDA approval, because that’s the “signal” that the medical-marijuana market has to head higher.
Immunalysis said that its test – the SEFRIA Urine Enzyme Immunoassay – is now the first-ever FDA-cleared screening test of its type. What had previously only been available for forensic testing – the kind of thing you’d see on CSI–type shows, where the “patient” was actually a cadaver – this new test means that fentanyl drug screening can be performed on live patients by Clinical Laboratory Improvement Amendments (CLIA)-certified healthcare units.
This is a pretty big deal, because Immunalysis’ announcement shows that the target is clearly drug abusers, and that the goal is to help squelch America’s opioid epidemic.
“The availability of an FDA-cleared fentanyl immunoassay enables more reference and hospital laboratories to conduct precise qualitative screening, which is a key strategy in stemming the alarming increase in misuse and abuse of fentanyl,” said Kathy Miller, Immunalysis’ vice president of sales and marketing. “The SEFRIA fentanyl urine drug screening test rounds out our offering of technologically advanced assays for detecting prescription and illegal drugs of abuse by providing clinicians and toxicologists with a relevant menu of FDA-cleared opiate and opioid tests.”
According to Immunalysis, fentanyl is a key ingredient in our opioid epidemic. Indeed, it cited Centers for Disease Control and Prevention (CDC) data stating that death rates from synthetic opioids like fentanyl zoomed 72.2% from 2014 to 2015.
But here’s the part of the equation that Immunalysis isn’t talking about.
I’m talking about the “War on Pain.”
In a study a year or so ago, the National Institutes of Health (NIH) found that about 11% of Americans suffered from debilitating pain. Other sources say the number of this country’s pain sufferers may run as high as 50 million.
The pain comes from many sources – accidents, injuries, botched surgeries, limitations in today’s medical technologies, diabetes, cancer, arthritis, the effects of aging… the list of causes is long and varied.
Indeed, I shared the story of my friend Tim – a carpenter who, in 1992, fell four floors from the roof of a house he was helping build.
Tim’s legs went numb, and his pain took on a life of its own – becoming a separate affliction that required its own treatment regimen. In recent years, some of the newer medications have made it possible for my friend to enjoy a more normal life. He’s restoring cars again, and I see him out and about more than in years past.
Millions of Americans share Tim’s plight and suffer from serious pain problems.
And that has turned the market for pain medication into a huge business.
According to market researcher VisionGain, the worldwide business for pain drugs is worth about $68 billion right now.
Other studies say it’s even bigger.
Transparency Market Research says demand for pain therapeutics will cause global sales to grow from about $60.2 billion in 2015 to $83 billion by 2024.
Of course, there are also some smaller specialty players that are positioned to capitalize on this big and growing need for pain-management medications.
But all these players are right now having to navigate a battlefield where two adversaries are pounding each other.
Some are referring to it as America’s “New Civil War.”
It’s Like a Medical WWE
A few years back, The New England Journal of Medicine published a commentary by two doctors who argued that pain patients should pursue “coping and acceptance strategies that primarily reduce the suffering associated with pain and only secondarily reduce pain intensity.”
In other words, those doctors say physicians should focus less on providing medicine for pain treatment and look more at how patients “deal” with pain.
This op-ed ignited a war on the NEJM website: One group lauded the doctors for focusing on public health and opioid abuse, while another flamed the authors for lacking compassion and being unrealistic about the very real problem of chronic pain.
The upshot: “There’s a civil war in the pain community,” Dr. Daniel B. Carr, president of the American Academy of Pain Medicine, told STAT back in January. “One group believes the primary goal of pain treatment is curtailing opioid prescribing. The other group looks at the disability, the human suffering, the expense of chronic pain.”
The “casualties” in this war are folks like my buddy Tim, who had to endure scores of operations, physical and alternative therapies, and all sorts of medications – many that clearly weren’t going to work.
This backlash is now making it tougher to get conventional pain medications, even as the pain issue grows.
The language in the Immunalysis FDA-approval announcement is the latest tangible evidence of the militant, anti-opioid stance the medical community is increasingly taking.
It took years for pain to achieve front-and-center status as a real medical malady – one that warranted treatment. That finally happened during the 1990s and 2000s.
But the surge in we’re seeing in the number of pain sufferers – coupled with the snapback we’re now seeing against the prescription of opioid drugs – has opened the door to a wholly new approach to pain treatment.
I’m talking about cannabinoids – medical marijuana and all its derivatives.
And there’s one company, in particular, that we’re watching…
A Profit “Trigger”
As recently as 2013, legally sanctioned medical marijuana was worth only about $1.5 billion in sales. But this year – when more than half the states have some form of legal medical or recreational use laws – the cannabis sector will be worth $6.7 billion.
This market could be worth $35 billion by 2020. And I’ve seen estimates taking this market as high as $100 billion by decade’s end.
One challenge is that there aren’t yet a lot of direct ways to play this market.
But I’ve uncovered one.
And it’s fascinating – because of a drug it’s developed.
In the area of pain treatment, one of those marijuana derivatives is a drug called Marinol.
Marinol is a synthetic form of Delta-9-THC, a compound that occurs naturally in marijuana. The FDA has approved Marinol to treat nausea in chemotherapy patients who’ve failed to adequately respond to conventional treatments.
Though not widely known, Marinol has also shown itself to be effective in the treatment of pain.
And one company that’s developed its own version of Marinol is a company called Insys Therapeutics Inc. (NASDAQ: INSY).
Insys, based in Phoenix, is a “commercial stage” specialty pharmaceutical company – with a big focus on pain treatment.
I’m broadening my definition of “pain” here a bit – taking it beyond the traditional “it hurts” definition to include forms of discomfort that impinge upon our desire to live active, full lives.
Insys has a version of Marinol, known as Syndros, which could hit the market this month: The FDA approved the final “product label” for the drug back in May.
Investors who specialize in drug stocks are always trying to pull profits from trades based on the three-step FDA phalanx that up-and-coming biotechs must navigate to finally get a new drug to market.
But if you really want to cash in, commercialization is the “triggering event” that can make that happen.
And that’s exactly where Insys is right now.
As I know from my years as a business journalist covering biotech, even after getting an approval, drug developers look to add new “indications” (treatments) for their drugs. That’s how they recoup their hefty development costs. You can bet Insys will do that with Syndros.
That’s just one of the reasons to like Insys.
Another reason is that the stock is cheap relative to its long-term potential – because it’s been beat up.
When Old News Becomes “New” News
Last year, six former Insys executives – including onetime CEO Michael Babich – were arrested for allegedly conspiring to bribe doctors to prescribe Subsys, an FDA-approved pain spray marketed by the company.
The spray is actually fentanyl – the same kind of drug we talked about at the outset of today’s report (it’s made by a number of companies). And that’s made Insys a target.
A few months ago, in the debut of her “news magazine” show, NBC’s Megyn Kelly did a media “hatchet job” on Insys.
Here’s the thing: Insys’ misdeeds had already been all over the news.
And we’ve talked about it here.
Most important of all, Insys has already responded: It cleaned house by canning the execs involved with the scheme and, since then, has moved aggressively to fix the issues that plagued it.
And it has a new CEO – a visionary – to help it capitalize.
Saeed Motahari, who just came on board last month, has had senior roles at Abbott Laboratories (NYSE: ABT), Bristol-Myers Squibb Co. (NYSE: BMY), and Roche Holding AG (OTC ADR: RHHBY) – all successful, big-cap firms.
And Motahari just brought on board a new head of medical affairs – an executive named Dr. Steven James, who’s logged stints at Merck, Shire PLC (Nasdaq ADR: SHPG), and Eli Lilly and Co. (NYSE: LLY). He also served as head of medical affairs at Allergan PLC (NYSE: AGN).
I’m not the only guru here at Money Map Press who likes Insys. So, too, does your own Michael A. Robinson, our resident tech expert who’s also emerged as a national guru on cannabinoids and medical marijuana.
“Bill, the medical-marijuana market is the next big opportunity in biotech,” Michael told me. “And I agree that Insys is, right now, the front-and-center best way to play it.”
Michael and I also agree on the “Accumulate” strategy for Insys.
Buy the stock here by using a staggered-entry strategy. Buy, say, 60% of your intended position here, and then split the remaining portion into two equal tranches one at, for example, 12% below your purchase price and the other at 20%. Look to hold it for three years.
To see some of Michael’s other medical-marijuana recommendations, take a look here.
Note From Michael: Thanks, Bill, for that “plug” – and for letting us run your report. As you folks all know by now, cannabis is one of the fastest-growing tech investment segments. A high-tech approach to cultivating this ancient plant – that’s already legal to use in more than half of the 50 states – is generating a multibillion-dollar investment opportunity for early investors. Click here to find out more, including how you can get your copy of my Roadmap to Marijuana Millions. Packed with more than 30 great companies to buy, it’s fast becoming “the weed investor’s bible.” Check it out…
I’ll see you folks back here on Friday. Have a great week.
- Strategic Tech Investor: How to Cash In on This Less-Than-Civil War.
- Strategic Tech Investor: The One Statistic All “Pot Stock” Investors Should Know.
- The New England Journal of Medicine: Intensity of Chronic Pain – the Wrong Metric?
- STAT: A “Civil War” Over Painkillers Rips Apart the Medical Community – and Leaves Patients in Fear.
- WebMD: Marijuana to Treat Pain: A Pill May Outlast a Puff.
- Private Briefing: Breaking News: The FDA Just Put Its “Seal of Approval” on Our Surging Medical Marijuana Biotech.
- Forbes: Billionaire John Kapoor Stepping Down as CEO, Chairman of Opioid Maker Insys.
- Private Briefing: Megyn Kelly Took an Ax, and Gave This Pot Stock 40 Whacks – and We Don’t Care.
- Private Briefing: My Favorite “Medical Marijuana” Biotech Just Made This Gutsy Call.