Best Ideas for 2014 (Part 2)

 | Jan 07, 2014 | 3:29 PM EST  | Comments
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Last week I highlighted a few of my best ideas in the tech space

With Obamacare the law of the land, millions of people will be added to the health insurance roles over the next few years. I think healthcare will be one of the most important sectors to focus on as all those new customers seek treatment. In the one-year period ending yesterday, the S&P Healthcare Sector Index was up 34.47%.

Healthcare is made up of many subsectors, but the most interesting is biotech. Probably the most exciting company in the biotech space is Celgene (CELG). The company is a cancer treatment powerhouse. Celgene's blood cancer drug Revlimid is expected to produce revenue of between $4.2 billion and $4.3 billion this year. Abraxane, its breast cancer drug, was approved to treat non-small lung and pancreatic cancer in 2012 is expected to do north of $170 million in revenue. Pomalyst, a treatment for multiple myeloma that won approval last February, produced $90 million in revenue, up 35% in the most recent quarter. The company is expected to report $6.4 billion in revenue for fiscal 2013 and $7.4 billion in 2014. Furthermore, by 2015, analysts expect the company to win additional drug approvals, which could push revenues up 20% to $8.6 billion. Despite the stock's impressive run (up 90% in one year), Celgene should continue to push higher as the company banks profits.

Gilead (GILD) is another exciting name in the space. Gilead is a powerhouse in the hepatitis C space and its novel drug Sovaldi could surpass $8 billion in sales annually by 2018. Hep C is a big problem. According to estimates by the National Institutes of Health, 180 million people have hepatitis and fewer than 50% of those have been diagnosed. And of those 50%, less than 10% have been treated. In the U.S., an estimated 4 million people suffer from hepatitis C and treating the disease costs an estimated $40 billion annually. Hep C is the leading cause of liver cancer.

Recently, Gilead announced it would seek approval for the combination of Sovaldi and its newest hepatitis drug Ledipasvir sometime in the first quarter of 2014. The company said it hopes the combination treatment will put an end to hepatitis.

If it hopes to achieve the high end of analyst estimates, Gilead will need the additional approvals. Right now, analysts think the company can achieve $19 billion in revenue by fiscal 2015, up from $10.9 billion in FY2013. Despite the high cost of the treatment ($85,000) and the intense competition in the hepatitis space, I think Gilead will be a long-term winner.

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