Tue Jul 29 2014
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A Clear Way to Profit from a Graying Population

The Baby Boom generation, which includes everyone born from 1946 through 1964, is now entering retirement age (65) at a rate of 10,000 per day. That demographic wave is so big that in 2010, the U.S. Administration on Aging (AoA) predicted the elderly population in this country would double to about 71 million by 2030.

That presents a huge opportunity for bioscience investors. Here’s why.

As people grow older, as a group, they get sicker. About 80% of older adults cope with at least one chronic condition – illnesses that need to be managed but can’t be cured – and 50% struggle with two or more. Here are some of them:

  • Alzheimer’s and other dementias
  • Arthritis
  • Balance and gait problems
  • Bladder conditions
  • Cardiovascular disease
  • Cerebrovascular disease
  • Chronic Obstructive Pulmonary Disease (COPD)
  • Depression
  • Diabetes
  • Eye disease (glaucoma, cataracts, macular degeneration)
  • High blood pressure
  • Kidney disease
  • Osteoporosis
  • Parkinson’s disease
  • Prostatic hyperplasia (enlarged prostate)

Infectious diseases such as pneumonia, and injuries such as hip fractures from falling, also take a big toll on our older adults.

Naturally, the more seniors there are, the more demand there will be on the medical community for better and safer therapies to manage their health.

It’s Already Happening

But that isn’t the whole story. Not only are there more elders now than ever before, but they’re living longer. According to the Centers for Disease Control and Prevention, life expectancy currently stands at 78.7 years for adults in the United States. Compare that to a century ago, when the average figure was 47.3 years, or a half-century ago, in 1964, when it was 70.3 years.

Thanks to advances in medicine and improved public sanitation, we’ve made huge strides in longevity. But the outlook isn’t as rosy as the numbers suggest, because living longer means more years of dealing with those chronic conditions mentioned above.

All of this costs a lot of money. In 2010, older adults represented only 13% of the population, but accounted for 34% of total healthcare dollars spent. That’s $ 1.3 trillion. And that’s a heck of a market.

So as investors, where does all of this take us?

Obviously, with all this demand for better treatment, drugs that help manage chronic conditions associated with age will be on everyone’s watch list. And they’re already paying off.

Let’s take a look at just one of these diseases: adult onset (type 2) diabetes.

Since the beginning of the year, MannKind Corp.’s (Nasdaq: MNKD) price per share (PPS) has risen from $ 5.31 to $ 9.70 (as I write this), an increase of more than 80%.

During that time, MNKD’s new drug in development, Afrezza, an inhalable form of insulin for type 2 diabetes, received a positive recommendation from a U.S. Food and Drug Administration (FDA) advisory committee (AdCom), and then, a couple of months later, FDA approval. Predictably, both of these catalysts helped drive up PPS.

Immediately after the AdCom, PPS soared more than 100% in a single trading session.

And I suspect Afrezza won’t be the last diabetes drug to deliver high profits to investors.


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