The First Alzheimer's Drug That Has Ever Worked

Why you should be following Biogen carefully... The first Alzheimer's drug that has ever worked... Why I'm personally making big investments in Niobium... A business for my sons...

Today's Digest includes two very unusual items...

First, I (Porter) am going to do something I've never done before in any Digest we've ever published. I'm going to urge you to buy a stock. A risky stock. A biotech stock.

I'll admit from the start, this advice is the opposite of what I normally advise investors to do. I usually talk about how to avoid risk or how to hedge it. Not today. Today, we have an unusual situation – a vast dichotomy between what most people believe about Alzheimer's and Alzheimer's treatments and what has actually been proven in clinical trials. This gives us a rare edge in the market right now.

It's so unusual that I feel compelled to tell every subscriber about it, whether he has paid me to do so or not. It's what I would want you to do for me if our roles were reversed.

Of course, you're under no obligation to buy the stock in question. And in fact, you might disagree with our analysis completely. But it's certainly worthy of discussion. You'll find that information below.

Second, I'd like to tell you something very personal...

It's an idea that's normally difficult to explain to folks. It's about the concept of quality. It's how some people are driven to create quality at their companies, even when doing so results in worse business results – at least, temporarily. I call this concept the "Niobium Difference." I'd like to talk about how I discovered it and what it means to me, my businesses, and you as an investor.

I hope these ideas provoke a lot of thinking... and I'd love to hear what you think about them. Send me a note at feedback@stansberryresearch.com.

Let's start with Alzheimer's...

A tremendously powerful belief is held almost universally across Wall Street and inside major pharmaceutical companies. The belief is that all Alzheimer's drugs fail.

The brain is a difficult and risky target. And no one talks publicly about the underlying risk that maybe we just don't understand how amyloid plaques are formed or how they're involved with Alzheimer's. Maybe we just don't yet understand something fundamental about how Alzheimer's attacks the brain. Maybe all of these drugs have been chasing the wrong target and that's why none of them work.

These beliefs are so widely held that some investors simply bet against any Alzheimer's drug, no matter who is developing it. And many pharmaceutical executives kill any Alzheimer's research project that comes up their pipeline. It's just too difficult a disease. Nothing anyone has tried works... or so virtually everyone believes.

This pervasive skepticism was on display in the New York Times last month...

A new Alzheimer's drug by Eli Lilly failed its Phase III trial. This added to the long line of failed drugs... and the billions of dollars that have been lost trying to build a safe and effective treatment.

The Times summed up the conventional wisdom...

No drug so far has been able to demonstrate that removing or preventing the accumulation of amyloid translates into a result that matters for patients: stalling or blocking some of the symptoms of dementia.

The writer was playing on the nagging doubts that many have about our fundamental understanding of Alzheimer's...

But the Times is simply wrong. For the first time ever, we have proof that targeting plaque in the brain can stop Alzheimer's. On September 1, biotech firm Biogen (BIIB) published results in the journal Nature that proved (having met statistical endpoints) that its monoclonal antibody can clean patients' brains of plaque within 12 months. It also proved that those patients stop declining on a cognitive scale.

As our senior technology analyst David Lashmet wrote in the October issue of Stansberry's Investment Advisory...

The drug (called BIIB-037) is a specialized antibody that grabs on to the Alzheimer's plaque. And because this antibody is active, white blood cells inside your brain help dissolve the plaque. The net effect of the specialized antibody and your white blood cells working together can be seen by using a contrast agent for a brain scan. After a year on this drug, the patient's plaques all but disappear.

So, there's no doubt that Biogen's drug can safely remove amyloid plaque. But does this actually help patients? Does this really cure Alzheimer's? Again, there was no doubt in the analysis as presented in Nature...

The Clinical Dementia Rating is an 18-point scale. A perfect score is zero points. As your cognitive ability declines, your scores get higher. At the start of this trial, the patients had an average score of three points. No matter how much of Biogen's drug people got, after six months they all progressed by about half a point.

But then, the results diverged. Patients not receiving the drug continued to decline. Those getting the drug saw the erosion of their cognition stop. And again, the larger the dose, the greater the improvement. After a year, the patients on the highest dose saw the progression of the disease stop.

Today, Biogen released the data on a supplemental dosing study for this new drug...

It discovered similar results could be achieved by slowly increasing the dosage over a year, rather than just starting with a full dose. Slowly increasing the dosage helped to minimize side effects. On the news, Biogen's stock went up a little, but not much.

In my view, this drug is likely to win approval. We're still a long, long way from the end of Biogen's Phase III trial, results from which won't be known until next year. But I'm unusually optimistic because the results are highly correlated. Patients' response to the drug could be predicted by the amount they received. And these results mark the first time any drug has been proven to both remove amyloid plaque safely and stop the progression of Alzheimer's.

If I'm right, this drug will be worth tens of billions to Biogen...

We recommended Biogen in the October issue of my Investment Advisory newsletter. With the stock trading around $290 a share today, we're currently down about 5.5% on the position. But… if I'm right about the implications of the trial results, this drug will be worth tens of billions of dollars to Biogen. And I think the stock would see new all-time highs of more than $400 a share. That's a substantial return from today's prices.

In the meantime, few investors are likely to pay attention to this drug (or to the stock) because of the pervasive (but false) view on Wall Street that all Alzheimer's drugs fail.

It's this unusual dichotomy between most investors' views about Biogen's drug and the positive clinical reality that gives investors a relatively low-risk way to speculate on a very important (and immensely valuable) new drug. If you have the interest and capacity to invest in biotech stocks, we think this is a great bet. At the very least, have it on your watch list.

Now, about the Niobium stuff...

Would you spend millions to make improvements to a product that no one is likely to ever notice?

Some businesses do.

And after deciding to do it myself a few times, I've decided to call it the "Niobium Difference." What's the Niobium Difference? Why does it matter to me? And why is it a critical concept for investors to understand?

I hope you'll let me explain it.

There's a huge difference between brands that are built with marketing and brands that are built with genuine innovation. The innovators last – for centuries, in some cases – because they're never satisfied. And sooner or later... everyone wants what they've built.

They "go to the Niobium."

I've always admired Rolex and BMW...

Long before I could afford to own either of these company's products, I was deeply impressed by their passion. And it wasn't their advertising at golf venues. It was the incredible effort they've expended to build watches and cars that are objectively better than any other in the world.

For example, most watch makers use a kind of high-quality German steel known as 316L. But in the 1980s, Rolex decided that even the highest-quality industrial-made steel available wasn't good enough. It developed something privately that was even better. Known as 904L, it is able to take and hold a polish that's far more intense and lasts far longer. It is also more rust- and corrosion-resistant.

To use this steel in its watches, Rolex had to replace practically every piece of tooling it owned. Even then, using 904L required years of climbing an expensive learning curve. Likewise, you might find this hard to believe, but Rolex also makes its own gold and platinum in its in-house foundry. In fact, although the company imports 24-karat gold into its factory, the output from this metal is 18-karat yellow, white, or Rolex's proprietary Everose gold (a kind of rose gold that never fades).

This obsession with building the perfect watch extends from the materials through the entire production process. All Rolex watches are made by hand and go through multiple quality control tests, including a pressurized water chamber. As a result, each Rolex watch takes about a year to make. Production can't easily be scaled beyond the million watches Rolex currently makes every year.

But it was this obsession with making perfect watches that drove the company to acquire almost every important watch-making record and develop most of the modern functions of mechanical watches.

Rolex was the first wristwatch to win the Swiss Certificate of Chronometric Precision in 1910. It developed the first waterproof watch in 1926. A Rolex was the first watch with a self-winding mechanism powered by the wearer's movements in 1928. It was the first watch to indicate the date in a window on the dial in 1946. And it was the first to show two time zones at once in 1954.

It was this record of outstanding quality and these innovations that explain why Chuck Yeager was wearing a Rolex when he broke the sound barrier in 1947 and why one was on Sir Edmund Hillary's wrist when he summited Mount Everest in 1953.

It was the quality of the watch that created the brand. And that's why, since the early 1900s, Rolex has been widely regarded as the world's finest brand of watch.

BMW originally made aircraft...

The Treaty of Versailles forced BMW to find a new line of business, so it began making motorcycles. In 1922, long before BMW was selling cars in America, its engineers designed a revolutionary new kind of motorcycle. They positioned the engine "sideways" on the frame (to increase airflow across the motor) and then linked the driveshaft directly to the rear wheels – no chain. This shaft-drive design continues to this day and makes BMW motorcycles the overwhelming bike choice for long-distance riders. BMW has won the Dakar Rally, the toughest long-distance bike race in the world, six times.

BMW was also the first carmaker to focus on smaller, more powerful, more capable cars at every price point. Its famous 2002 model (from the early 1970s) delivered a perfected balanced commuter car. (You didn't have to rotate the tires.) Thanks to its 100-horsepower engine and its handling, it was fun to drive. BMW sold more than 300,000 of these cars in the U.S., putting it on the road to becoming a major U.S. car brand. The 2002 and later BMW models created the entire class of sport sedan.

BMW engines are renowned around the world for their durability and power. The company has won the most grueling long-distance car race – the 24-hour race held at the Nurburgring ring in Germany – an amazing 19 times. Today, BMW's latest flagship vehicle, the 7 Series, is the most technologically advanced sedan ever built.

Once again... it's the product that has created the brand appeal.

When I set out to build a product company, I had one idea foremost in my mind – my children...

Stansberry Research is a great business. It's the largest independent source of financial research in the world, with almost 1 million subscribers around the world. Our lifetime subscribers – our partners – have given our firm a terrific advantage over the past 15 years, a strong financial foundation that has allowed us to invest heavily in making sure our content (our research) is top-notch.

But Stansberry Research doesn't make a "thing." We develop ideas. When I tried to explain to my children what I did at work, it was impossible. (My sons are now nine and five years old. And they still don't really understand what I do at Stansberry Research.)

Four years ago, when I turned 40, I decided I wanted to start a new business...

I wanted to build a "thing" – a great product. I wanted to build something that could last forever. I wanted to build something that my children could point to and say, "My Dad made that, it's the best in the world."

I decided to build a razor because ever since I started shaving in the 1980s, I had never been able to use any kind of shaving product happily. Razors always irritated my skin. I had tried everything and nothing was comfortable. Worst of all were cartridge razors, like the kind made by Gillette. These always caused me to get ingrown hairs. By my late 30s, I was only shaving once a week and only by going to a barber to get a straight-razor shave. That was the only solution that worked for me.

When we got started on the OneBlade project in 2012, the marketing-led shaving world hadn't taken off...

The Dollar Shave Club hadn't taken off yet. Harry's, another new entrant into the world of plastic cartridge razors, hadn't even been started. When those companies got up and running before we did, I wasn't worried. Those companies were all trying to compete with Gillette by making a lower-cost (and probably a lower-quality) version of the industry's standard razor. We had something completely different in mind.

We wanted to build an entirely new kind of razor, using the world's best materials.

Like Rolex and BMW, we wanted to build a new brand that would be valued not because of its marketing, but because of its technical capabilities and reputation for innovation. We weren't trying to sell everyone a razor. We were trying to build the best razor that had ever been built. Comparing OneBlade to Gillette, Dollar Shave Club, or Harry's would be like comparing a Rolex to a Casio. They both make watches, but they're not in the same business.

As a result, our development timeline was completely different...

The Dollar Shave Club got started in 2010 when a private-equity investor got stuck with 250,000 razors in a deal that went bad in Asia. A friend's son offered to help sell them online.

On the other hand, we spent about six months recruiting an experienced CEO, Tod Barrett, to lead our efforts. He was the head of small-appliance developer Ronco and its predecessor company for more than a decade. He had close relationships with dozens of industrial design firms and knew how to source ultra-modern, high-quality manufacturing in China. We struck a deal over dinner in Baltimore, and he set up OneBlade's headquarters near his home in Austin, Texas.

Over the next two years, we invested almost $2 million into building hundreds of prototypes and testing dozens of designs. Tod interviewed 20 different leading industrial-design firms, and then we both sat down with the top three candidates for the final selection. We choose PENSA, a firm headquartered in Brooklyn, New York.

The group's founder (Marco Perry) and its design director (Mark Prommel) were extremely enthusiastic about the project and our unusual requirements. We told them we weren't concerned about what it would cost to manufacture the razor – we just wanted them to build the best tool that had ever been made for shaving. This design request was so unusual that Fast Company magazine wrote a story about our design process...

"These guys at OneBlade are coming at it saying, we don't care about calling this what it is – being a return to safety razors, or being a better cartridge. It's not a value story. It's about, 'How can we create the best shave?'" Prommel says. "Right from that, it was interesting, a no-holds-barred approach. We were like, 'We don't know, the cost could be $100, $300, $500, but whatever it costs, it'll cost that for a reason,'" which is exactly what Barrett's team asked for.

For half a year, Pensa's team studied nothing but the blades and core geometries behind shaving. What they learned was that three basic components make up any shaving razor: the angle of the attack for the blade, the exposure of the blade (how much actually presses against your face), and the gap (or the chasm between the blade and the body of the razor, which is meant to catch your skin to be shaved).

"It's really down to the tenths of a millimeter spacing between the blade and the razor [chassis]... and dozens and dozens of ways you can affect the way the razor falls on your face," he says. The team concluded that the best razor would be a bit of a hybrid: one great blade with a handle, like a safety razor, with the pivoting and protection you get in a cartridge razor.

By mid-2015, we were ready to sell our first razors.

If you've purchased one, then you know never before has there been a razor like this on the market.

OneBlade comes in a heavy, wrapped box, with a red cord tied around it. The paper is carefully folded and held in place by a custom-made steel coin.

If you look carefully, you'll discover a number typed on the cover of the box. It's a production number. We individually number every razor we produce. You'll find the same number has been laser-etched into the steel of your razor, on the rear side of the floating head.

When you open the paper wrapper, you'll find a full-grain, hand-cut leather box. The form is made by carefully stitching up the corners with red silk. We wrap the leather in paper to make sure it doesn't get scratched on its way to you. This isn't just packaging – it's a gorgeous leather box. I use mine to pack my shaving supplies and my toothbrush when I travel. (If you're curious about the quality of the leather, you can see a complete "unboxing" here. One of our first buyers was so impressed with our packaging that he put a video of it on YouTube.)

But we didn't spend $2 million developing the box...

We spent our money building the razor. After you open the box, you'll discover why the package weighs so much. OneBlade razors are made with the same high-grade, 316L German stainless steel that most watch makers use.

To mold this ultra-hard steel into the form our technology requires, we use a revolutionary kind of manufacturing process called metal injection molding ("MIM"). This kind of manufacturing, which involves using a laser to melt the steel, allows extremely precise designs, while maintaining the unbelievable strength of the steel.

Then... we go even further to ensure that your OneBlade will last forever. All OneBlade razors are treated with a military-grade physical vapor deposition ("PVD") coating – making them practically indestructible and permanently resistant to corrosion.

But the handle isn't where you'll find most of the weight. In fact, our handle design is revolutionary in its own right. It has been "hollowed out" in a counterintuitive way, as the beveled edges provide a firm grip on the smooth surface. This is also a weight-saving measure that allows us to use ultra-high-quality steel without making a handle that weighs too much.

No, it's not the razor handle that's so heavy in the box. It's the razor stand.

Trust me, you've never seen anything like this before in any consumer product. This is half a pound of solid stainless steel that's made in exactly the same way as our razor – PVD coating and everything. OneBlade fits horizontally on top of this solid piece of metal, like putting a key into a lock.

If you've ever knocked over a cheap metal razor on a vertical stand, you'll understand why we built it this way. You can't knock our razor over. But that's not the only reason. The combination of a steel razor and a heavy steel stand just looks, feels, and even sounds right. If you've ever closed the door to a BMW, you know what I mean. Things that have been carefully designed and exquisitely crafted just feel better. That feeling is produced by a combination of senses, not just by the way it looks.

The guys at Pensa have designed an entirely new kind of razor.

OneBlade isn't merely a safety razor. But it's not a cartridge razor, either. It only has a single blade, like a safety razor. But like a cartridge razor, the technology in place makes cutting yourself almost impossible. In fact, OneBlade goes even further. Our technology is designed to give you the closeness of a professional straight-razor shave, with zero irritation and without any practice.

The secret to our design is the floating razor head – the assembly that holds the blade. A Teflon-coated spring is hidden inside the handle that ensures the blade is presented against your skin at the perfect angle, and with the right amount of pressure.

That's the magic: OneBlade doesn't require any "learning curve" like most old-fashioned safety razors, which will quickly cut you if you hold them at the wrong angle or press too hard. With OneBlade, you just set the razor against your face until you feel the spring engage and you're ready to go. No practice or expertise required. (If you want, you can set your own angle for shaving. But I'm sure that if you try it a few times, you'll discover that the pre-set angle we've built into the razor delivers the smoothest, least irritating shave.)

Ironically, it's this feature of OneBlade – the way the razor essentially shaves for you – that has come under criticism from shaving enthusiasts. These guys have spent years developing the skill to use a dangerous safety razor. Suddenly, those skills and all that experience aren't necessary... because OneBlade is giving them better shaves than they can give themselves.

Telling the OneBlade story in a 30-second television ad isn't possible. There isn't even a name yet for the kind of product we've built. The technology in this product will completely change what you expect from a razor – like the first time you drove a car with antilock brakes.

Likewise, most people who haven't tried OneBlade think our advice about always using a new blade is just a marketing gimmick...

It's not.

We studied every kind of safety-razor blade available in the world. We put them under microscopes to see their leading edge. And we shaved them, using prototypes of the OneBlade razor. We were looking for one thing in particular from these blades: zero irritation. We want you to hear your shave, not feel it.

Again, we didn't care what the blades cost, we just wanted the best. We even tried to build our own, but we couldn't build or find any blades that were better than those produced by a company in Japan, Feather. A well-known brand among professional barbers and shaving enthusiasts, Feather has been making the FHS-10 blade since the 1920s. There's something about the alloys in this blade (the specific formula is a secret) that permits nearly perfect, uniform leading edges.

It's the best shaving edge in the world. But as any professional will tell you, this particular blade has one serious shortcoming: It dulls quickly. If you experiment, you'll see that our advice, to use a new blade with every shave, is important and genuine. If you want the world's best shave, you have to use a new blade, which isn't much of a surprise. And by the way, we're now selling these blades for about $0.60 each, which means using OneBlade will still cost less than using any cartridge-razor system, even the "Dollar Shave Club," which, of course, costs a lot more than a dollar.

Maybe you like this story, maybe you don't...

But just because we built a great razor doesn't mean we're finished. Our brand is about innovation. Constant innovation. We can always be improving. So this year, as we began thinking about our next major production sequence, we went back to Pensa with the feedback we received from our users.

First, we needed steel that was even stronger than 316L. We needed steel that wouldn't bend, at all, no matter what happens to the handle. And second, we wanted a razor-head system that was even safer – no nicks or cuts, ever.

In October, we began shipping OneBlade 2.0.

While this razor looks and feels exactly like our first model, it has subtly been improved. Our new active floating blade approach system ("FBAS") allows the blade to float – to move slightly – in all three dimensions inside the razor's head assembly. You'll never notice these incredibly minor variations, but the new system is even more comfortable and offers users a dramatic improvement in the "forgiveness."

In addition to the extraordinary forgiveness that comes from the pivoting/floating head design of our razor, this new FBAS innovation gives us much better ability to overcome many of the typical user errors as well as deal with the extreme differences in skin topography. This is yet another radical new way of building a razor. And like almost all of the new technology in OneBlade, you would never know it was there unless I told you.

Now... about the Niobium...

A small amount of OneBlade users noticed – after dropping their razors from a height of more than five feet onto extremely hard surfaces like marble and granite – that the head assembly was slightly damaged. Obviously for a precision instrument like our razor, any damage is unacceptable.

Therefore, we went out looking for a kind of steel that was even stronger than 316L. We found a new steel alloy made by BASF of Germany, called PANACEA. The yield strength of this material is four times stronger than 316L. Yield strength is the minimum amount of stress required to deform the metal. Said another way, OneBlade 2.0 is four times more damage resistant than the original.

And once again, unless we told you about these changes, you would never know the difference. PANACEA also has twice the tensile strength, it's more than two times harder, and it's more corrosion-resistant (although that's probably a moot point, given our PVD coating). What makes PANACEA so much better? Niobium. PANACEA steel contains 0.73% Niobium, a special element that's normally found in superalloys that are used to make things like jet and rocket engines.

Did we need to go to all of this trouble?

Don't average razor blades get the job done? Why build things like individually numbered handles, which most people never even notice? Why use super-expensive materials, like Niobium? Why wrap OneBlade in hand-cut, full-grain leather? Why build it to extreme tolerances, using the latest manufacturing technology available? Why spend four years and millions of dollars building this tool... money I might never get back? And why keep investing in improvements that most users will never notice?

Two reasons: One, I wanted to build the world's greatest shaving tool, a product that creates its own brand through its dedication to quality and innovation. And two, I wanted to build a legacy that will make my children proud of me.

I hope you understand my passion for this product. And I hope you'll want to be a part of it. We can make shaving the best part of your day. Give OneBlade a try.

Oh, one last thing… As you've likely noticed in recent Digests (see below), we're currently offering readers a special 30% holiday discount on a complete OneBlade shaving kit… and throwing in nearly $200 worth of free stuff to go with it. And as always, you'll get our 100% risk-free return policy so you can purchase without worry.

There has never been a better time to try OneBlade for yourself… or a better chance to give a truly unforgettable holiday gift. Click here to take advantage of this limited-time offer.

New 52-week highs (as of 12/8/16): Automatic Data Processing (ADP), American Financial (AFG), Altius Minerals (ALS.TO), American Express (AXP), Axis Capital (AXS), Boeing (BA), Bank of Montreal (BMO), C.H. Robinson Worldwide (CHRW), CME Group (CME), Corsa Coal (CSO.V), WisdomTree SmallCap Dividend Fund (DES), ProShares Ultra Oil & Gas Fund (DIG), iShares Select Dividend Fund (DVY), WisdomTree Japan Hedged SmallCap Equity Fund (DXJS), EOG Resources (EOG), short position in Hertz Global (HTZ), iShares Core S&P Small-Cap Fund (IJR), PureFunds ISE Mobile Payments Fund (IPAY), Lindsay (LNN), Newfield Exploration (NFX), PowerShares High Yield Equity Dividend Achievers Fund (PEY), iShares MSCI Global Metals & Mining Producers Fund (PICK), PNC Financial Warrants (PNC-WT), Potash Corporation of Saskatchewan (POT), VanEck Vectors Russia Fund (RSX), and W.R. Berkley (WRB).

In the mailbag, one reader argues that contributing editor P.J. O'Rourke left an important book off his holiday gift book list... and another shares the impressive growth in his portfolio. What's on your mind? Let us know at feedback@stansberryresearch.com.

"I enjoyed P.J. O'Rourke's holiday gift book list, and have read several of his suggested books. Perhaps out of modesty... well, maybe not... he omits one of his own very best works: 'Eat the Rich.' If I were a teacher of economics, this book would be the first reading assignment given to my students. I have myself given it as a gift on multiple occasions. Merry Christmas and Happy 2017…" – Paid-up subscriber Kevin Moore

"Dear Justin, as of January 20, 2016, our Schwab portfolio was $943,000.00. We rotated from High Yield to Gold to Internet of Things. Today at the closing bell our Schwab portfolio was worth $1,708,000.00. And this gain included a $50,000.00 payment for our Internet of Things investment... a 2017 E Class Sedan MB with all of the 'safety tech' that one could order. I will never be able to completely thank all of you at Stansberry Research for mentoring me for the past five years." – Paid-up Stansberry Alliance member John B.

Regards,

Porter Stansberry

Baltimore, Maryland

December 9, 2016