This week’s Outside the Box is again a little unusual.

Some of you
will think, “There goes Mauldin again, dreaming of a brave new world of
biotech.” Except this time the brave new world is here. My friend Pat Cox of
Breakthrough Technology Alert has written a piece for me on what he and I
think is potentially one of the most important scientific breakthroughs of the
last few decades. Normally I don’t mention specific companies, but in this
case we can’t talk about the breakthrough without mentioning the company.
Disclosure: I own a small number of shares I bought over a year ago. This is
one of a number of companies I am buying as part of my biotech holdings
for the very long term. This is not investment advice and you should not
replicate my holdings as each individual situation is very different. Always
consult your investment professional and read all disclosures below.

Second, Pat gave what I thought was one of the better speeches I have
heard in years last summer in Vancouver, and it is still relevant today. It is
also one of the best and funniest PowerPoint presentations I have even seen.
I was in awe with the creativity. It is about Schumpeter, creative destruction,
and why the future is going to be full of dramatic changes. I really urge you
to take the 35 minutes or so and listen to the speech and watch the
PowerPoint. This is something that will really give you an education. Here’s
the link. It is on my website. If you are not a member, you will have to enter
your email address.

Now, I know the sales promotion is over the top, typical of investment
letters, and not my style at all; it is just what investment newsletter
publishers do. But that does not take away from my respect for Pat and the
quality of his work. He is one of my real “go to” guys for biotech and all
new technology.

As part of the agreement with Pat’s publisher to allow me to use this

piece, I offer this link to a way to subscribe to his letter. If you want to
subscribe to Pat’s newsletter, click on this link to get a significant discount
(over 50%), for my readers only, available through March 15. I consider Pat
one of the really must-read writers on new technology. His record speaks for
itself. And the promo has an old date in it they couldn’t change – the real
date is March 15.

Your hoping to live a lot longer analyst,

John Mauldin, Editor, Outside the Box

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Want a New Cardiovascular System?

Seven weeks ago, on January 3, the father of stem cell medicine made an
announcement that will be remembered forever by historians. Dr. Michael
West, CEO of BioTime Inc., launched a subsidiary, ReCyte Therapeutics, to
commercialize endothelial stem cell therapies to reverse senescence in the
cardiovascular and immune systems – the number one killer in the
developed world. This newly launched enterprise will have a profound
impact on our government and economy as well as our own expectations
regarding investment, retirement and lifespans.

West's announcement elicited the same response that other similarly historic
medical breakthroughs have in the past. For the most part, it has been
ignored.

Though I first met West over 15 years ago and have followed his progress as
he developed the tools needed to take on cardiovascular disease, I'm
nevertheless stunned to see the revolutionary stem cell therapy actually
approaching the clinic. Despite having studied and written about the fact that
such leaps in science are almost never recognized when they appear, I'm
nevertheless disappointed. West, after all, is not some fringe scientist. He
founded Geron and only recently published proof in a peer-reviewed journal
that he can reset the telomere clock of aging in stem cells created from
normal adult cells. And all of this is done without the use of embryos or
cloning.

If you think I'm exaggerating about this media fail, do a Google News search
on the keywords “BioTime”, “ReCyte”, “heart”, and “disease”. As I write
this, the search produces nothing but the company's own press release. But
read just the title and think about it. “BioTime Subsidiary ReCyte
Therapeutics, Inc. to Develop Therapies for Age-Related Cardiovascular and
Blood Disorders”.
http://www.b2i.us/profiles/investor/ResLibraryView.asp?ResLibraryID=427
54&GoTopage=1&Category=1802&BzID=1152

Admittedly, this is understated prose, but the statement clearly says that
ReCyte's purpose is not to cure diseases caused by lifestyle, genetic defects,
or pathogens. Though it will also do that, ReCyte is forthrightly announcing
that it will cure conditions caused by normal human aging. This is truly
revolutionary.

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How BioTime Will Give You a New Heart and Vascular System
Nonsurgically

This is how it will probably happen. A clinician will draw and send some of
your blood to BioTime's subsidiary, ReCyte Therapeutics. ReCyte will
introduce four transcription factors into some of your blood cells. Those four
transcription factors (OCT4, SOX2, LIN28, and NANOG) activate the
programming machinery of your DNA that determines what cells are and do.
The result is the creation of your own induced pluripotent stem (iPS) cells.
These cells have full telomere lengths restored, having effectively turned
back the clock of cellular aging to age zero.

I'm not going to get into the science of telomeres here today, but I can give
you a link, recommended by my seventeen-year-old son, at the University of
Utah's genetics website:
http://learn.genetics.utah.edu/content/begin/traits/telomeres/ . For advanced
students, you can read a description of West's process with telomere
restoration in an article published in the journal Regenerative Medicine.
http://www.futuremedicine.com/doi/abs/10.2217/rme.10.21

West, by the way, applied for patents on this process as far back as 1999.
His application for IP covering the use of those four transcription factors to
create iPS cells was filed in 2005, before Dr. Shinya Yamanaka published
his “mouse paper” describing the process and years before his human paper.

These new “pluripotent” stem cells, made from your own cells, are identical
to embryonic stem cells in that they do not age and can be potentiated to
become any cell type in your body. They can also be multiplied and stored
indefinitely. Only when these cells have started down the path to their final
cell state does the biological clock begin ticking.

You can probably start this part of your rejuvenation process within months,
as it does not require regulatory approval. ReCyte has announced that it will
begin banking individuals' cells this year in preparation for regulatory
approval.

ReCyte will then take your rejuvenated pluripotent stem cells and shepherd
their conversion into the adult stem cells that repair hearts and vascular
systems. These are endothelial precursor stem cells. This “potentiation” is

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routine for BioTime now, and the ability was developed as part of the
company's ongoing mapping of natural stem cell development or
differentiation.

When ReCyte has enough of these cardiovascular repair cells (and

regulatory approval in some legal jurisdiction), they will be given back to
you via transfusion. There will be no immune reaction, because they are
your own cells. We know what they will do because you have lots of these
cells already, though they are as old as you are. The new cells, though, will
be only weeks or months old biologically and will displace the older and less
effective endothelial precursor cells.

Once in your body, your new rejuvenated stem cells will produce the various
cells needed to replace old and damaged heart and vascular cells. These new
cells will be vigorous, fully functioning, and youthful. In time, you will
have, essentially, a new heart and vascular system – without surgery. The
same technology can and will be used, incidentally, to rejuvenate your
immune system.

Everything I've just told you is public information. For the vast majority of
you, however, I understand that this is the first time you've heard about it.
Once again, I have to wonder where the media is. I could understand
skepticism from people who have not spent time studying stem cell science,
but there's not even skeptical coverage.

Incidentally, my concern is not simply academic. The impact of this

breakthrough therapy and others that will come in its wake will be
enormous, and we should be preparing for them now.

I'll deal with some of the reasons we need to prepare for the reality of
BioTime's therapy in a bit. First, though, let me address the understandable
skepticism that many of you are experiencing. Ultimately, some of you will
have to see medical data from rejuvenated patients. That's fine. It's coming.

You should understand, however, that BioTime's stem cell therapy is

completely unlike the typical small-molecule drug candidate and company.
These cells are inside you now. They are not some new manmade product
with unknown side effects and dosing concerns. Only the process of
manufacturing the rejuvenated endothelial stem cells is new. The actual
mechanism of action, the replacement of aged cardiovascular cells with new

4
cells, is taking place in your body even as you read this article. If it didn't
work, you would already be dead.

BioTime is exploiting natural biological processes, but they will use

rejuvenated versions of your own cells. Every aspect of this science has
already been demonstrated and observed in nature. No human has yet
received this therapy, but every link in BioTime's chain of logic has been
studied and validated.

The company still needs to develop scalable procedures and get regulatory
approval somewhere, but I consider that all but inevitable. Even if the FDA
drags its feet, BioTime has numerous options internationally. The company
already has subsidiaries and facilities in Israel, Singapore and, through Hong
Kong, China. The Israeli subsidiary, Cell Cure Neuroscience, recently
penned the first agreement between a stem cell company and big pharma,
Teva Pharmaceutical Industries.

I foresee no problem finding a jurisdiction eager for the profit and prestige
this technology will generate. Not only would there be tax revenues, the
associated income from health tourism would be substantial. Let's do some
simple back-of-the-napkin projections to get a handle on the type of
revenues we might expect.

First, compare BioTime to Dendreon Corp., which is projected to earn $1

billion annually on a prostate cancer vaccine that costs north of $90,000.
Dendreon's improvements in lifespans, however, are measured in months.
Cardiovascular rejuvenation could easily extend patients' lives by a decade
or more.

Let's say that BioTime charges $100,000 per patient. I actually don't think
the cost will be that high, but we are just thinking out loud. There are easily
10,000 people in the world annually who would pay that price for the
cardiovascular system they were born with. I expect that the actual number
is far more than 100,000, but we'll stick to 10,000 for this thought
experiment.

At $100,000 per therapy, these 10,000 patients would generate $1 billion in

revenue annually. That's less than 40 transfusions per working day in one
year. One clinic could easily handle that volume.

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The Impact of Nonsurgical Cardiovascular Rejuvenation

Until now, four out of ten of us were destined to die from age-related
cardiovascular disease. If you're one of them, your healthy life span will be
extended significantly by endothelial precursor therapy. You will be spared
the extraordinary expenses associated with dying of cardiovascular disease,
as will our health-care system. According to the American Heart Association
and the National Heart, Lung, and Blood Institute (NHLBI), the cost of
cardiovascular diseases and stroke in the United States in 2009, including
both direct and indirect costs, was an estimated $475 billion.

Initially, BioTime's therapy will be expensive, but not as expensive as the

cost of treating an end-stage heart condition. In time, most of the procedure
will be roboticized. Costs will plummet. BioTime's technology, I believe,
could reduce that $475 billion cost by as much as 90 percent. We'd feel that.
The same basic technology, as I've said, can also be used to reboot immune
systems, giving you youthful, vigorous resistance to disease, no matter how
old you are chronologically.

Normally, of course, analysts like me don't “name names” outside of our

subscription firewall. In my line of work, our marketing departments “tease”
a story, without giving away the name of the company, to get new
subscribers. John Mauldin, however, believes that the BioTime story is too
important to keep secret. In my experience, John usually gets his way and, to
prove it, he's putting online the presentation that I gave at a private Agora
Financial conference in July.

In that presentation, I talked at some length about BioTime and a number of

other important companies and technologies that will transform our world.
Dr. West, in fact, spoke at the same conference. I predicted BioTime's
ReCyte announcement in that presentation, though I have to admit it has
come earlier than I expected. I also laid out a bit of the history of public and
media rejection of past medical breakthroughs.

My marketing department has slipped in a sales pitch, but I'm not going to
apologize for being part of the capitalist system. I'm proud to help attract
investor attention to the companies that have the potential to save our
collective glutes from the fecklessness and irresponsibility of our governing
class. More on that in a bit.

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I'm grateful, therefore, to John for this opportunity to speak to people outside
of my subscriber base. Much of my career has been spent in the not-for-
profit arena of think tanks, and I remain deeply concerned about public
policy issues.

My biggest concern is one that you, as a reader of John Mauldin's Outside

the Box, know well. It is the enormous debt burden that threatens to turn the
United States into Greece or Portugal. The current deficit and debt are not
what keep me awake at night, however. It is the impact of demographic
changes on entitlement obligations and taxation.

Only months ago, the first Baby Boomer became eligible for Medicare. As I
explained in another article here, titled “The Ultimate Hedge in Economic
Crisis,” health-care costs rise exponentially as we age. We know, in fact,
that current levels of health-care spending will not suffice for a rapidly aging
population.

Costs can be kept down artificially through rationing, but the American
public has demonstrated its growing rejection of any kind of triage – “death
panels,” in the popular parlance. There are ways to reduce spending
somewhat, such as true tort and insurance reform, but they would not
provide enough in savings to fund the additional demands of an increasingly
older population.

Simultaneously, the birth rate has plummeted. Social Security and Medicare
were crafted when far fewer lived beyond retirement age. Additionally,
birthrates were high enough to insure that there were far more young people
in the tax-paying workforce than older people reliant on transfer payments.
None of those conditions exist today. The demographic pyramid is flipping
and will, in keeping with the metaphor, fail.

This is not, by the way, a situation unique to the United States. John has
given you an excellent overview of this worldwide problem in a recent
column titled “Global Aging and the Crisis of the 2020s.” It can be
summarized briefly, however, as this: Fewer working young simply will not
be able to pay the medical bills of a growing world population of older
retired people.

Those tempted to interpret this as an ideological position are sorely

mistaken. It's just math. If enough resources to cover the medical costs of the

7
coming “gray tsunami” were to be taken from the productive sector, it would
devastate job-creating investment and innovation. The economy would
shrivel even further, guaranteeing that our current distress would be viewed
nostalgically.

There is a simple solution, however: People work longer or invest more

wisely to fund more of their own medical needs. Problem solved.

Though you can find little support for extending the retirement age, either in
the current administration or public opinion polls, it is increasingly accepted
as an inevitability by those thinking seriously about the problem. This is
despite the well-known gift of my cohort, the Baby Boomers, for self-
absorption and a sense of entitlement.

I'm actually very optimistic. Healthy lifespans, or health spans, have risen
continuously for the last hundred years, but that increase is about to
accelerate with quantum improvements in medical science. The BioTime
therapy is only one of many truly remarkable advances that are coming at us
now.

Moreover, there seems to be, for the first time, serious public recognition
that the current system is untenable. Older people may be willing to argue
now that they deserve the massive transfer payments that come with current
retirement ages. That claim will become laughably absurd, however, as
healthy lifespans begin to increase dramatically.

BioTime's endothelial stem cell therapy is only one of the quantum movers,
by the way. Besides other stem cell therapies, new cancer technologies are in
development that will soon put cancer into the same historical dust bin as
polio and smallpox. I hope to tell you about them in a future article here.
There is even real reason for hope regarding Alzheimer's disease.

John and I both recently learned, incidentally, about a revolutionary drug

technology that could become universally adopted within a few years. This
remarkable but amazingly inexpensive therapy could easily extend average
healthy lifespans by five to ten years – and quickly.

Given these rapid advances in health spans, the pressures to extend working
careers will be irresistible. Significantly longer and healthier lives will
increase the urgency for making this change, but it will also make the sale

8
far easier to close.

These coming technologies will not only increase income-earning career

lengths and the resources that go into the health-care system, they will also
reduce or postpone medical costs associated with the last stages of life. The
postponing of end-stage medical costs, accompanied by increases in total
economic wealth, amounts to a cost reduction. This is because increased
costs are irrelevant if they represent a smaller percentage of personal and
total wealth, which is the natural outcome of longer working careers and
reduced transfer payments.

You know that John was warning about the housing bubble while
Washington was denying it existed. Many of us were issuing that warning,
with a visible lack of results. Hopefully, we have learned enough from the
current fiasco that we just might avoid the next one. The way to do so is to
help accelerate the technologies that will allow us to outlive the iatrogenic
economic disease inflicted on us by our intellectual elites. We must,
however, begin planning for it now.

Incidentally, I have no personal financial interest in BioTime or any of the

companies I discuss in the accompanying video. That is not to say that I do
not have an interest in seeing these transformational medical technologies
come to market as soon as possible. We all do.

Patrick Cox