Two Small-Cap Biotechs To Consider

The small-cap biotech and biopharma sectors have been very kind to my portfolio over the past six months. I have managed to book triples on some of the speculative concerns I have mentioned on these pages, including Avanir Pharmaceuticals (AVNR) and Tetraphase Pharmaceuticals (TTPH) as well as Ziopharm Oncology (ZIOP). Eagle Pharmaceuticals (EGRX) and Halozyme Therapeutics (HALO) have also been star performers since recently being added to my Best Ideas list here on Real Money Pro. However, my portfolio of small biotech stocks has not been without some misses, which every speculative biotech portfolio encounters. This is why one must be deeply diversified across this volatile sector, although, overall, it has been a stellar couple of quarters for this part of my portfolio. For Small-Cap Friday let's take a look at a couple of attractive but speculative stocks in this space. Fibrocell Science (FCSC) has been making a big move recently, going from around $2.50 a share to begin the year to over $4 a share currently, as the stock seems to be breaking out in the first quarter. Fibrocell develops therapies to treat rare and serious skin and connective tissue disease based on its proprietary technology platform. It extracts cells from skin to create localized therapies that are compatible with the unique biology of each patient. The company has one FDA-approved product, LAVIV, a compound approved for targeting smile lines. The company has another compound that is in Phase II trials for the treatment of restrictive burn scarring as well as scarring of the vocal cords. It also has another compound in pre-clinical work for a variety of indications. Fibrocell is a very speculative name but one with several shots on goal and sporting a market capitalization of just $175 million. The company has over $40 million in cash on hand and insiders have been small but frequent purchasers of the stock over the past 18 months. Next up is Prothena Corporation (PRTA), which has done nothing share price-wise since I purchased an initial stake last summer. The shares are still down some 50% from the huge selloff that rocked the entire biotech sector last March. Prothena has several early-stage compounds focused on developing novel antibodies for diseases involving protein misfolding or cell adhesion, such as Parkinson's, for which it has a partnership with Roche to develop. The FDA recently fast-tracked Prothena's investigational monoclonal antibody for the treatment of AL amyloidosis, which has begun Phase III testing. Spun off from Elan late in 2012, Prothena has a seasoned management team that has experience successfully bringing drugs to market. Insiders and beneficial owners own some 40% of the company's shares. Prothena has about $300 million in cash on hand and a market capitalization just north of $600 million. This is another speculative biotech concern with many shots on goal but little in the way of recurring revenues at the moment. There should be several important milestones in 2015 for the various phase trials currently under way. And analysts are high on Prothena's prospects, with the median analyst price target about 75% above the current stock price. Both of these high risk/high reward plays are worth consideration within a well-diversified biotech portfolio for aggressive investors. Hopefully at least one of them turns out to be my next triple in this inherently volatile but lucrative space.

Two Small-Cap Biotechs To Consider

Fibrocell Science and Prothena have several 'shots on goal.'

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