5 Small-Cap Biotechs With Big Potential

 | Jul 31, 2016 | 2:00 PM EDT
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This commentary originally appeared on Real Money Pro on July 29. Click here to learn about this dynamic market information service for active traders.

During the last Small-Cap Friday column, I highlighted Synergy Pharmaceuticals (SGYP) as a new "Best Idea." It took the place of Relypsa (RLYP) on the list after that small biopharma concern was bought out with a 60% premium early Thursday by Swiss outfit Galencia. I have received a fair number of inquiries on what other small biotech names I like right now, given their current risk/reward profiles.

Here is a quick list of names that I find attractive -- and have potentially positive catalysts in the next quarter or two. 

1. Portola Pharmaceuticals (PTLA) . The name on the list with the nearest-term catalyst is Portola. The company has a PDUFA date on Aug. 17 for ANDEXXA. This would be the first approved universal antidote in patients treated with a Factor Xa inhibitor (an anticoagulant/blood thinner) like Eliquis, who experience a serious uncontrolled bleeding event, or who require urgent surgery. The stock trades at around $26 a share. Approval probably kicks the shares up in the low $30s. Rejection would make for an ugly reaction in the stock, but that seems unlikely, based on trial results and analyst commentary.

2. Progenics Pharmaceuticals (PGNX) . Progenics got a 20% pop when its oral version of relistor was approved by the FDA on Jul. 19. However, the company has other catalysts upcoming. Interim analysis of a combo compound the company is working on with Bayer, for a new therapeutic approach to prostate cancer, has interim Phase III results due. In addition, its compound AZEDRA should have Phase III trial readouts out sometime between December and March. The stock is undervalued, solely based on relistor. Its pipeline is gravy, at these valuations.

3. Dynavax Technologies (DVAX) . Next up is another "Best Idea," Dynavax, for which I have been waiting a long time to see commercial success. Its Hepatitis B vaccine has a PDUFA date on Dec. 15. Given the results of a large-scale Phase III study, it is hard to see how this vaccine does not get approved. Its vaccine offers better protection, and can be administered in two dosages over one month -- compared to three doses over six months with the current standard. This will greatly improve regimen compliance, which is a pretty abysmal 55%. The company also has a Phase II asthma compound that it is developing with AstraZeneca AZN, and an intriguing early stage oncology product "SD-101." The company has a market capitalization of just $600 million, more than a quarter of which is cash.

4. and 5. Amicus Therapeutics (FOLD) and Redhill Biopharma (RDHL) . Finally, we have Amicus and Redhill Biopharma. Both companies have two separate drug candidates that should have late stage readouts out by the end of 2016. I like both firms' multiple "shots on goal," addressable markets and funding position. They make attractive high risk/high reward plays. I would not be surprised if both stocks run up into results, giving investors a chance to take a little profit off the table and "de-risk" their bets some before trial results are released.

There you have just a few thoughts on the small biotech/biopharma sector. Hopefully one or two of these selections will be able to recreate that Relypsa magic before 2016 is out.

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