3 Little-Known Biotech Stocks I'm Keeping an Eye On

By Markets Fool.com

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Source: Neuralstem.

I haven't bought these three little-known biotech stocks (yet), but I am watching them closely because I think each of them could have catalysts soon that could move their shares this year. All three are small-market-cap companies that come with risks that are common in this highly speculative pop-and-drop industry, but for investors willing to take a risk, these three may soon offer up news that could make them worthy of portfolios.

No. 1: Neuralstem, Inc.
Neuralstem's shares have been on a bit of a roll. Since bottoming at less than $2.50 per share in December, the company's shares have jumped 55%. That rally has come as analysts have become increasingly intrigued by the treatments it's developing for central nervous system diseases.

One of those treatments is NSI-566 for ALS, an important indication with a big need for new treatment options.

The company's phase 2 trials for NSI-566 dosed its last patient last July, and results from that trial should be announced soon. If results show that NSI-566 is effective, then it could mark a significant advance, given that the 5,000 ALS patients diagnosed with the disease every year have few treatment options.

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Source: Neuralstem.

No. 2: Depomed
While Neuralstem is pinning its hopes on its clinical pipeline, Depomed has been breathing new life into previously approved drugs that have been under-marketed.

Its best-seller is Gralise, a drug that had originally been licensed to Solvay, which Abbott Labs later bought. Abbott chose not to commercialize the shingles pain drug after it was approved in 2010 and instead returned the rights to it back to Depomed in 2011. In the fourth quarter,Gralise sales jumped 55% to $18.1 million.

In addition to Gralise, the company markets the migraine drug Cambia, which it acquired U.S. rights to in December 2013. Sales of Cambria totaled $6.3 million last quarter, giving the drug a $24 million annualized sales run rate that's nicely higher than the $18 million annualized run rate it had when it was acquired.

Thanks in large part to Gralise and Cambria, Depomed reported fourth-quarter net product sales that jumped by 80% year over year to $33.9 million and full-year net product sales of $114.2 million, up from $58.3 million in 2013.

Although Gralise and Cambria are intriguing, I'm even more interested in whether Depomed can kick-start sales for its newly acquired opioid drug Nucynta. In January, Depomed announced the acquisition of Nucynta from Johnson & Johnson for $1.05 billion. Nucynta already has annualized sales of $176 million, and Depomed believes that Nucynta will be immediately accretive to earnings, but the big question on my mind is how accretive the drug will prove to be. Depomed expects to provide investors with a bit more insight into its Nucynta game plan soon, so I'll be listening carefully to what the company says.

No. 3: Xoma Corp.
Xoma is teamed up with the French drugmaker Servier on gevokizumab, a monoclonal antibody drug that the two companies are studying across a variety of eye-related diseases.

The trial results that I'm waiting eagerly to see are for the use of gevokizumab in Behcet's disease, a rare immune disease of the eye that can damage the optic nerve and cause permanent vision loss.

Servier's trial enrolled its targeted number of patients last year; however, delays in achieving the appropriate number of exacerbations have pushed back the release of data.

Hopefully, those results will come soon, and if they're positive, it could mean that gevokizumab will also post solid results in its trials as a treatment for non-infectious uveitis. The company has two ongoing phase 3 studies for that indication that could have data readouts in the coming year.

Source: Xoma Corporation.

Looking ahead
Biotech stocks aren't for the faint of heart, and these biotechs are no exception; however, investors who are willing to accept the risk of failure may want to join me in keeping tabs on these three tiny biotech stocks because each could end up delivering some profit-friendly news this year.

The article 3 Little-Known Biotech Stocks I'm Keeping an Eye On originally appeared on Fool.com.

Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may or may not have positions in the companies mentioned. The Motley Fool recommends Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.