3 Little-Known Biotechs Working On Potential Blockbusters

By Markets Fool.com

Biotech stocks are prone to jaw-dropping pops and drops, caused by even the hint of positive or negative news surrounding drugs in their pipelines. That makes biotech one of the riskiest industries for investors. However, for those willing to take on the risk of pipeline failure, there can be significant profit to be had if drugs pan out. For that reason, investors may want to keep a sharp eye on these three clinical-stage biotech stocks that have intriguing drugs in their pipelines that address blockbuster indications.

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Source: Flickr user Ali T.

No 1: Ophthotech Corp.
First up is Ophthotech, a clinical-stage biotech that is developing a drug that can be used alongside Novartis and Regeneron's blockbuster wet-age related macular degeneration, or wet-AMD, drugs Lucentis and Eylea.

Both Novartis and Regeneron are reaping multibillions of dollars in sales for their wet-AMD drugs, and given that aging baby boomers are likely to increase the prevalence of this age related disease in the coming decade, new therapies like Ophthotech's Fovista could similarly put up blockbuster sales numbers one day.

Fovista is currently in phase 3 trials, so the drug isn't up for consideration by the FDA yet. But results from previous trials have been compelling. In one mid-stage study, using Fovista alongside Novartis' Lucentis improved vision by 10.6 letters on a standard eye chart versus 6.5 letters for patients receiving Lucentis alone. Those results were good enough for Novartis to agree to license rights to Fovista overseas.

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As part of that deal, Novartis has already paid Ophthotech $200 million, and Ophthotech could receive up to another $800 million in milestones if Fovista pans out. The fact that Ophthotech has a been-there-done-that partner with deep pockets, and in a proven indication, is particularly intriguing when we consider that Ophthotech's market cap is less than $2 billion.

No. 2: Esperion Therapeutics
Despite the widespread use of statins, heart disease is the most common cause of death in the United States. That suggests that there's a big unmet need for new drugs like Esperion Therapeutics' ETC-1002, which can reduce bad cholesterol levels, which are a major risk factor of blockages resulting in heart attack and stroke.

During recently reported phase 2 trials, patients who received ETC-1002 alongside commonly-used statins like Pfizer's Lipitor (formerly the top selling drug on the planet, with $12 billion in annual sales) saw their bad cholesterol levels fall by as much as 24%. That was statistically better than the reduction for patients receiving statin therapy plus a placebo.

Since ETC-1002 is on its way toward phase 3 trials, investors may want to start paying close attention to this company, especially since its founder, Roger Newton, was also the co-inventor of the massively successful Lipitor.

Source: Prothena Corporation Plc

No. 3: Prothena Corporation Plc
Although significantly more time and attention has been spent researching Parkinson's disease over the past decade than ever before, it remains one of the most difficult diseases to treat.

Currently, there aren't any approved therapies that are designed to halt or reverse the disease. Instead, patients are treated with drugs that can -- for a time -- reduce their symptoms. Prothena Corporation Plc, with the help of its collaboration partner Roche Holdings , hopes that its PRX-002 can change that.

PRX-002 is a monoclonal antibody drug designed to reduce the buildup and spread of the alpha synuclein enzyme, a protein commonly found in brain tissue that is involved in dopamine regulation. A growing body of evidence suggests that an unnatural buildup of this enzyme in neurons can result in neurodegeneration, and that the spreading of those improperly functioning enzymes can lead to a worsening of the disease.

In recently reported phase 1 trials, PRX-002 reduced alpha synuclein levels by up to 96%. That could suggest that PRX-002 could one day halt or reverse Parkinson's disease progression. However, before getting the cart too far in front of the horse, investors should recognize that the trial was small, involving just 40 patients, and that this drug remains miles away from any potential future commercialization. That said, Roche has already paid Prothena $45 million under a $600 million licensing deal inked in 2013, so this could be an intriguing blockbuster opportunity someday.

Tying it together
There may be no other industry where the reality of risk and reward is as evident as biotechnology. Anything can -- and often does -- derail clinical research programs, and that means that the vast majority of promising research never results in commercialized medicine. Although biotech stocks can be high-risk, I ultimately believe Ophthotech Corp, Esperion Therapeutics, and Prothena Corporation Plc's opportunities are big enough that investors may want to own them, but they should only do so in the speculative parts of their portfolios.

The article 3 Little-Known Biotechs Working On Potential Blockbusters originally appeared on Fool.com.

Todd Campbell owns shares of Ophthotec and Prothena Corp. 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 has no position in any of the stocks mentioned. 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.