3 Biotech Stocks That Could Double Before 2016

Small-cap biotech stocks have the ability to produce eye-popping gains -- and even double, in short order. In the same breath, they also have the capacity to wreak havoc on your portfolio if things go the wrong way in the clinic or on the regulatory front.

Source: Pixabay

With this in mind, we asked three of our top healthcare contributors to discuss a biotech stock they thought could double before year's end and offered investors a compelling risk to reward ratio. Here's what they had to say.

:Picking any stock to double in less than a year is a guessing game at best, but I do think Spark Therapeutics is one company that could pull it off.

Source: Spark

Spark Therapeutics is using neutralized vaccines to deliver missing genes to patient cells in order to significantly improve disease symptoms. Initially, the company is focused on SPK-RPE65, a therapy in phase 3 trials for the treatment of visual loss in patients with mutations of the RPE65 gene.

Spark Therapeutics expects to report phase 3 data from this trial soon and if those results are solid, the company could file for FDA approval by the end of this year. If, and admittedly it's a big "if," the FDA clears SPK-RPE65, then Spark Therapeutics could be generating sales in less than a year.

Although it's unclear what the peak sales potential for SPK-RPE65 could be, Spark Therapeutics believes there are only 3,500 people in the U.S. and Europe who would benefit from this therapy. Because treatments for rare diseases typically carry six figure price tags, it's conceivable that SPK-RPE65 could rack up sales of $300 million or more.

That could lead investors to decide that Spark Therapeutics is worth more than its current $1.5 billion market cap, especially since an approval helps validate the company's other research programs, including SPK-CHM, a therapy that could help restore vision in up to 12,500 patients.

Sean Williams: As Todd notes, picking a stock to double over the next six months is akin to throwing a dart at the newspaper and hoping for the best. But if I had to put my money on one stock (and, oh look, it's already on it!), it would beExelixis.

The primary catalyst of biotech stocks are clinical trial data and PDUFA decisions from the Food and Drug Administration. Throughout the remainder of the year Exelixis shareholders like me will be privy to three potentially huge catalysts.

Source: Exelixis

First, Exelixis just reported fantastic top-line data from its late-stage METEOR study involving Cometriq as a treatment for advanced renal cell carcinoma. The primary endpoint of the study is a statistically significant improvement in median progression-free survival over Afinitor, and the results demonstrated a 42% reduction in the risk of disease progression or death. In previous studies (medullary thyroid cancer and the COMET-1 study), Cometriq also delivered a statistically significant improvement in PFS. Full details on PFS will be released at a future scientific conference. Long story short, a supplemental new drug filing is expected in the U.S. and EU in early 2016.

Secondly, although the FDA chose to exercise a three-month extension on the PDUFA action date to Nov. 11, 2015, the combo therapy of cobimetinib, discovered by Exelixis, andRoche's Zelboraf, for BRAF V600 mutation-positive metastatic melanoma is coming up. Both the top-line data and updated data release at the American Society of Clinical Oncology's annual meeting showed a definitive statistical improvement in terms of PFS and response rate for the combo therapy compared to just Zelboraf alone.

Lastly, we should be hearing news from Roche in Q4, most likely on a phase 1 study involving the combination of cobimetinib with a Roche anti-PD-L1 therapy. Cancer immunotherapies are arguably the hottest topic of discussion among investors, and if cobimetinib can latch on as a combo therapy, Exelixis could see substantial revenue.

: If you're looking for a stock with serious growth potential,Geron should definitely be on your radar. After two decades of clinical failures, this tiny biotech has reshaped itself into a lean, mean cancer-fighting machine that has caught the eye ofJohnson & Johnsonvia its biotech subsidiary Janssen.

Geron has put all of its energy into developing its flagship telomerase inhibitor, imetelstat, into a game-changing treatment for a diversity of blood-based disorders. The key issue to understand is that Janssen decided to sign a lucrative licensing agreement with Geron following some impressive -- and even unprecedented -- early clinical trial results for imetelstat as a treatment for both essential thrombocytopenia and myelofibrosis.

Source: Wikimedia

Per this agreement, Janssen is presently launching a midstage study for the drug in relapsed/refractory myelofibrosis, and plans on initiating a second midstage trial in myelodysplastic syndromes before the end of the year. Based solely on the relapsed/refractory myelofibrosis indication, though, Janssen is already predicting, via arecent investor update, that this novel therapy will turn out to be a blockbuster product. As such, it's not unreasonable to suggest that Geron's market cap could rise substantially from its current level of $667 million, if imetelstat does indeed live up to Janssen's expectations.

While there's certainly no guarantee that imetelstat's early-stage results will be replicated in these larger trials, Geron does offer investors a low cash-burn rate because of its restructuring process combined with its licensing agreement with Janssen, giving the company a cash runway that extends well beyond these forthcoming clinical milestones. So, unlike most developmental-stage biotechs, dilution shouldn't be a major concern for investors at this point, allowing investors to focus squarely on imetelstat's clinical-trial results going forward.

The article 3 Biotech Stocks That Could Double Before 2016 originally appeared on Fool.com.

George Budwell has no position in any stocks mentioned. Sean Williams owns shares of Exelixis. Todd Campbell has no position in any stocks mentioned. The Motley Fool recommends Exelixis and 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.

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