Forget Gilead Sciences, Inc. -- This Tiny Biotech Offers A Much Richer Opportunity

Gilead Scienceshas been one of the most closely watched and hotly debated biotechs over the last two years following the launch of its game-changing hepatitis C franchise composed of Harvoni and Sovaldi. Its share price, though, has struggled since the launch of rival drugs late last year, shown by the chart below:

The market apparently believes that the flood of forthcoming hep C treatments, and a dwindling market in Western nations, will ultimately erode Gilead's sales in this space.

While I'm not in total agreement with the market's pessimistic outlook, I do think there are better, albeit riskier, biotech stocks that investors should consider adding to their portfolio. Here is a look at one high-risk, high-reward biotech that could lead to jaw-dropping gains over the next year.

A fallen star that could be ready to rise againSarepta Therapeuticsand its exon-skipping Duchenne muscular dystrophy, or DMD, treatment called eteplirsen were once the darlings of Wall Street. After reporting some highly encouraging midstage data showing the drug increased levels of a key protein, dystrophin, that's deficient in DMD patients, as well as stabilized the ambulatory abilities of patients on a standardized test, shares catapulted higher in early 2013.

A late-stage failure by a competing drug known as drisapersen -- since snapped up by byBioMarin and submitted for regulatory review -- combined with several regulatory setbacks for Sarepta's DMD offering, however, have lead to, well, this:

In a nutshell, Sarepta has been pushing to have its drug reviewed based on a small midstage trial, whereas the FDA appears to want the biotech to finish up a pivotal late-stage trial, prior to review.

This tug-of-war reportedly led to an increasingly poor relationship between Sarepta's former CEOChrisGarabedianand the agency, resulting in achange of leadershipat the small-cap biotech earlier this year.

And that's where things get interesting from an investing standpoint.

With Garabedian's exit, Sarepta now has the opportunity to rehabilitate its relationship with the FDA, which is exactly what management appears to be trying to do.

Per its recent conference call, the biotech is planning to meet with the agency sometime before the end of the second quarter to discuss eteplirsen's regulatory filing.

According to interim CEO Ed Kaye, the company believes it is on track to submit eteplirsen's New Drug Application to the agency by mid-year. So, this upcoming meeting would serve as a final checkpoint to make sure there aren't any additional issues that could derail a regulatory filing yet again.

Despite these hang-ups, Sarepta's upside potential is enormousBecause of eteplirsen's limited clinical data set so far, and the FDA's subsequent reservations about this issue, Sarepta is certainly a high risk stock. But it also has one of the highest potential upsides among developmental-stage biotechs right now.

What's key to understand is that eteplirsen is Sarepta's "make or break" drug for its exon-skipping DMD platform that could provide treatments for up to 80% of boys afflicted with this devastating disease:

Source: Sarepta Therapeutics

While the DMD market as a whole is estimated to be worth billions, I find putting even a rough dollar value on Sarepta's DMD platform, though, to be an exercise in futility at this juncture. Right now, there's no telling how the FDA is going to view BioMarin's rival drug and its mixed bag of clinical trial data. In short, there are simply too many moving parts that could drastically affect pricing structures and market penetration for these drugs going forward.

That said, I think investors should bear in mind that the market once valued Sarepta at over $45 a share (before the FDA's first change of heart back in 2013), or 300% higher than the stock's current price.

Is Sarepta a buy right now?While this orphan drug stock could easily double this year after getting pummeled, I think investors should wait until the FDA has formally agreed to accept a regulatory filing for eteplirsen, before pulling the trigger. After all, we should have the answer to this vital question by the end of the second quarter, which isn't that far off.

All told, I think Sarepta is a speculative biotech that healthcare investors should definitely be watching right now, given its potential to become one of the sector's best-performing stocks this year.

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George Budwell owns shares of Gilead Sciences. The Motley Fool recommends BioMarin Pharmaceutical and Gilead Sciences. The Motley Fool owns shares of Gilead Sciences. 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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