Over the past few months, three biotechnology stocks have surged in value as investor appetite for small-cap biotechnology stocks continues to increase. The three stocks that have shown dramatic price increases are OncoSec Medical (OTC:ONCS), Clovis Oncology (NASDAQ:CLVS), and Dyax (NASDAQ:DYAX).
OncoSec Medical is a small-cap biotechnology company focused on creating treatments for advanced-stage skin cancer. The company’s unique approach allows for the development of non-invasive therapies that are able to destroy solid tumors and metastatic cancer while preserving the healthy cells.
Many may not know that skin cancer is the most common form of cancer in the United States, with more than 3.5 million skin cancers being diagnosed annually. In fact, each year, there are more new cases of skin cancer than the combined incidences of breast, prostate, lung, and colon cancer. Because of this, it is imperative that more is done to offer better treatment options. Luckily, OncoSec Medical appears to be doing just that.
The company’s lead candidate is ImmunoPulse, which has the benefit of using the body’s immune system to help destroy cancer cells. ImmunoPulse uses electroporation, which generates an electrical pulse to increase the porosity of cells. After the pores have been opened, DNA IL-12 is inserted into the cells. Once inserted, each cell is able to produce the IL-12 protein, which can then act in concert with the body’s immune system to eliminate all cancerous cells.
OncoSec Medical is currently evaluating its technology in three major clinical trials:
- Phase II: Merkel cell carcinoma
- Phase II: Metastatic melanoma
- Phase II: Cutaneous T-cell lymphoma
While metastatic melanoma certainly represents the most significant potential for annual sales, the other indications could generate substantial sales, as well. The market size for melanoma is expected to reach $2.8 billion by 2021. The other smaller indications, Merkel cell carcinoma and cutaneous T-cell lymphoma, could generate hundreds of millions. OncoSec Medical is currently valued at just $118 million, which gives prospective investors an excellent opportunity to get in while the getting is still good. 2014 could certainly be an exciting year for the compan,y with several milestones likely to be announced:
- Metastatic melanoma: Phase II enrollment completion, interim, and final data
- Merkel cell carcinoma: Phase II enrollment completion and data
A wildcard announcement could be if the company decides to uplist to a major national exchange. This strategy can often pay big dividends for a small-cap biotechnology company, as it tends to attract institutional investment. An uplist can also serve to generate additional liquidity for traders and investors.
Given the company’s potential and upcoming catalysts, it’s no surprise that shares of OncoSec Medical have been surging. Shares of ONCS are up approximately 120 percent over the past three months. If the company can deliver on its potential, that return will likely pale in comparison to what’s in store for the next couple of years.
Clovis Oncology is a biopharmaceutical company focused on acquiring, developing, and commercializing cancer treatments in the United States, Europe, and other international markets. The company’s development programs are targeted at specific types of cancer. Clovis currently has three candidates in clinical development:
- CO-1686: NSCLC (non-small cell lung cancer), phase I/II
- Rucaparib: Ovarian cancer, phase II and phase III
- Lucitanib: Breast and lung cancer, phase II
Because of the pipeline focused on cancer, shares of Clovis Oncology have surged, as investors appear to be banking on long-term outperformance. Over the past three months, shares of Clovis have generated a 42 percent return.
In January, an analyst from Citi, Dr. Yaron Werber, appeared on CNBC to give his analysis on Clovis. Werber said that Clovis Oncology is his favorite play in the biotechnology industry. He is most excited about the prospects for CO-1686. The Citi analyst believes the drug has the potential to generate $4 billion in peak sales, which is roughly 57 percent higher than the company’s current market capitalization. Essentially, investors can buy in just for CO-1686 and get the rest of the company’s business for free.
Clovis management also has a history of strong results. The company has previously sold two companies to biotech giants. It sold one company to Gilead and one company to Celgene. If CO-1686 generates the success that Werber believes it can, Clovis could become a prime takeover candidate, as well.
In addition to Werber’s $109 price target on Clovis, several other analysts are also big on the company:
- JP Morgan: $101 price target
- Leerink: $110 price target
Both of those price targets were issued on Friday. Shares of Clovis are trading up more than 8 percent on the news.
Dyax is a biopharmaceutical company focused on discovering, developing, and commercializing innovative treatments for unmet medical needs. Dyax has an advantage in that the company has already produced a large portfolio of antibodies, peptides, and small proteins. Because of this portfolio, Dyax has implemented “phage display,” which allows the company’s scientists to scan the portfolio for potent binders. The scan is able to identify drug candidates that have the potential to meet areas of therapeutic interest.
Dyax is specifically focused on identifying and developing treatments for patients who experience plasma kallikrein (bradykinin) mediated angiodema. The company developed a compound that demonstrated the ability to inhibit human plasma kallikrein. HPK is an enzyme in the blood that produces bradykinin, a protein that can cause blood vessels to enlarge.
In 2010, Dyax developed KALBITOR, which is now approved in the U.S. for the treatment of acute attacks of HAE (hereditary angiodema). The company is also developing DX-2930, a monoclonal antibody inhibitor of plasma kallikrein.
While many investors may not be as familiar with angiodema, one biotechnology investment fund certainly is. During the fourth quarter of 2013, the Baker Brothers initiated a new position in Dyax. The fund’s current position is slightly more than 2 million shares, which makes the position worth more than $20 million based on today’s prices. Investors should be aware that the Baker Brothers have risen to fame because of their early stakes in biotechnology companies such as Acadia Pharmaceuticals, Pharmacyclics, and ViroPharma.
Like Clovis Oncology, Dyax has been a big winner over the past three months. Shares have surged by more than 17 percent during that period. Once word gets out that the Baker Brothers took a stake, it’s likely that shares will continue heading higher.