3 Small Cap Biotech Stocks with Great Potential

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Small cap stocks are a bit riskier, but offer more growth than the stable large cap ones. The biotech sector in U.S. has a number of small cap stocks that are thriving, developing their product portfolios. Out of all these, some have exceptional potential of growth. I took a peak into the current business scenario of one of them and was impressed enough to share it with you. My pick is Cytokinetics (NASDAQ: CYTK), and I will analyze it with its peers, which are also performing quite well.

Cytokinetics

Cytokinetics develops drugs for patients suffering from chronic cardiac failure, skeletal muscle wasting or weakness and amyotrophic lateral sclerosis (ALS). The company’s drug development in the chronic cardiac segment is its gem. This is mainly because every year approximately 700,000 people in the U.S. suffer heart attacks, out of which 190,000 have already suffered an attack before. Thus, there is a huge demand for drugs related to heart ailments.

For cardiac muscle damage, Cytokinetics is collaborating with Amgen to work on a drug called Omecamtiv Mecarbil. This has helped the company as most of the expenses on clinical trials and commercialization are paid by Amgen. Cytokinetics, on the other hand, will enjoy double figure royalties for the drug. Omecamtiv Macarbil is in phase II clinical trials and helps patients to achieve cardiac muscle recovery with a laboring heart after a cardiac event.

Cytokinetics is also working on two other drugs, i.e. Tirasemtiv and CK-2127107 for related skeletal muscle ailments like muscle aging, wasting or fatigue and ALS. Tirasemtiv is in Phase II trial (BENEFIT-ALS) for ALS whereas CK-2127107 is in the Phase I trials stage for safety and tolerability.

The company is not producing large amount of drugs, instead it is catering to the unmet medical needs of the people. Its BENEFIT-ALS study is currently being conducted in 67 different study centers in 8 countries. This tells me that after Omecativ Mecarbil, the company’s next big revenue driver would be Tirasemtiv.

Peers

Another small cap company in the industry is Exelixis (NASDAQ: EXEL), which is working on cancer cures, is under the radar for its successful lead compound, cabozantinib. The company got its first FDA approval for marketing its drug called Cometriq (cabozantinib), which treats progressive, metastatic medullary thyroid cancer (MTC). MTC is a rare disease that is quite difficult to treat. Approximately 2,250 people in the U.S. suffer from MTC, and about 500 to 700 patients reach the advanced stage of MTC each year.

Cometriq would be largely welcomed by the consumers who are suffering from MTC. The company is currently developing a research program revolving around Cometriq in which it is testing different compounds for the treatment of other forms of cancer. It has 10 other compounds in phase II and III clinical trials. The company has quite an optimistic future ahead in the cancer treatment drug segment.

Similarly, InterMune (NASDAQ: ITMN) is also a small cap company developing drugs related to pulmonology and orphan fibrotic diseases. Its premier drug, Esbriet, is related to the therapy of pulmonology i.e. treatment of lung conditions. It has been approved by European Union and Canada and as of the first quarter of the year, the drug has been launched into 15 different countries. In the U.S. the company is conducting Phase III trials to get an approval for marketing its product.

The development for the treatment of orphan fibrotic disease is still under the drug discovery and preclinical stage. Now the research and development for the program can be easily be supported by the revenues generated by Esbriet, due to its presence in the European and Canadian markets. The company would get a major uplift once Esbriet gets approved in the U.S.

Final takeaway

To tell you the truth, the risk associated with biotech companies is so high that it is pretty difficult to trust a small cap company with your investment. If the potential of growth is there in a company, then we can expect impressive returns on investment. All the companies that I have discussed above have a positive future outlook and the investors can trust them for hefty returns in the future.

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usman iftikhar has no position in any stocks mentioned. The Motley Fool recommends Exelixis. The Motley Fool owns shares of Exelixis. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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