3 Fast-Growing Biotech Stocks To Buy in December

Year end is coming up quickly, and that has investors pouring over portfolios, dissecting financial reports, and considering names to own heading into 2015.  With that in mind, read on to learn why I think these three biotech stocks may prove worthy enough of investor wish-lists next month.

Source: Cubist Pharmaceuticals

1. Treating hospital infections
On December 21, the FDA will make a decision on whether or not to approve Cubist Pharmaceuticals'(CBST.DL) latest drug, Zerbaxa. If the FDA gives Cubist a green-light, the company believes that Zerbaxa could eventually have billion dollar blockbuster potential as a treatment for complicated urinary tract infections.

But Zerbaxa isn't the only reason to consider owning Cubist. The company's best-selling MRSA drug Cubicin continues to carve out sales growth globally. In the third quarter, sales of Cubicin reached $256.7 million in the quarter, up from $229.9 million last year, giving Cubicin, which won FDA approval back in 2003, a billion dollar annualized sales rate for the first time. Overall, Cubicin and Cubist's other drugs generated third quarter sales of $309.2 million, up 16% from a year ago.

Since hospital infection rates are likely to remain troublesome as baby boomers increasingly receive in-patient care, demand for Cubist's antibacterial drugs including Cubicin, Dificid, Entereg, and Sivextro should continue to deliver bottom-line growth. In 2015, analysts covering Cubist expect the company to deliver earnings per share of $1.81. If the company can make good on that projection, it would represent a 55% jump from the $1.17 expected this year.

Source: Emergent BioSolutions

2. Preventing and treating dangerous disease
The ability to protect against biological warfare is a major focus of the Department of Defense, and that suggests Emergent BioSolutions'(EBS 7.26%) government contract revenue should continue to prop up its sales and earnings for years to come.

Emergent BioSolutions' best-selling product is BioThrax, the only FDA-approved vaccine used to prevent anthrax. Sales of BioThrax totaled $66 million during the third quarter, which brought sales of the vaccine to $158 million through the first nine months. Thanks to BioThrax and sales of its other products, including those acquired when Emergent bought Cangene earlier this year, the company reported products sales of $84.5 million last quarter, up 11% from a year ago.

Additionally, Emergent BioSolutions also reported that revenue from contracts, grants, and collaborations grew 244% in the past year to $44.1 million in the third quarter. A big reason for that increase is the recognition of $15.3 million of $20 million in upfront fees tied to its collaboration with MorphoSys to develop the pre-clinical prostate cancer treatment MOR209/ES414.

In 2015, the company should continue to see steady sales of BioThrax, but it could also benefit from other catalysts. In November, the company submitted a plan to the Biomedical Advanced Research and Development Authority that could result in it being selected to help boost production of the experimental ZMapp Ebola vaccine. There may also be an opportunity to win over FDA regulators for its hemophilia B drug, IXinity. Wanting more information, the FDA rejected IXinity in July, however, Emergent has since resubmitted its application, putting an FDA decision on tap again in 2015. Regardless, analysts think that Emergent BioSolutions' earnings per share will jump from $1.17 this year to $1.58 next year.

Source: Insys Therapeutics

3. Reformulating existing treatments
Insys Therapeutics(INSY) already has a fast-growing drug in Subsys, an oral formulation of the widely used cancer pain medication fentanyl. Since launching in 2012, Subsys has become the most prescribed formulation of fentanyl, and that has translated into significant sales success. In the third quarter, Subsys sales totaled $58.2 million, up 105% year over year.

But it's not just Subsys sales growth that may support Insys shares next year. The company also plans to refile its application for FDA approval of oral dronabinol soon. Oral dronabinol is a new formulation of the medical marijuana drug marinol, which is widely used in treating anorexia in HIV patients and nausea in chemotherapy patients. In October, the FDA kicked back Insys application on dronibinol for additional information on the drug's impact on children. The company expects to provide that information in a new NDA, and if the FDA eventually gives Insys the go-ahead on dronabinol, it could win away a solid share of the marinol market, which is currently worth $150 million annually and growing.

Additionally, Insys could provide investors with insight into its epilepsy drugs during 2015, too. The company plans to launch a study of CBD, a marijuana cannibinioid, in both Dravet Syndrome and Lennox-Gastaut Syndrome, or LGS, early next year.

Insys' pipeline opportunity is intriguing, but unlike many small biotech companies, investors don't have to wait around for profitability. Analysts think that Insys earnings per share will hit $1.67 next year, up from $1.13 this year.

Moving pieces
All three of these biotechs are smaller companies with catalysts that may or may not pan out in the coming year, so investors will need to approach each of these without rose-colored glasses. That said, each company is already rewarding investors with earnings, and earnings growth forecasts typically don't include results for drugs that have yet to win regulatory approval. That suggests that any new FDA wins could result in upward earnings revisions that could further support share prices in 2015. For that reason, these three speculative biotechs may be worth considering for portfolios.