With that as preamble, here are four biopharmas trying to get their first compounds onto the market. They're all worth a place on your watch list.
1. Pharmacopeia (Nasdaq: PCOP )
Like Array BioPharma (Nasdaq: ARRY ) (a stock I profiled a few weeks back), Pharmacopeia boasts a large drug pipeline and some well-known big pharma partners. It currently has five compounds in clinical stage development -- with another four in the preclinical stage -- targeting a broad rage of ailments.
Its lead unpartnered drug candidate is in phase 1 testing as a treatment for hypertension. It is an antagonist to both angiotensin and endothelin receptors. The FDA has already approved several compounds blocking either the angiotensin or the endothelin receptor, so both of these targets have been validated in the past.
Pharmacopeia has only one product in phase 2 testing, a drug for chronic obstructive pulmonary disease that is being tested by partner Schering-Plough (NYSE: SGP ) , so it still has a long way to go until any of its pipeline drugs reach the market.
With multiple big pharma partners like GlaxoSmithKline (NYSE: GSK ) , Wyeth, and the aforementioned Schering-Plough validating at least the work of its preclinical drug discovery platform, its worth putting this highly speculative drug developer on your watch list.
2. Pain Therapeutics (Nasdaq: PTIE )
I've mentioned Pain Therapeutics in the past when I called it the one development stage drugmaker to buy. Since then shares have been up 13% as the announcement of pivotal trial results for its lead drug, Remoxy, approach.
In the fourth quarter, Pain and partner King Pharmaceuticals plan to release data from the second phase 3 study of Remoxy, their abuse-resistant version of the powerful painkiller oxycodone, which will determine whether the companies have an approvable compound on their hands.
Pain and King plan on going through the relatively easier 505(b)2 pathway for approval of Remoxy rather than the New Drug Application process. There could be hiccups with the drug in the regulatory process if any competitors claim patent infringement, since the 505(b)2 process is similar to the generic drug approval process.
Trading at an enterprise value a tad above $200 million, investors should expect a wild ride in shares of Pain Therapeutics over the next couple of months as all these events unfold.
3. Pharmasset (Nasdaq: VRUS )
One of the hotter areas of drug development right now is in treating hepatitis C. There are relatively few treatment options available in this multibillion-dollar indication, and the two standards of care from Roche and Schering-Plough have been on the market since 2002 and 2001, respectively.
Pharmasset has one of the earlier stage hep C compounds in development, with its polymerase inhibitor dubbed R7128, which is in phase 1 testing. Partnering with Roche should speed up development though, and the recent crashing of ViroPharma's and Idenix Pharmaceuticals' inhibitors removes some competition.
The first results of a phase 1 study testing R7128's safety and pharmacokinetic efficacy are expected in the second week of September, so investors won't have to wait long to get an initial glimpse at whether the drug holds promise or is emitting smoke.
4. SGX Pharmaceuticals (Nasdaq: SGXP )
Even on this list of risky development stage drugmakers, SGX deserves to be labeled as extra speculative, with a market capitalization of below $100 million, $28 million in cash and investments at the end of June, and no compounds in clinical stage testing.
Despite these drawbacks, SGX warrants a mention as it plans to begin phase 1 testing on an unpartnered cancer compound, SGX523, whose target could draw lots of big pharma attention over the coming months.
SGX's drug candidate in question inhibits a pathway that is crucial for the growth of multiple solid tumors. No such inhibitors are currently on the market; SGX's so-called MET inhibitor is expected to start phase 1 testing in the first quarter of next year.
Just last week, shares of Exelixis jumped after it announced that partner GlaxoSmithKline wanted to speed up a review of the development of its MET inhibitor. With Exelixis and GSK working to validate the MET target, other oncology-focused pharmas such as AstraZeneca or Genentech will likely be looking to find other MET inhibitors to put into their pipeline, either via partnership or acquisition.
As long as SGX's MET inhibitor fares positively in phase 1 testing, shares could easily double or triple as its valuation gets more in line with other development stage pharmas with a novel cancer compound. With no data on its compounds to date though, SGX could just as easily fall back into obscurity if Exelixis or other pharmas, like ArQule (Nasdaq: ARQL ) , working on similar drugs fail to produce robust data on their compounds. Any bet on SGX is really a bet on the success of other MET inhibiting compounds at this point.
Foolish bottom line
Even by biotech standards, the above four drugmakers are speculative investments. Nonetheless, they all possess interesting pipelines that investors should follow because of their potential.
Exelixis is an active pick of our market-beatingRule Breakers newsletter. You can check out all our recommendations as well as get access to our message boards and exclusive content with a 30-day free trial.
Fool contributor Brian Lawler owns shares of Pain Therapeutics, but no other company mentioned in this article. GlaxoSmithKline is an active Income Investor pick. The Fool has a pain-free disclosure policy.