"The large print giveth and the small print taketh away."
-- Tom Waits

A handful of investment-bank analysts think Chimerix Inc. (NASDAQ: CMRX), and Aclaris Therapeutics Inc. (NASDAQ: ACRS) have what it takes to more than double your money. It's not unusual for biotech stocks to deliver huge gains, but there's always a lot that can go wrong along the way.

To help you decide if any of these small-cap players are worth the risk, here's what you need to know about the opportunities and challenges they're facing right now.

Upward sloping chart inside a crystal ball.

Image source: Getty Images.

Chimerix Inc.: Second chances

This biotech crashed and burned at the end of 2015, when its lead candidate, brincidofovir, failed to lower cytomegalovirus (CMV) infection rates among patients undergoing hematopoietic cell transplantation. Undetrerred, Chimerix is pressing on with the same candidate, but with two different plans of attack. H.C. Wainwright thinks the company's failed candidate still has enough potential to raise the stock to $10 per share, a 105% gain over recent prices.

Chimerix recently began a pivotal study intended to make brincidofovir the go-to antiviral to fight adenovirus infections that frequently threaten the lives of pediatric transplant recipients. During a mid-stage clinical trial, patients with infections that responded had a significantly better chance of survival.

While data from the mid-stage adenovirus study was encouraging, all patients received the experimental antiviral. For the pivotal study with pediatric patients to succeed, brincidofovir needs to beat the standard of care, something we haven't seen it do yet.

Perhaps the most lucrative opportunity for Chimerix at the moment involves brincidofovir' potential as a smallpox insurance plan. So far animal studies suggest it's a winner, and there won't be any human trials.

The company expects it will have the necessary data to support a filing in 2019, approval for which could result in the U.S. government ordering millions of doses for strategic stockpiles. Unfortunately for Chimerix, the FDA recently began reviewing an application from Siga Technologies, Inc. (NASDAQOTH: SIGAQ) for its smallpox antiviral, Tpoxx.

Since we're not supposed to find out which is most effective in humans, an order for several million doses of both antivirals, at more than $100 per dose, isn't unreasonable.

Exkata package.

An Eskata package. Image source: Aclaris Therapeutics Inc.

Aclaris Therapeutics Inc.: Warts and all

This dermatology-focused company is gearing up to launch its first commercial-stage product. The FDA approved Eskata last December for the treatment of raised seborrheic keratoses, or dark-colored warts that affect more than 83 million adults in the U.S. alone. Analysts at Guggenheim think Eskata, and drugs emerging from Aclaris' pipeline make it a $53 stock, around 177% more than it was worth at recent prices.

Eskata is essentially a 40% hydrogen peroxide solution packaged in a little applicator pen that holds just 0.7 ml, but Aclaris expects dermatologists to pay between $75 and $125 per unit. You can get Amazon.com to deliver a whole gallon of 35% hydrogen peroxide solution to your doorstep for just $49.99, which is enough to fill around 5,400 Eskarta applicators. 

That doesn't necessarily mean Aclaris won't be able to market Eskata, but it won't be easy. During one of two pivotal trials that led to Eskata's approval, 8% of patients experienced complete clearance of all four warts treated 106 days after beginning treatment. None of the patients treated with a placebo achieved this endpoint, proving something dermatologists suspected for a long time. Concentrated hydrogen peroxide works extremely well for a small cross-section of patients.

Concentrated hydrogen peroxide also appears to clear verruca vulgaris, or common warts. Earlier this year, Aclaris Therapeutics posted results from a mid-stage trial with its follow-on candidate to Eskata, A-101, a 45% hydrogen peroxide solution. The stronger solution cleared 30.2% of all treated warts after 56 days. Only 9.2% of warts among patients in the placebo group cleared on their own, suggesting A-101 has a shot in this indication as well.

Aclaris' pipeline isn't entirely limited to hydrogen peroxide. In 2015, the company licensed two Janus kinase (JAK) inhibitors from Rigel Pharmaceuticals (NASDAQ: RIGL), oral ATI-50001 and topical ATI-50002, that it will develop for the treatment of alopecia areata. This is an autoimmune disorder that results in patchy hair loss for some, and total baldness in others. 

Last May, ATI-50001 passed a safety study with 12 healthy volunteers, but we won't know if it can stop hair from falling out until it finishes a mid-stage trial slated to begin in the first half of the year. Two mid-stage clinical trials with ATI-50002 as a topical treatment for alopecia areata are under way, with results expected in the first half.

Know the risks

In terms of efficacy, we really don't know anything about the alopecia candidates Aclaris licensed from Rigel, which means everything's riding on Eskarta's popularity with dermatologists. At recent prices, the company's $596 million market cap could come crashing down if initial sales figures are less than thrilling. 

Although Aclaris finished last September with a $229 million cash balance, without a significant source of revenue, the company also lost $46 million in the first nine months of 2017. If Aclaris' hydrogen peroxide pen doesn't start generating significant sales soon, funding development of Rigel's JAK inhibitors could be next to impossible.

I'm a bit more optimistic about Chimerix's ability to become a double-bagger, but only for biotech investors with nerves of steel. It's hard to guess just how many vials of brincidofovir could end up stockpiled if the drug's approved for smallpox, especially if SIGA's candidate earns an approval.

One thing we can say, though, is that Chimerix's recent market cap of just $232 million could swell. Since we won't know if any drug approved to compat smallpox actually works in humans, Uncle Sam will probably order several million doses of Chimerix's candidate, rather than risk finding out it backed the wrong horse in the midst a bioweapon attack.

Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.