Investors love being early adopters and supporters of innovative and disruptive companies, especially biotech companies, which can yield outsized gains. Unfortunately, it can be difficult to decipher which developmental companies truly have an edge, or the science to back up their claims. Let's face it... every CEO believes his or her company will change the world, so listening to conference calls, or reading one-sided presentations, likely won't yield an objective view. That's why Protalix Bio Therapeutics (NYSEMKT:PLX), Geron (NASDAQ:GERN), and Inovio Pharmaceuticals (NASDAQ:INO) are three biotech stocks that I'm watching over the long-term as potential investments.


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Despite having an approved product on the market in Gaucher disease treatment Elelyso/Uplyso, and a well-funded partner in Pfizer, Protalix faces a long road ahead for developing its novel ProCellEx platform. Luckily, that platform and $91 million in cash at the end of the third quarter could be all long-term investors need to sustain hopes of grandeur. ProCellEx is a modular cell culture platform capable of producing various biological drugs from plant cell lines; the current status quo in the industry utilizes Chinese hamster ovary, or CHO, cells. In English: Protalix owns a proprietary platform -- and numerous patents surrounding the processes involved -- that could provide a way around the patent protection of numerous blockbusters, and offers several compelling advantages over the industry standard.

The company is doing just that by developing PRX-106, an anti-TNF protein taking aim at Amgen's Enbrel, which had nearly $8 billion in worldwide sales in 2012. I think it may be a little late to the party, especially considering its lack of development and the large number of cheaper generics under development, but ProCellEx offers advantages elsewhere. For instance, the company is also developing PRX-112, an oral version of Elelyso. If successfully developed and approved, the drug could be a huge step forward for patients currently relying on injectable enzyme replacement therapies. It would also further demonstrate the advantages of the company's platform, and surely attract the attention of bigger players looking for competitive advantages in manufacturing.


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Geron dragged shareholders through a few painful years of development focused on regenerative medicine and stem cell therapeutics, but has redesigned itself to focus on a promising cancer compound named imetelstat. The first-in-class telomerase inhibitor failed a phase 2 trial for breast cancer, which means it won't have a future for solid tumors. However, it could still be a successful treatment for blood cancers, or hematologic tumors, which is the current focus of the compound.

The market has cheered management's pipeline pivot -- sending the company's share price and market cap to levels last witnessed in 2011. But while imetelstat offers more financial and regulatory certainty than stem cells, investors aren't quite off the hook. The compound remains Geron's only compound in clinical development, which means failure could strike a fatal blow to the company and its shareholders. On the other hand, successful development could lead to an entirely new way to treat blood cancers. 


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Another investing story that busted onto the scene in 2013 was synthetic vaccine developer Inovio Pharmaceuticals. Things really took off when the company announced a partnership with Roche for a prostate cancer and hepatitis B vaccine, which yielded $10 million upfront and could result in up to $412.5 million in milestone payments in addition to double-digit royalties on potential future sales. There are also development programs being funded in part by the Bill & Melinda Gates Foundation and various government grants -- free money (i.e. non-dilutive) that gives a sense of credibility. Does that mean Inovio is for real?

Well, no one should write-off synthetic vaccines as snake oil. They can be assembled from scratch using synthetic nucleotides that mimic sequences found in various viruses or cancers, which marks a major improvement in manufacturing. Vaccines that protect against all strains of a virus -- a universal cold vaccine? -- are also not out of the equation, either. As I recently described, the global expansion of DNA sequencing capacity has indirectly led to an expansion in DNA synthesis capacity. Inovio's platform will capitalize on that trend, as long as its immunotherapies are proven safe and effective.

Foolish bottom line
Will Protalix, Geron, or Inovio change the face of the pharmaceutical industry? Each has the disruptive potential that could lead to incredible long-term returns, but each comes with sizable risks ranging from long term dilution to regulatory uncertainty. As risk-tolerant investors think of taking small, speculative positions in these biotechs, or stocks like them, it's essential to understand both the risks and upcoming catalysts associated with each stock.

Fool contributor Maxx Chatsko has no position in any stocks mentioned. Check out his personal portfolio, his CAPS pagehis previous writing for The Motley Fool, or his work for the SynBioBeta Blog to keep up with developments in the synthetic biology industry.

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