Most of the time, life-changing financial gains are generated over the long haul, not in the blink of an eye. However, sometimes stocks can put up jaw-dropping returns over a short period of time too. For example, these three health care stocks have rewarded investors with remarkable returns over the past three months. Each one of them would have more than doubled an investor's money during the fourth quarter. While no one can know if these companies will see similar success in the future, we can consider what made these stocks such big winners and what lessons they might offer in finding the next big winner.
1. Ovascience (NASDAQ:OVAS): up 174% since September 30th.
Ovascience is developing next-generation fertility treatments that could help make women's eggs healthier and eventually may reduce or eliminate the need for hormone injections.
The company's Augment treatment, which improves a patient's egg health by using mitochondria from precursor egg cells found in the ovarian lining, is already being used outside America in Canada, the United Kingdom, and other markets. Ovascience's OvaPrime, a fertility approach that increases a patient's egg reserve by moving precursor egg cells from the ovarian lining to a patient's ovaries, should launch in some international markets in 2015. And Ovascience is also developing OvaTure, a process that would mature a patient's precursor egg cells outside the body, which could one day reduce or eliminate the need for hormone therapy.
According to the Centers for Disease Control, roughly 6 million women in the U.S. of child bearing age have difficulty getting or staying pregnant. As a result, many families turn to in vitro fertilization procedures, which can cost more than $12,000 per cycle. Add in the costs for related medicine and tests and costs can eclipse $20,000 for a procedure that works less than half the time.
Since fertility treatment is a major market and Ovascience is advancing unique approaches that could lower costs and boost success rates, investors have embraced shares following the company's investor day meeting which was held in the middle of December. Although Ovascience shares could rise or fall from current levels, the company's share price performance suggests that investors may want to keep an eye out for similar companies that are innovating existing therapies in a bid to lower costs or improve outcomes.
2. Bluebird Bio (NASDAQ:BLUE): up 161% since September 30th
Bluebird Bio is a small cap immunotherapy biotech that is working on technology that reengineers a patient's cells in a bid to treat various diseases. For example, Bluebird's Lenti-D modifies patient stem cells to include a functioning version of a missing gene associated with childhood cerebral adrenoleukodystrophy, a rare genetic disease, and its LentiGlobin BB305 inserts a fully functional human beta-globin gene into patient stem cells to treat beta thalassemia major and severe sickle cell disease.
In addition to treating those rare indications, Bluebird is also studying immunotherapy approaches that could allow the immune system to more easily identify and kill cancer cells. Bluebird's partner on that program is Celgene (NASDAQ:CELG), a highly successful biotech company that already markets cancer therapies that generate billions of dollars in annual sales. In 2013, Celgene paid Bluebird $75 million upfront and agreed to pay as much as $225 million in additional fees and milestones to partner on Bluebird's program.
Bluebird's shares soared in December when the company reported that its LentiGlobin BB305 successfully reduced or eliminated the need for blood transfusions that are typically necessary for patients. However, the results were based on just a handful of patients; while compelling, there's a lot more work that needs to be done. In that vein, the company's LentiGlobin BB305 phase 1/2 trials will continue through 2015. Whether or not Bluebird's trials will ultimately succeed is uncertain, but the fact that its shares surged may suggest that investors ought to keep an eye on other immunotherapy companies too.
3. Regulus Therapeutics (NASDAQ:RGLS): up 137% since September 30th
Regulus Therapeutics is an emerging biotech company that is researching treatments that target micro RNAs, which are RNA molecules that play an important role in regulating cell activity.
Regulus, which was founded in 2007 by Isis Pharmaceuticals and Alnylam, has seen its shares trade significantly higher following promising results for its pre-clinical drug for hepatitis C.
In an early stage trial, one single dose of Regulus' RG-101 resulted in a 4.1 log drop in hepatitis C viral load at 29 days. Since that knockdown is in the same ballpark as existing therapies including Gilead Sciences' Sovaldi, investors hope that RG-101 could someday become a key cog in a next generation, short treatment cycle, hepatitis C therapy. If so, it could be a big win for Regulus, as well as Isis and Alnylam, which still own equity stakes in the company. However, before investors extrapolate RG-101's early stage success into a billion dollar blockbuster, remember that results were from a very small, early stage trial and that mid-stage phase 2 studies won't begin until the second quarter of 2015. Regardless, Regulus' impressive performance may suggest that investors continue to look for companies developing innovative approaches to treating hepatitis C, a disease that affects nearly 3 million people in the United States.
Tying it all together
Ovascience, Bluebird, and Regulus are all small cap stocks and none of them have any revenue producing products yet. That means that all three are high-risk bets for investors. But each is working on potentially market-altering solutions, and that common thread may mean that investors ought to consider investing at least some of their money in small cap stocks.