Although all small-market-cap stocks can move wildly on whims and whispers, it's small-market-cap healthcare stocks that are among the most prone to jaw-dropping pops and drops.
Reports from ongoing clinical research trials, ever-shifting competitive threats, and risks tied to healthcare payer pushback can all make shares soar or plummet, and for that reason it's important for investors to pay close attention to companies such as these three, all of which could trade much higher or lower on news over the coming year.
No. 1: Celldex Therapeutics (NASDAQ:CLDX)Innovating cancer therapy is incredibility difficult. Historically, 93% of oncology drugs entering phase 1 human trials are destined for the dustbin rather than pharmacy shelves.
The tough-to-crack oncology market means that when clinical-stage biotech companies do end up showing signs of success, investors ought to be paying attention.
Last year, Celldex Therapeutics reported promising interim midstage trial results for its brain-cancer drug Rintega, a therapy that could help in the treatment of up to 30% of brain-cancer patients who possess a specific genetic mutation.
Celldex is expected to update investors on how Rintega is doing in late-stage trials soon, and since that update could significantly move shares up or down, investors will need to be paying attention.
Celldex could offer up other market-moving data across other trials in the coming year, too. Celldex's pipeline includes treatments for breast cancer, lung cancer, and lymphoma.
No. 2: Exact Sciences Corporation (NASDAQ:EXAS)Exact Sciences Corporation doesn't get much love on Wall Street, but the company and its shareholders hope that will change as more health-insurance companies agree to reimburse patients taking its ColoGuard colorectal-cancer test.
Colon cancer can be much easier to treat if it's discovered early, but too few people get the proper screening. As a result, there would seem to be a market for a better, and less anxiety-producing, testing solution.
That may be true, but so far that theory hasn't panned out. Although the FDA approved ColoGuard last summer, sales have proved to be more a trickle than a flood. In the fourth quarter, Exact Sciences reported sales of just $1.5 million.
With anemic sales like that and a market cap of $2 billion, it's little wonder that sellers have piled into the stock. At last count, they held a whopping 34.4% of the company's share float short.
If insurers are motivated enough to cut costs associated with treating advanced colon cancer, they could help make ColoGuard a standard in doctors' offices, boosting sales and forcing shorts to cover their positions at increasingly higher prices. If that doesn't happen, then short sellers could end up making a handsome profit, given that the company is posting big losses, including a $100 million loss last year alone. Since it's uncertain how this one will shake out, Exact Sciences is definitely one to watch.
No. 3: Sangamo Biosciences, Inc. (NASDAQ:SGMO)Innovative treatments have turned previously life-ending diseases such as HIV into chronic diseases, but Sangamo Biosciences thinks it can take those advances further by developing vaccines that could offer a functional cure for patients.
One of the most intriguing vaccines in Sangamo's pipeline is SB-728, which uses the company's zinc finger therapeutics approach to modify the CCR5 gene, a key receptor used in HIV replication. Sangamo is currently conducting phase 2 trials evaluating SB-728 in HIV patients.
If SB-728 succeeds, it could revolutionize the treatment of HIV by eliminating the need for life-long, daily medicines that can often cause unpleasant side effects. It will be a while before we know whether SB-728 works, but Sangamo expects to give a sneak peek into interim trial data by year end. Since there are 35 million people living globally with HIV, Sangamo shouldn't be ignored.
Tying it together
Companies like these three offer compelling stories that could lead to game-changing (and highly profitable) outcomes, but each is an emerging company that offers little in the way of safety. For that reason, only risk-tolerant investors should consider buying companies such as Celldex, Exact Sciences, and Sangamo, and even those investors should approach them cautiously.
Todd Campbell owns Celldex Therapeutics. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may or may not have positions in the companies mentioned. The Motley Fool recommends Celldex Therapeutics. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.