Investors who are looking to add a little jolt to their portfolios should strongly consider looking at small-cap biotech stocks. If you are smart (or lucky) enough to find a winning biotech stock, the returns can simply be extraordinary, and a single great name can add a serious boost to your portfolios returns.
We asked our team of Motley Fool healthcare contributors to share a name that they believe can add a little spice to your portfolio's return. Read below why our team thinks Amicus Therapeutics (FOLD 2.51%), Sarepta Therapeutics (SRPT 1.40%), and ACADIA Pharmaceuticals (ACAD -1.40%) might be just the next home-run biotech stocks to add to your portfolio.
Todd Campbell: One way to add a little performance-related spark to your portfolio is to include small-cap stocks with catalysts coming that could send shares higher. For example, Amicus Therapeutics is one company I've included in my portfolio.
Amicus Therapeutics is a clinical-stage biotech company researching drugs for rare diseases. While Amicus is by no means a risk-free stock, it does already have one drug, Galafold, under regulatory review, and if Galafold is approved, it could have nine-figure sales potential.
Galafold is designed to treat Fabry disease, a rare enzyme deficiency disorder that is currently treated by enzyme replacement therapies with six-figure annual price tags and hundreds of millions in annual sales.
Initially, Galafold is being reviewed as a monotherapy for a subset of Fabry disease patients with an amenable genetic makeup. The company estimates that as many as half of all Fabry disease patients could qualify for Galafold therapy, but that addressable patient population may grow over time.
Because Galafold has a different mechanism of action than other existing therapies, Amicus Therapeutics is conducting studies evaluating its use alongside them. If those trials pan out, Galafold could eventually be used in the majority of Fabry disease patients, and for that reason, I find the stock to be incredibly intriguing.
George Budwell: When it comes to spicy biotech stocks, Sarepta Therapeutics is about as hot as it gets. Sarepta's stock has rocked wildly back and forth over the last few years as the Food and Drug Administration has changed course numerous times on its decision on whether or not to review the company's experimental Duchenne muscular dystrophy drug, eteplirsen.
But now that the FDA has set a formal review date of Feb. 26, 2016, the moment of truth is nearing for Sarepta and its best chance at rapidly transforming into a commercial operation.
Here is the situation in a nutshell: Eteplirsen, if approved, is expected to generate peak sales in excess of $700 million within the next decade. So, even with a market cap of around $1.3 billion, it's certainly possible a green light from the FDA could cause Sarepta's shares to double from current levels.
The problem, however, is that eteplirsen's approval is far from a sure thing. As most investors are aware by now, the drug has run into serious headwinds because its midstage study, which is the basis of the current regulatory filing, only enrolled 12 patients.
The FDA could therefore very well send Sarepta back to the clinic to ask for more data prior to an approval. In that case, Sarepta's shares are undoubtedly going to take a major haircut.
As such, I think this speculative biotech is only suited for investors looking for jaw-dropping growth opportunities, but who also truly understand the serious risks that come with the territory.
Brian Feroldi: George and Todd offered up some great small-cap names for you to consider, so I'll toss in one more that's currently in mid-cap land, but still offers huge upside: ACADIA Pharmaceuticals.
Acadia is focused on creating products that treat neurological disorders, and since the company is still firmly in the clinical stage, it remains a more speculative name. However, that may be changing soon enough; the company announced earlier this month that its lead product candidate, Nuplazid, which the company has studied as a treatment for Parkinson's Disease Psychosis, had officially been submitted for FDA approval.
Investors have been bidding up shares of Acadia for years now, as Nuplazid looks like it could be the real deal. It has been granted the much coveted "breakthrough therapy" designation by the FDA, and it offers hope to patients who suffer from Parkinson's Disease Psychosis, which is a disease that currently has no real treatment options.
Analysts expect big things from Nuplazid, with peak sales currently expected to eclipse more than $2 billion. However, the company is also currently in phase 2 testing for the compound used in Nuplazid, called pimavanzserin, as a treatment for Alzheimer's Disease Psychosis and Schizophrenia, which could certainly push that estimate higher.
I'm a big fan of buying into stocks that have already thumped the market's return, and where insiders hold a significant chunk of stock, and Acadia looks great on both of these metrics. While the company is far from a sure bet, for investors willing to take a risk, Acadia certainly has the potential to add a spark to their portfolios' returns.