Image source: NIH Image Gallery via Flickr.

Chances are that if you're investing in the stock market, you're down from where you began the year. If you're heavily invested in biotech stocks, however, you might just be contemplating crawling into bed and never coming out again.

Biotech stocks get spliced and diced
There haven't really been any industries immune from the stock market correction over the past three weeks, but biotech has been hit particularly hard. The SPDR S&P Biotech ETF was down nearly 22% through Wednesday, year-to-date, and it's off about 40% from the all-time high it set last year.

Why has this sector had such a bull's-eye on its back when it comes to selling pressure? It pretty much boils down to the fact that most biotech companies are losing money. When volatility and fear increase, investors like to park their money in so-called "safe, defensive investments." With minimal profits to speak of, many biotech stocks are easy targets to be jettisoned from institutional and consumer portfolios.

It also doesn't help that emotions play a big role in determining biotech valuations. With most drug developers losing money, Wall Street and investors are left to calculate valuations solely based on the potential peak sales and sparse clinical data from leading pipeline products. It's an inexact science that often leads to exceptional stock price volatility.

Image source: AstraZeneca. 

Speculative small-cap biotech stocks that could double
However, this volatility can sometimes create intriguing buying opportunities. Today, I thought we'd take a look at two speculative small-cap biotech stocks that are on my personal buy radar. What do I mean by speculative? These are companies that currently have no products on pharmacy shelves, and thus have no guarantee of generating sales anytime soon, nor even of surviving over the long run. But I believe these two small-cap biotech stocks hold attributes and/or pipeline assets that make them attractive following their recent thumping.

After initially doubting Geron (NASDAQ:GERN), I've come over to the camp of believers in its experimental cancer drug, imetelstat.

Imetelstat is being studied as a treatment for myelofibrosis, a rare cancer of the bone marrow, and myelodysplastic syndrome. Myelofibrosis, or MF, has only one approved therapy: Jakafi, a drug developed by Incyte (NASDAQ:INCY). Jakafi is a JAK-2 inhibitor that does exactly what it's intended to do, which is provide clinical improvement in terms of reducing the adverse effects of enlarged spleen and anemia associated with MF. One thing it doesn't do, though, is actually treat MF. That's where imetelstat comes in.

Image source: Geron.

During early stage clinical studies, imetelstat actually demonstrated partial and complete responses in MF patients, which was a first-of-its-kind result. My suspicion is that if imetelstat gets approved as an MF treatment and (this is key) if it offers a similar safety profile to Jakafi, it could wind up eating Incyte's MF revenue stream for lunch.

Additionally, Geron landed a collaboration with Johnson & Johnson (NYSE:JNJ) for imetelstat. Geron secured $35 million in cash up front, and is eligible for up to $900 million in development, regulatory, and sales-based milestones. The last time Johnson & Johnson went all-in on a small-cap drug developer was Pharmacyclics, and the duo wound up bringing blood cancer drug Imbruvica to market. Imbruvica may have peak sales potential of $7 billion or higher.

The risk? Geron's hopes and dreams can go only so far as imetelstat. Its pipeline essentially revolves around that single drug, and any safety concerns or clinical failures would leave the company essentially supported only by its cash on hand. Keep in mind that imetelstat was, for a short time, on clinical hold due to elevated liver values. Regulators eventually lifted the hold, but its safety profile deserves close monitoring.

Nonetheless, I believe a doubling in Geron shares is possible in the coming years.

Inovio Pharmaceuticals
Another clinical-stage biotech with an interesting future is Inovio Pharmaceuticals (NASDAQ:INO), a company focused on developing DNA-based immunotherapies for the treatment of cancer and infectious diseases.

Despite having a fairly equal distribution between oncology and infectious disease treatments in its pipeline, Inovio's management doesn't hide the fact that it's all-in on oncology research first and foremost.

Its leading drug candidate is VGX-3100, an immunotherapy designed to treat cervical dysplasia caused by human papillomavirus types 16 and 18. In mid-stage studies, VGX-3100 helped reduce the severity of cervical dysplasia in tested patients from grade 2 or 3 to grade 1 or no disease in almost 50% of cases. The placebo did so in less than 31% of patients. More impressively, VGX-3100 also demonstrated HPV clearance in 40% of all patients compared to just 14% for the placebo. HPV clearance is believed to be important for preventing recurrences of cervical dysplasia.

Image source: Inovio Pharmaceuticals. 

There are plenty of other exciting oncology and infectious disease compounds in Inovio's pipeline worth poring over, but I find its collaborations even more impressive. It's in the midst of developing a hepatitis B vaccine known as INO-1800 with Roche -- HBV affects an estimated 240 million people worldwide. And it's also partnered with AstraZeneca (NYSE:AZN) on INO-3112, which is VGX-3100 combined with a DNA-based immune activator encoded for IL-12, designed to activate patients' immune responses to attack HPV-associated tumors.

The deal with AstraZeneca's subsidiary, MedImmune, netted Inovio $27.5 million in up-front payments and gives the company the opportunity to net up to $700 million more in milestones. It's also exciting because AstraZeneca plans to test INO-3112 with multiple other products in its own pipeline, including other immunotherapies.

The risk? Inovio was founded in 1979 and it has yet to deliver a commercial product to market. Investors tend to be less forgiving of clinical-stage biotech companies when market volatility increases, so emotions could easily drive Inovio even lower, given that it's not expected to deliver a commercial product until 2019 at the earliest.

Still, I see the potential for ample upside. Inovio has a cash runway that should extend well into 2019, and considering its diverse portfolio and solid early-stage results, I'm considering adding it to my own portfolio.