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Clinical trials and FDA recommendations play vital roles in the life expectancy of drug companies. They also happen to be the two key variables I use when considering small-cap pharmaceutical stocks. That being said, the two biotech companies featured have reacted positively to recent news regarding clinical trial development.

OxiGene, Inc. (NASDAQ:OXGN) which trades in a 52-week range of $0.31 (52-week low) and $1.37 (52-week high), rose quite nicely during Tuesday's intraday session. Shares surged nearly 7.50% on the news that the company's Phase 2 trial of Zybrestat, which is intended for patients with polypoidal choroidal vasculopathy, also known as PCV, suggest that the drug, even if administered as a single dose through an intravenous, may produce a transient reduction in both polyp activity and amount of sub-retinal fluid in patients with the disease.

According to the National Institutes of Health website, "PCV found more often in individuals of African-American and Asian descent is a disease involving abnormal blood vessels of the macula characterized by recurrent serosanguinous detachment of the retinal pigment epithelium (RPE), sub-macular hemorrhage and development of sub-retinal polyps with resulting vision loss." If Oxigene can continue to demonstrate positive results, especially in terms of Zybrestat, and more importantly patients currently diagnosed with PCV, I see no reason why an investment should not be established at these levels.

For potential investors of OxiGene, the clinical trial developments with regard to Zybrestat aren't the only catalysts long-term investors should consider. If approved the drug the drug could actually work wonders for the company's earnings which have struggled over the last two years. On November 8th the company recently announced that "for the three months ended September 30, 2012, the company reported a net loss of $2.2 million or $0.13 per share, compared with a net loss of $3.5 million or $0.25 per share for the three-month period in 2011. The decrease in the net loss in the three months ended September 30, 2012 as compared to 2011 was primarily due to a one-time restructuring charge of $1.1 million in 2011".

Are there any risks potential investors should consider when it comes to establishing a position in OxiGene? There are several risks involved when it comes to Oxigene. The first variable that concerns me is the possibility of an unexpected cash burn by the company. Although the company has $6.32 million in cash on its books, unexpected costs associated with current clinical trials or the publication of those trials could ensue. The second variable to consider is the fact that any stock at these levels has the ability to be manipulated by a rogue trader or newsletter that may be backed by an investor looking to pump and dump the stock, creating a very real liability for long-term investors. Lastly, and most importantly, any number of things could go wrong in terms of the continued clinical trials of Zybrestat and until the drug is approved I'd remain very cautious on the size of the position one were to establish at current levels.

Astex Pharmaceuticals (NASDAQ:ASTX) which trades in a 52-week range of $1.51 (52-week low) and $3.49 (52-week high), also rose quite nicely during Tuesday's intraday session. Shares surged nearly 11.00% on the news that was announced regarding the company's Phase I/II testing of its SGI-110 drug candidate. Clinical trials have showed that the drug was well tolerated in patients with leukemia or myelodysplastic syndromes at doses higher than the biologically effective dose.

For those looking to establish a position in Astex Pharma, there are two ancillary catalysts to keep in mind, especially when it comes to the company's pipeline and performance. First and foremost, I wanted to note that the company's lead drug, Docagen, was approved for use in the EU, bringing the total number of countries marketing the drug to 35.

According to the company's third quarter press release, "Dacogen (decitabine) was approved for use in the European Union for the treatment of adult patients (age 65 years and above) with newly diagnosed de novo or secondary Acute Myeloid Leukemia (AML). In October 2012, the company earned $5 million upon first commercial sale of Dacogen in the EU." The approval of Dacogen will most certainly have an immediate impact on the company's top and bottom lines as it has already managed to generate revenue as a result of its initial commercial sale. The second variable to consider is the company's improving revenues year over year. Astex's total revenues for the third quarter increased 2.75% on a year over year basis. Reported revenues were $17.20 million compared with $16.90 million for the same prior year period.

Are there any risks potential investors should consider when it comes to establishing a position in Astex? There are several risks involved when it comes to Astex, all of which are similar to the risks involved with OxiGene. The first variable that concerns me is the possibility of an unexpected cash burn by the company. Although the company has $129.84 million in cash on its books, unexpected costs associated with current clinical trials or the publication of those trials could ensue. The second variable to consider is the fact that any stock at these levels has the ability to be manipulated by a rogue trader or maliciously written newsletter that may be backed by an investor looking to pump and dump the stock, creating a very real liability for long term investors. Lastly, and most importantly, any number of things could go wrong in terms of the continued clinical trials of SGI-110 and until the drug is approved I'd remain very cautious on the size of the position one were to establish at current levels.

Source: Risk Vs. Reward: 2 Biotech Stocks I'm Considering In The Wake Of Recent Developments