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Investing in Biotech stocks was a very good strategy in 2012. The SPDR Biotechnology Select ETF(NYSEARCA:XBI) gained about 32% last year and has continued higher into 2013. Small Cap biotechnology stocks are attractive investments because they offer the possibility of very high returns to investors. In this article I will give a brief introduction to a five potentially lucrative small-cap biotech stocks if you are looking for a few speculative plays to spice up your portfolio for the new year. These companies were chosen for the article because their portfolios include drugs in Phase II and III trials for currently unmet markets. These stocks offer investors the possibility of 100% returns but unfortunately also carry high risk and may not be suitable for all investors. Use this as a starting point for continued research.

Astex Pharmaceuticals Inc. (ASTX)

Astex Pharmaceuticals Inc. currently develops small molecule therapeutics with a focus on oncology and hematology. Shares closed at $2.95 on Friday which gives the company a current market cap of $275.8 million. As of the most recent Zacks quarterly report there is currently $232 million in shareholder equity and $130 million in cash & equivalents on the balance sheet. The company currently has a drug on the market in partnership with Janssen Pharmaceuticals called Dacogen. Dacogen is currently approved for the treatment of myelodysplastic syndromes. The drug has also been approved for the treatment of acute myeloid leukemia (AML) for patients 65 years and older. The company currently has five other drugs in Phase II trials.

Oncolytics Biotech Inc. (ONCY)

Oncolytics Biotech Inc. currently develops oncolytic viruses as potential therapeutics to treat a broad range of cancers. Shares closed at $3.85 on Friday which gives the company a current market cap of $295.2 million. As of the most recent Zacks quarterly report there is $22 million in shareholder equity and $28 million in cash & equivalents on the balance sheet. The company currently has a drug called Reolysin in Phase III trials which is used to treat head and neck cancers. Reolysin targets the cancer cells specifically. There are currently nine other Phase II trials in the pipeline that use Reolysin in combination with other drugs aimed to treat specific cancers.

ACADIA Pharmaceuticals Inc. (ACAD)

ACADIA Pharmaceticals Inc. currently develops innovative treatments that address medical needs for neurological and central nervous system disorders. Shares closed on Friday at $4.95 which gives the company a current market cap of $280.2 million. As of the most recent Zacks quarterly report there is currently $18 million in shareholder equity and $23 million in cash & equivalents on the balance sheet. In December the company raised $86 million through a stock sale. The company currently has a drug called Pimavanserin in Phase III trials for the treatment of Parkinson's Disease Psychosis. Pimavanserin is currently being studied in two other Phase II trials for other possible treatments. The company also has one other drug, Andrenergin, in Phase II trials being studied for the treatment of chronic pain.

Galena Biopharma Inc. (GALE)

Galena Biophara Inc. currently develops cancer therapeutics aimed at treating and keeping cancer patients in remission. Shares closed on Friday at $1.79 giving the company a current market cap of $121.1 million. As of the most recent Zacks quarterly report there is $14 million in shareholder equity and $16 million in cash & equivalents on the balance sheet. The company's drug NeuVax is in Phase III trials where it is being evaluated as a medication to keep breast cancer patients in disease free status. These potential patients are not eligible for the drug Herceptin which is currently on the market. The company is also working on a vaccine called Folate Binding Protein-E39 which is aimed at preventing the recurrence of ovarian, endometrial, and breast cancers.

PROLOR Biotech (PBTH)

PROLOR Biotech currently develops proprietary versions of already approved therapeutic proteins. The proprietary versions aim to stabilize treatments used in the bloodstream. Shares closed on Friday at $4.86 which gives the company a current market cap of $308.1 million. As of the most recent Zacks quarterly report there is $37.4 million in shareholder equity and $28 million in cash & equivalents on the balance sheet. The company's Carboxyl Terminal Peptide technology extends the lifespan of current treatments without adding toxicity or loss of effectiveness. The company currently has a drug for growth disorders in Phase III trials with a company estimated market of $3 billion. There are also three other drugs in the pipeline in Phase I trials.

Data Source - All of the financial data was sourced from Zacks

Source: 5 Biotech Stocks To Watch Under $5