Regular readers of my columns know I take a different approach when it comes to investing in the biotech space. I call the philosophy "Shotgun Investing". The sector just calls for a different investing strategy. Success is much more problematic to attain than any other sector. An investor must realize that there will be many misses within the biotech portion of his portfolio. However, this should be more than compensated for by the occasional five or ten bagger.
In the biotech space, I look for companies with interesting products, some possible catalysts and balance sheets that should allow the firms to get their products to market provided they have good trial results and eventual FDA approval. Here are two speculative but intriguing biotech plays have garnered some recent positive press.
Oncolytics Biotech (ONCY) is a development stage biopharmaceutical company that focuses on the discovery and development of pharmaceutical products for the treatment of cancers. The company is developing Reolysin, a therapeutic reovirus that is in various clinical trials for use as human cancer therapeutic.
The company recently announced positive top-line data from a study of a Reolysin /carboplatin/paclitaxel combo in second-line platinum-refractory, taxane-naïve head and neck cancers. The combination was safe and well-tolerated. The company will now proceed with a follow up registration study in this indication.
Analysts are all over the map on the prospects for Oncolytics with price targets ranging from $3.50 to $12 a share. The median price target by 10 analysts that cover the stock is north of $7 a share, substantially above the ~$2.50 a share ONCY currently is selling for.
The company raised money earlier this year via secondary offering of some 8mm shares. Oncolytics still has over $30mm of net cash on the balance sheet and could attract acquisition or joint partner interest now that Reoslyn seems to be doing well in Phase II trials.
Inovio Pharmaceuticals (NYSEMKT:INO) is a small vaccine maker focusing on the discovery and development of synthetic vaccines and immune therapies focusing on cancers and infectious diseases.
The stock has more than tripled over the six months but insiders continue to be positive on the company's prospects judging from their buying activity. Two insiders bought over $450k of new shares last week.
The company just announced that preclinical testing of a MERS vaccine "induced robust and durable immune responses". Giant Swiss drugmaker Roche (OTCQX:RHHBY) recently struck an exclusive global licensing deal with Inovio to develop vaccines to fight cancer and hepatitis B.
The company easily exceeded revenue expectations when it recently reported quarterly results. Inovio has also has over $50mm in net cash on its balance sheet. This is more than two years of operational funding at the current burn rate. This should be more than adequate to see it through until its vaccines (it has a dozen vaccines in the pipeline) get out of trials and onto the market.
Disclosure: I am long INO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.