An investment in a biotechnology company can offer the greatest of rewards or the ultimate feeling of defeat. A small investment into a clinical stage company can offer massive returns. The following companies have seen large gains in stock price over the last year and present the opportunity for much larger returns.
Amarin Corporation (NASDAQ:AMRN) has posted gains in excess of 450% during a year full of positive news. The company is trading with a market cap of $1.72 billion and a 52-week range of $2.24-19.87. Amarin is a clinical stage pharmaceutical company focused on improving cardiovascular disease. Its lead product AMR101 has recently completed two pivotal phase three programs, MARINE and ANCHOR, which evaluated the treatment of patients with high triglycerides.
In April, the stock nearly doubled after the company announced its ANCHOR clinical trial met all primary and secondary endpoints. The company announced it will be submitting to the FDA a new drug application during the third quarter of this year. Investors are excited about the potential for the new drug and its chances for approval.
The CEO said the company is receiving attention from other companies that have an interest in buying. People are divided on this issue; some believe it should sell since the company has no marketing department, no sales force, and a limited manufacturing infrastructure. Some investors would like to see the company remain alone, in fear that a large company would pay nickels on the dollar for what this company is ultimately worth.
The company estimates 150 million people with high Triglyceride levels. It believes 34 million out of this group may use its drug. Amarin has compared their drug to Lovaza, which has $1 billion in sales, according to the company. These numbers are in part responsible for the market's reaction, which has increased the price. I am curious to see what happens in the coming months. If the company chooses to sell, it makes more sense to do so before meeting with the FDA as its value has the potential to decrease if not approved.
Most assume it will be granted approval and if the company has intentions to sell, it should take advantage of the assumption. If for some reason the company does not receive approval, the value drops significantly both in company acquisition cost and market value. It is a risk/reward scenario the company is sure to be considering. It realizes that if approved the cost of production and sales will be high. The company expects a potential of 34 million users; however, anyone who follows biotech knows it could take years to reach that point.
Pharmaceuticals can be a rewarding field but involves patience from its investors. Regardless of what the company decides, if it's approved, investors will be rewarded. This company may be another three years from reaching profitability, so patience should prove to be the ultimate reward. The drug works and the company has crossed all it T's and dotted every I during the clinical trial process. I have no doubt the company will make the best decision and return exceptional profit in the coming years.
Jazz Pharmaceuticals (NASDAQ:JAZZ) stock continues to rise with each passing quarter and has the finances to back it up. The stock has gained over 360% in one year as the result of earnings that continue to beat expectations. Revenue for the second quarter increased by $24.1 million to $64.6 million. Adjusted net income was $38.4 million compared to $10.5 million during the second quarter of 2010. These numbers would be considered incredible for any company, but investors have grown to expect these figures from Jazz Pharmaceuticals as its product revenue is growing at a rate at which analysts cannot keep up.
The company credits the growth to its drug Xyrem, which increased by 67% to $56.2 million. The once daily Luvox, the company's other approved drug, saw net sales increase by 26% to $7.3 million. While Luvox is not growing at the rate of Xyrem, they are both still showing impressive growth which has impacted the stock.
I believe this stock has a winning formula and will see gains for years to come. The company is working diligently to correct its balance sheets by paying off long-term debt. The company has focused on Xyrem at the center of operations since sales show no sign of slowing down. With three additional drugs in Jazz's pipeline, I see a company that is positioning itself for long term growth. With a relatively low P/E ratio of 19.54, accelerated revenue, and guidance that continues to increase, the company has room to see gains in price for a while to come.
Questor Pharmaceuticals (QCOR) is a company that has seen yearly gains in excess of 175%. The stock has experienced five year gains over 1,700% as lead drug Acthar gel continues to grow in sales. During 2010, the company reported a significant increase in revenue versus 2009. This year, with only two quarters of financial results, the company has dramatically increased revenue compared to 2010.
The second quarter of 2011 posted record financial figures which include net sales of $46 million, up 62% year over year. The growth is a result of the company's H.P. Acthar Gel, in which sales have increased 147% year over year and 48% since the first quarter of 2011. The company announced because of demand for this drug its sales team is being expanded from five to 28 representatives. The company expects the entire sales force to be trained and actively promoting Acthar by the end of the third quarter.
The sales force numbers are more impressive to me than everything else. If Questcor has been able to accomplish these results with only five representatives, then I cannot wait to see what 28 can do. I do not believe that $46 million in revenue has come close to the quarterly goals this company has set for itself. It's been realistic in expectations up until this point and I believe it's surprised even itself. I expect the company to grow even more. With an EPS of 0.66 on 62.32 million shares, the trade is modest in comparison to its growth. This stock is a buy at its current price of $31.00 trading near its 52-week high. With a market cap under $2 billion and two products that continue to increase in net sales, $31 should prove to be nothing more than a distant memory by December of this year.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in JAZZ over the next 72 hours.