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On May 31st, the Russell 2000 began to rebalance its holdings to determine which securities would be added to its index and which companies would be removed. To be included in the Russell 2000 is a great accomplishment for small companies and a provider of great opportunity. This index is often the benchmark for mutual funds with small cap strategies. Those investing in it are often required to purchase each security within the index. Due to the sheer size of the Russell 2000, it can provide significant buying pressure to all companies involved, even the ones that are the smallest in terms of weighted average in the index.

The average company in the Russell 2000 has a market cap of around $500 million. Each company in the index is required to have a stock price of at least $1 and a market capitalization of over $110 million (which was the smallest company included following the previous rebalancing). With that being said, let's take a look at five biotechnology companies that have returned large gains and could now be included in the index. The preliminary list will be announced on June 8th, but there is no doubt that investors will be trying to determine which stocks could be included due to the benefit of its exposure.

Threshold Pharmaceuticals (NASDAQ:THLD) has been the best performer of 2012 with a 470% gain. The company began 2012 with a market cap of under $70 million but is now valued at nearly $400 million. The reason is because of a global agreement with Merck KGaA (OTCPK:MKGAF) to co-develop and commercialize its small molecule hypoxia-targeted drug, TH-302. Soon after the agreement, THLD announced that its Phase IIb study met its primary endpoint with a 63% improvement in progression-free survival, creating even more optimism for this budding biotech.

As a result of Threshold's recent developments, its ability to maintain its valuation, and its potential, I expect its inclusion into the index. In fact, if the company is not included, it would most likely be a disappointment. In any case, the company has very significant institutional ownership. According to Reuters, 50.10% of its shares are held by institutions with about 24.66% being held by insiders, a strong show of support for the company from within.

ImmunoCellular Therapeutics (NYSEMKT:IMUC) is the only stock on this list that I currently own. I believe we will hear of its inclusion into the index on June 8th. It has been a very eventful year for IMUC. The stock began the year with a market cap of $50 million, but now trades with a market cap of $147 million as of May 31st. The reason for its momentum has been the early results from its seemingly transcendent vaccine that treats glioblastoma, one of the most deadly forms of cancer. In a phase I trial, the results have been very impressive. When combined with recent developments, some have suggested that it could become a one-stop-shop for treating multiple cancers.

If you take time to research the company's lead candidate, ICT-107, and its early data for treating glioblastoma, you might think that you are reading the information incorrectly, because it is so effective. In the treatment of cancer, success is measured in months, but IMUC is rewriting all the books with a vaccine that is providing the best hope yet for glioblastoma patients. Its latest data, presented at last weekend's ASCO meeting, showed survival rates over four years. The results show that 38% of patients treated with ICT-107 survived over four years compared to 10% with standard care alone.

It's important to remember that this is a disease in which the average patient lives a little more than a year and 95% of patients die within five years. IMUC is now enrolling patients for its phase II trial and is having no problems, with 213 already enrolled of the 200 expected, a solid over enrollment. The company has also been acquiring intellectual property and patents over the last six months, and is testing the vaccine using even more antigens to determine just how successful this drug could be in cancer treatment.

If IMUC is added to the Russell 2000 it could create a number of possibilities. Up until last week, the company could not have qualified due to being an OTC stock, but the stock was just recently uplisted to the NYSE, making its timing almost perfect to be included in the index. The company has just 7.08% of its shares held by insiders most likely because it was just recently an OTC stock, and its institutional presence is minimal. Therefore, being included in the Russell index could reduce already large float, which I expect to occur with a frenzy of new institutional investors as a result of its data and IMUC's new NYSE listing.

Omeros Corporation (NASDAQ:OMER) has returned a 150% gain in 2012 climbing to a market cap of more than $225 million. As a result of the company's large YTD gains, it is now eligible to be included in the Russell 2000. An inclusion in the index would be beneficial to the company since it has few institutional investors, with 16%. The stock trades with particularly low volume, so being included in the index will help by creating volume and adding exposure for the company.

Omeros has had a number of encouraging developments in 2012 leading to its rally. It announced successful results from its late-stage trial of OMS302, followed by a patent and upgrades for the stock. The company is now enrolling patients for its second late-stage trial and has significantly increased its number of class A orphan GPCR's, which are important for the development of new drugs.

Agenus Inc (NASDAQ:AGEN) is my wildcard of the bunch that may or may not be included. The company barely met the market cap requirements at $118 million on May 31st and is particularly volatile. The company has come a long way in 2012 starting the year with a market cap of just $45 million, but now more than doubling due to impressive clinical data. AGEN focuses on several immunotherapy- based treatments and has the support of recent insiders who have purchased shares. These insiders hold nearly 12% of the shares with another 16% being held by institutional investors. The stock has traded significantly lower in May despite investors long awaiting the ASCO to hear updates from the company on several projects. AGEN is definitely a company worth watching over the next week as it could change directions abruptly with positive news from ASCO or an addition to the Russell 2000.

Anika Therapeutics (NASDAQ:ANIK) is a company that barely missed the Russell 2000 last year and should have no problems in being added to the index in 2012. The company is under-the-radar and does not trade with the same level of momentum as other stocks on this list, but is a consistent performer. The stock has returned gains of 90% over the last year, including 40% gains YTD, and now trades with a market cap of $185 million. In my opinion the stock is undervalued, with significant revenue and a pipeline of products that could grow the company over the next few years, making it a smart purchase for Russell.

Anika is attempting to commercialize both of its revenue-producing products into new regions. It has posted five years of revenue growth and is now seeing vast improvements to its margins. It is a fundamentally strong company with very little debt and a large cash position considering the size of its company. Over the last year the company has produced revenue growth of more than 20% year-over-year, reporting $67.40 million during the last 12 months with $10 million in net income. The company is undervalued and under-the-radar. Its inclusion into the Russell 2000 could create new interest among investors and add to its already large 35% institutional ownership.

In conclusion, I believe each of these companies have the possibility of being included in the Russell 2000 following the rebalancing period. Each has seen a great deal of progress over the last year and would benefit from the added exposure and investors that would occur from being included in the index. As for which company would benefit the most, I'd say it's obvious that would be IMUC. It has a large float and very little in institutional investors due to recently being an OTC stock. The other companies on this list have strong insider and institutional presence already and will still benefit with the added liquidity.

Although I anticipate a great deal of new investors for IMUC in the next year due to its many merits, it would still benefit from the advantages provided as being a part of the Russell 2000, as would each company on this list. Catalysts are numerous for each of these companies in 2012, and the possible inclusion into the Russell 2000 is yet another for investors to enjoy.

Disclosure: I am long IMUC.

Source: 5 Biotech Stocks That Could Be Included In The Russell 2000