Four Small Cap Healthcare Breakouts

by: Marc Lichtenfeld

One of the best aspects of my job is when my role as a healthcare specialist merges with the human nature aspect of life.

Like most people, I’ve lost family members and friends to cancer, heart disease and other ailments that I never even thought about 20 years ago. And as the years go by, it’s natural to wonder what potential illnesses lurk around the corner.

That’s why I love going to healthcare conferences, where companies present their latest research to investors. These presentations often reveal amazing new technologies, groundbreaking drugs, or novel ways of attacking diseases.

They’re inspirational events and I leave both hopeful for patients and optimistic about investments that could be 10-baggers (stocks that go up by 1,000%).

And LifeTech Capital’s small-cap healthcare conference in Miami last week was one of those events …

Four Small-Cap Healthcare Companies Out to Change the World

In between talking with hedge fund managers and investment bankers, I sat in on some very interesting presentations. I’m going to run down four of them for you here.

Keep in mind, however, that these are not recommendations, as I haven’t conducted thorough due diligence yet. They’re simply starting points for more research. In addition, remember that with small-cap healthcare companies comes a greater degree of speculation, so do your homework and make sure you’re able to handle the risk before getting involved with them.

  • Inovio Pharmaceuticals (NYSEMKT:INO)

The company’s VGX-3100 vaccine has had a sensational response to cervical cancer in Phase I trials. It saw a T-cell response in 72% of patients and in 83% of patients who received a high dose of the vaccine.

Phase II will begin in the first quarter of 2011 and Inovio has yet to find a partner for the drug, which means a lucrative collaboration with a big drug firm is possible.

Inovio currently has nine drugs in early clinical trials and is also expecting Phase I data from its flu and HIV vaccines in the next six to nine months.

  • Nabi Biopharmaceuticals (NASDAQ:NABI)

I’ve followed Nabi’s fortunes for a few years now. After activist investors threw out the management team and installed a new one, the company is now lean and well-funded. It has over $100 million in cash and no debt.

Its leading product candidate is NicVax, an anti-smoking vaccine that is two years ahead of the nearest competition. Not only that, Pfizer’s (NYSE:PFE) Chantix, the most lucrative smoking cessation drug on the market, has a horrific side-effect profile. Users experience terrible psychological problems like severe depression that have even led to suicide. But despite the well-publicized problems, Chantix still generated nearly $800 million in revenue last year.

So far in clinical trials, NicVax hasn’t shown any nasty side-effects. It’s currently in two Phase III trials and if it gets approved, it should be an instant blockbuster, given the fewer side-effects. And that approval could come in late 2012.

  • NeoStem (NBS)

The company specializes in therapies derived from adult stem cells. Interestingly, it has a contract with the Vatican to expand research and raise awareness of the potential of adult stem cells.

NeoStem is also in the generic drug business in China and has a budding U.S. stem cell banking business, too.

  • Oculus Innovative Sciences (OCLS)

Oculus’ Microcyn technology is used for tissue and wound care. Its products reduce infections and facilitate healing. It has various products – from animal care (for which it charges a premium), to surgical products, plus prescription gels.

The FDA has approved the Microcyn technology, including for use around the eyes, nose and mouth. Over two million patients have used it with no safety issues.

Oculus currently has a revenue rate of $10 million per year, but management expects that to grow to $45 million in two to three years as it launches new products and adds more salespeople.

The Twin Benefits of Digging Up the Next Healthcare Giants

Investors who knew how to identify the profit potential in firms like GlaxoSmithKline (NYSE:GSK) or Amgen (NASDAQ:AMGN) and bought early ended up making millions.

Of course, it’s not quite that simple. There are many hurdles to clear, including the arduous process for companies to prove that their drugs or therapies actually work, are safe and are commercially viable.

But the four companies I just mentioned could be on the way to enjoying the same success. The fact that it’s my job to find the next healthcare superstars that not only help people live healthier, longer lives, but also make investors rich in the process is inspiring and makes me eager to get to work each morning.

Editor’s Note: The Centers for Disease Control calls it “the next breakthrough in medical treatments.” And with good reason, too. One tiny biotech company has created a single remedy for some of the world’s deadliest diseases – including Alzheimer’s, Parkinson’s, heart disease and arthritis.

It’s so powerful and important that the company has even managed to legally fast-track the product through the FDA’s long and expensive clearance process and it’s set to hit the global marketplace very soon.

And as you can imagine, it’s triggered a massive wave of excitement. Not to mention a potential windfall of almost $500 billion, as the treatment hits 64 markets across the world.

And for investors who jump on this opportunity early – and more importantly, before Wall Street gets wind of it? Well, let’s just say the potential is enormous.

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