Acadia Pharmaceuticals (NASDAQ:ACAD) is the model investment we all strive for. In the last 12 months, shares rocketed from $1.36 to over $20.00 returning over 1,500% to investors who had the foresight and the courage to buy while it was cheap and to hold on through all the gyrations and price swings. This is the kind of trade many of us stay up at nights dreaming about, but it's really hard to duplicate because few investors put in the time it takes to research a company. A little research will help save making some big mistakes and can help you become a far more profitable investor.
To match Acadia's 1,500% return, a stock must increase in value 15 times. A $20 stock would have to increase to $300. A $100 stock would have to increase to $1,500, and so on. Knowing these multiples, it becomes apparent that it is far more likely for a lower price stock, like a dollar stock, to increase 15 times opposed to a higher price stock.
In the past 12 months BioMarin traded from a low of $36.28 to a high of $71.56 while Vertex has risen from a low of $38.44 to a high of $89.96. With returns of between 100% to 135%, Acadia clearly leaves them both in the dust.
Extensive research turned up two small-cap pharma companies that stand out as extraordinary opportunities primarily because of their impressive pipelines with a low risk of failure in their trials. They both have potential for large sales in a relatively short timeframe that is substantially less than the traditional big pharma model of 10 years and most importantly because the potential percentage returns is large and can exceed those of Acadia.
Ampio Pharmaceuticals (NASDAQ:AMPE)
Ampio's pipeline of 4 drugs for multiple indications includes, Ampion that is currently completing its Phase III pivotal trial. Ampion is a breakthrough Anti-Inflammatory that has shown remarkable results in earlier trials and testimonials, and the company has announced that they expect to release data before the end of August 2013. That is less than a month from now and it could even be any day now. If results are positive, Ampio shares will soar to record highs because the anti-inflammatory market is over $65 billion and growing fast and Ampion could quickly become a dominant player. Ampion is likely to be approved for its first indication of osteoarthritis of the knee and commercial in 2015. Ampion for a host of other indications would follow right behind
Optina for Diabetic Macular Edema is also in a pivotal trial that is expected to be completed in the next few months. If successful, Optina could replace Anti VEGF drugs Eylea and Lucentis that are both expensive and unpleasant injections directly into the eyeball because Optina is a pill and is expected to work even better than the Anti VEGF competitors. Eylea and Lucentis produce revenues exceeding $3 billion combined.
Zertane is a drug for the indication of sexual dysfunction called premature ejaculation. The Patient Outcome Premature Ejaculation questionnaire that is critical to the phase III trial was recently approved by the FDA and Ampio has stated that they are in negotiations with several big pharma companies for a licensing agreement that may result in a large cash advance to Ampio and large future royalties. Zertane ED is the next generation drug that the company owns worldwide patents for combining Zertane with PE5 inhibitors such as Viagra. Pfizer is the obvious company expected to become the suitor for Zertane ED because of their expiring patent for Viagra.
NCE001 is a new class of a Phosphatase Activator opposed to Kinase Inhibitors. In 2012, the company announced that NCE001 demonstrated remarkable efficacy on three fatal cancers, inflammatory breast cancer, multiforme glioblastoma and renal cell carcinoma. NCE001 is expected to be fast tracked because of its anticipated orphan drug status and the fact that there are no treatment options for these terminal indications.
There is also the Oxidation Reduction Potential (ORP) diagnostic that promises to change the way the patients are diagnosed throughout the world and will save millions of lives and billions of dollars. The ORP diagnostic is expected to launch in 2014.
And finally, the company owns a treasure chest of over 100 compounds that it plans to develop as more resources become available.
With fewer than 45 million shares fully weighted, Ampio is poised to achieve stratospheric prices beyond even the most optimistic forecasts. With the sole exception of NCE001, all Ampio's drugs are low risk for failure for safety because they are all repurposed drugs that have already been approved by the FDA for different indications or in the case of Ampion, is a naturally occurring biologic with a 50 year safety record. With Ampio selling at under $6.00, it appears, if just one of their blockbuster drugs is successful in current trials, it is likely that its shares will outperform Acadia, but if all three hit, then this could be one for the history books.
Catalyst Pharmaceuticals (NASDAQ:CPRX)
Like Acadia Pharmaceuticals, Catalyst Pharmaceutical Partners suffered a failure of its CPP109 for cocaine addiction that sent shares tumbling to $.37. Catalyst quickly shifted its focus to CPP115 as the next generation of CPP 109 for a large number of indications including epilepsy, infantile spasms, Tourette Syndrome, Post Traumatic Stress Disorder and movement disorders and shares are now climbing again and trading in relatively heavy volume. CPP115 is 200 times stronger than CPP109 and it has been shown to be free of the potential adverse side effect of loss of peripheral vision that was associated with CPP109.
CPP115 was designed by Dr. Richard Silverman, the well-known drug designer who created the blockbusters Lyrica and Neurontin for Pfizer.
In October 2012, Catalyst in licensed Firdapse from BioMarin (NASDAQ:BMRN). Firdapse is already approved and selling in Europe as the top line treatment for Lambert-Eaton Myasthenic Syndrome, "LEMS". Phase III trials in the U.S. are currently underway with Top Line Data expected in the second quarter of 2014. The fact that Firdapse has already been approved in Europe is a strong indication that it will also be approved in the United States. According to the analyst from Aegis Capital, Firdapse has the potential to generate sales of between $200 and $300 million per year and is expected to be commercially available at the beginning of 2016.
BioMarin is a very successful orphan drug developer that understands this space very well and the fact that they invested $5,000,000 in Catalyst for 17% ownership reflects their confidence in not only Firdapse, but in Catalyst. This acquisition combined with BioMarin's statement by their CEO that their business model is to acquire smaller companies that enhance their pipeline strongly implies that BioMarin may seek to buy the balance of Catalyst before CPP115 is too advanced and too expensive. See Catalyst Pharmaceutical's CPP-115 May Be Big Pipeline In Just One Little Pill. Rumors are already beginning to circulate about this buyout possibility.
In a recent report by Aegis Capital, the analyst projected peak sales of CPP115 at $1.6 billion and combined with peak sales of Firdapse at $200 million, projected sales are $1.8 billion. With only 42 million shares outstanding, this would translate to revenues of $43 per share. If Firdapse and CPP115 are successful in trials and approved, and if $43 per share of revenues is realized, it is apparent that Catalyst will outperform Acadia by several magnitudes.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
This article is tagged with: Long Ideas