The Best Small Cap BioPharma Investments This Year

At stockmatusow, we have compiled 5 of our best end of year, and long term small cap developmental biopharma companies we feel have an excellent chance to be longterm "multibaggers." By multibaggers, we mean that we feel these stocks can bring back 3 to 10 times return of investment over time. However, because these companies are in the developmental stages, greater risk comes into play, but as the old adage goes, "higher risk, higher reward"

Sarepta (SRPT)
Sarepta focuses on the discovery and development of RNA-based therapeutics for the treatment of rare and infectious diseases. Its lead product candidate is eteplirsen, an antisense PMO-based therapeutic, which is in Phase IIb clinical development for the treatment of individuals with Duchenne muscular dystrophy (DMD). DMD is a very rare disease that affects 1 in 3,600 boys -- a potential cure for any form of MD would be on par with Jonas Salk's discovery of the Polio vaccine in my strong opinion. DMD is classified as a recessive X-linked form of muscular dystrophy, and the disorder is caused by a mutation in the dystrophin gene.

Dystrophin is a rod-shaped cytoplasmic protein, and a vital part of a protein complex that connects the cytoskeleton of a muscle fiber to the surrounding extracellular matrix through the cell membrane. This complex is variously known as the costamere or the dystrophin-associated protein complex. Many muscle proteins, such as α-dystrobrevin, syncoilin, synemin, sarcoglycan, dystroglycan, and sarcospan, colocalize with dystrophin at the costamere.

Dystrophin deficiency has been definitively established as one of the root causes of the general class of myopathies collectively referred to as muscular dystrophy. The large cytosolic protein was first identified in 1987 by Louis M. Kunkel, after the 1986 discovery of the mutated gene that causes Duchenne muscular dystrophy .
Some analysts have put a $50 price target (which is too low in our opinion) on Sarepta, and on potential approval next year,it's my opinion the stock will surpass $75, at least temporarily, so traders and investors might consider selling any large gap, as it's likely the stock will likely settle back down to the mid to low $50 range. Remember, should the FDA approval, a lot of investors and traders will be realizing massive profit, and are likely to take that profit. In turn, I would expect short sellers to take advantage of this and sell the gap as well.

The company plans to meet with the FDA soon to discuss the path forward to an NDA filing for eteplirsen, which is likely by January of 2014. However, it's possible an NDA filing could come earlier, based on the 96 week data. Sarepta is a very volatile stock, so it might be a good idea to consider hedging any long position by considering buying puts.

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Halozyme (HALO) engages in the research, development, and commercialization of human enzymes. Its research focuses on human enzymes that transiently modify tissue under the skin to facilitate the delivery of injected drugs and fluids, or to alter abnormal tissue structures for clinical benefit. The company’s products are based on the Enhanze technology, a patented human recombinant hyaluronidase enzyme that enables the subcutaneous delivery of injectable biologics, such as monoclonal antibodies and other therapeutic molecules.

Halozyme's platform uses Hyaluronidase, a naturally occurring human enzyme. It is released by the acrosome of the sperm cell to aid in penetrating the outer wall of the ovum, allowing fertilization. While animal forms of this enzyme have been used for decades, it was not until Halozyme began producing human recombinant hyaluronidase, or rhupH20, that the pure enzyme has been applied to multiple clinical targets, mostly via the subcutaneous space.

Pegylation is simply the addition of a polyethylene glycol moiety to any therapeutic molecule. In the case of rhupH20, that addition creates PEGPH20. The aim of this process is to enhance the delivery of the enzyme as an IV medication. Given as an enhancing agent with intravenous chemotherapy, PEGPH20 could reach a tumor and alter its environment in a unique and targeted two pronged approach.

PEGPH20 works by improving the blood flow to the tumor, It does this by removing hyaluron from the body of the tumor, physically de-bulking it. Since hyaluron is highly hydrophilic, its removal also removes water from the tumor, thereby decreasing the interstitial pressure surrounding the arterioles being used to deliver chemotherapy to the tumor. This reduction allows the arterioles to expand and more effectively deliver the treatment. Since pancreatic cancer is a high hylaluron producing tumor, Halozyme chose this form of cancerous tumor to test the effectiveness of PEGPH20. Other types of malignancies that have high hylauron content include bladder, ovarian, and some forms of breast cancer. Of great interest is that high levels of hyaluron are found more in metastatic than in primary lesions. As a component of the extracellular matrix, it promotes spread by acting as a scaffold for tumor migration. So, by removing hyaluron, PEGPH20 should allow for more intense chemotherapy and reduces one means of tumor spread.

Halozyme most recent article on Antares:

If you believe Antares' sales pitch -- the convenience of Otrexup (patients can self inject at home) will convince doctors to increase their use of injectable methotrexate (MTX) for treating rheumatoid arthritis patients. If oral methotrexate is no longer effective, some patients might try Otrexup.

The above seems to be a misunderstanding of what Otrexup is. First off, patients currently can self-dose MTX at home, but using a "classic" needle. This causes certain issues for patients who suffer from Rheumatoid Arthritis (RA). Many Patients with RA suffer from bent fingers and hands that causes them trouble using a classic needle, making it harder to self-dose. Otrexup makes it much easier, as it is designed to do so. Also, Adam is mistaken about oral MTX in that Otrexup is not designed to replace oral MTX, but supplement it. Many patients need a much higher dose of MTX to gain an effective level of treatment. Too much oral MTX can be very toxic on the stomach and liver. Since Otrexup is subcutaneous (injected), this by-passes the liver and stomach, allowing for more of the drug to enter the system, while being safer at higher doses.

Biolologics are used in conjunction with lower dose levels of oral MTX in order to achieve the desired effective results. However, biologics are very expensive -- this is why Antares considers Otrexup a "pre-biologic." Adam feels insurance companies will not support Otrexup, but I feel otherwise, because it will be more cost effective. Doctors can now prescribe the easier to use Otrexup product, along with oral MTX to reach an effective dose to treat patients with RA, at a fraction of the cost of a combo oral MTX and biologic, notwithstanding that some patients will no longer need to receive an injected dose at the doctor's office, which should help with patient backlog.

Adam goes on to state:

Don't expect Otrexup sales to roar out of the starting gate. This is a me-too drug, perhaps a bit more convenient. Rheumatologists and insurance companies aren't likely to embrace Otrexup.

I do tend to agree that the drug will not "roar out of the gate," but once doctors fully understand what I explained above, I do expect the device to do very well, perhaps reaching peak sales of $200M if marketed correctly. Otrexup, for the reasons I mention is not a "me too" device, but rather a "hey, I'm easier to use than a standard needle for both patients and care givers, plus I'm bio-degradable, so I'm easier on the environment."

Antares is also developing Vibex QST, a quick shot testosterone self injector. Vibex-QST is designed to offer a once-a-week subcutaneous injection solution for those suffering from Low Testosterone (Low-T.) Antares is seeking to prove in clinical trials that Vibex-QST will offer better efficacy and cost effectiveness in comparison to Low-T gel solutions, which are applied on a daily basis. If Antares is successful with Vibex-QST, this product can be a monetary "blockbuster" for the company within five years.
Additionally, as brought to my attention by long time Antares investor, "lokodude" (Lokodaug on Yahoo Boards) the company holds patents to, and is developing the following products:

• Ovaleap pen (Follitropin alfa )- Pat # 8376993 - "Multiple Dosage injector."

• Valebo (Teriparatide)- Pat # 8376993 - "Multiple Dosage injector"

• Lonquex (Lipegfilgrastim) - US 20130018354 - "Cammed ram Assembly" injector.

• Alazmia -Balugrastim - US 20130018354 - "Cammed ram Assembly" injector.

• Granix ( tbo-filgrastim) - US 20130018354 -"Cammed ram Assembly" injector.

In addition to these patents, Antares $6.5 billion by 2018 . Acelrx's Nanotab tech could potentially grab a significant piece of this market
ARX-01 has the potential to address many of the key disadvantages of IV PCA which also include:

• Reducing the incidence of drug-related side effects,
• Eliminating the risk of IV PCA-related infections, reducing analgesic gaps and enhancing mobility, and
• Eliminating the risk of pump programming errors.

Three Phase III trials have been completed rendering positive results. Top-line data from the final pivotal trial treating pain after knee or hip surgery was This article is intended for informational and entertainment use only, and should not be construed as professional investment advice. They are my opinions only. Trading stocks is risky -- always be sure to know and understand your risk tolerance. You can incur substantial financial losses in any trade or investment. Always do your own due diligence before buying and selling any stock, and/or consult with a licensed financial adviser.

Written By: Scott Matusow