by Traders Reserve | November 7, 2013 11:50 am
My four favorite biotech stocks are compelling investments that have skyrocketed in the last five years — and even better, are expected to again outperform the S&P 500 in the next several years.
I wrote about them some five years ago as “the fours Cs” – my four favorite biotechs, only one being a true biotech. At that time, the companies – Cerus (CERS), Curis (CRIS), Compugen (CGEN) and Cepheid (CPHD) were in different stages of development and faced vastly different markets.
The common denominator, besides Wall Street not understanding them, was core technology that was extensive once proven to the world. A secondary driving factor for three of the companies – CERS, CGEN and CPHD – is cost; their systems can radically reduce costs.
These four stocks still have tremendous growth potential – even after trouncing the moves in the S&P 500. How much have they beaten the S&P, which is up 73% over the past five years?
What do these outfits do and why do I like them?
Cerus (CERS) is the world leader in technology and systems to purify blood plasma – purify blood to such a degree blood banks (almost) need not worry about the donor. The company’s products are accepted in many European nations. A new CEO who understands the FDA in the United States is now putting the company on track to get approval in the U.S. – something that should have happened many years ago except for the objections of one FDA staffer – one – in a bad mood the day the Cerus application was being reviewed. Cerus is in development to extend its technology to whole blood, a much bigger market. Hence my enthusiasm.
Curis (CRIS) is a small cancer treatment company with novel technology already approved for one malady – advanced melanoma – and with more than 20 trials underway through powerful partners – Roche/Genentech and the National Cancer Institute. The core technology disrupts inter-cellular communications during the cell duplication process, preventing or slowing the growth of cancer cells. Advanced melanoma is a narrow indication; if the company’s approach is approved for a treatment for a solid tumor type, such as colon cancer, this will be further proof of concept for the technology and the stock should explode.
Compugen (CGEN) is the world leader in identification of proteins and other cellular matter that can be used as markets for disease, giving drug companies identifiable targets for research. Its technology and databases replace the hit-and-miss approach found in most R&D efforts and also produces patented information and markers the company can license or use for internal development efforts. Internally the company is developing therapeutic proteins and monoclonal antibodies for use against immunological disorders and cancer. Compugen has a large universe of clients among big and small drug development companies.
Cepheid (CPHD) is the world leader in genomic based diagnostic testing, has the most accurate and fastest testing system for a variety if illnesses and increasingly dominates the market for testing for Hospital Acquired Infections (HAIs) and tuberculosis. This latter test is the only one recommended by the World Health Organization (WHO), for it enables doctors to identify the strain of TB and therefore the appropriate antibiotic, avoiding trial and error. Revenues grew more 20% in 2012 to $330 million and I expect rapid growth for several years. Simply put, Cepheid makes a far better widget and hospitals desperate to reduce the cost of treating HAIs are turning rapidly to CPHD systems.
CRIS and CGEN can be considered speculative; CERS is an emerging company, CPHD is an established company pulling away from its competitors. Investments in these outfits should be according to their risk profile – a split position of these four, or two positions split four was, will, in my mind, easily outperform the S+P for several years to come.
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