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Investors looking to generate substantial gains over the coming years may want to take a look at the our small-cap biotechnology companies mentioned in this article. Although each company has its own set of risks, the potential that each company offers cannot be disputed. The four companies are Ariad Pharmaceuticals (NASDAQ:ARIA), Bristol-Myers Squibb Company (NYSE:BMY), and Sanomedics International Holdings (SIMH.PK).
One of the most actively traded biotechnology stocks over the past few months has been Ariad Pharmaceuticals. Ariad Pharmaceuticals is an integrated global oncology company focused on transforming the lives of cancer patients with breakthrough medicines. The company is working on developing new drugs for the treatment of chronic and acute leukemia, lung cancer, and other difficult-to-treat cancers.
Although Ariad Pharmaceuticals had a rough 2013 because of a series of FDA setbacks, the company is back on track. Over the past 3 months, shares of Ariad Pharmaceuticals have climbed by roughly 255 percent thanks to several positive developments and takeout chatter.
One of the biggest sparks for Ariad shares occurred in late November 2013 when the Committee for Human Medicinal Products of the European Medicines Agency gave a positive opinion on the continued availability of Iclusig in the European Union for use in patients in its authorized indications. Those indications included:
- The treatment of adult patients with chronic phase, accelerated phase or blast phase chronic myeloid leukemia (or, CML).
- The treatment of adult patients with Philadelphia-chromosome positive acute lymphoblastic leukemia.
An even bigger spark came in late December when the FDA approved revised U.S. prescribing information for Iclusig. Ariad was able to once again resume its marketing and commercial distribution of Iclusig in the U.S. Since that announcement, shares have continued to climb higher, which has led some to speculate that a takeout might be occurring. Given the value of the company compared to where it once was, it certainly is possible that a larger biotechnology firm may wish to acquire Ariad Pharmaceuticals at this bargain valuation.
A second company poised for big things in 2014 is Bristol-Myers Squibb Company. While almost all investors are familiar with the company, many may not be aware of the exciting technology that the company is currently working on. Over the past year, companies focused on harnessing the power of one’s own immune system have produced impressive trial data that has caused a huge rally across most of the biotechnology industry. Most recently, companies focused on PD-1 blocking antibodies have been producing incredible trial results.
Several companies have already produced therapies capable of blocking the receptor CTLA-4. Due to that success, several companies, like Bristol-Myers Squibb, is evaluating whether blocking the receptor PD-1 can generate the same kind of results. Bristol-Myers Squibb is currently exploring a potential game-changing treatment for lung cancer called nivolumab. Lung cancer is one of the deadliest forms of cancer, resulting in more than 1.3 million deaths each year according to the World Health Organization.
In late October, Bristol-Myers Squibb provided long-term follow-up results from the lung cancer cohort of the Phase 1 trial. Across all the cohorts, the one and two year survival rates were 42 percent and 24 percent, respectively. Additionally, the overall survival was 9.9 months. Due to these strong results, Bristol-Myers plans to continue further investigation of nivolumab in additional studies. Investors should also be aware that Bristol-Myers is evaluating nivolumab for additional indications that include:
- Advanced Melanoma
- Renal Cell Carcinoma
- Castration-Resistant Prostate Cancer
- Colorectal Cancer
Through the first thee quarters of 2013, Bristol-Myers generated total revenue of $11.94 billion. If the company can successfully develop nivolumab for the above listed indications, investors can expect a significant increase in future revenue potential.
A third company that should see significant appreciation in 2014 is Sanomedics International Holdings. Sanomedics International Holdings is a medical technology holding company that is focused on acquiring companies that have developed game changing products and/or services. The company plans to grow the business organically, as well as through strategic acquisitions.
The year 2013 was busy for Sanomedics as the company acquired a medical company that helped form the foundation of the company’s holding business. In April, Sanomedics announced that it had signed a definitive agreement to acquire Prime Time Medical, a leading durable medical equipment provider of home medical equipment, for $3 million. At the time of the acquisition, Prime Time Medical was focused on customers in the West Central Florida locale. Sanomedics hopes to scale that local brand into a national brand. One really attractive part of the deal is the fact that Sanomedics acquired a company generating annual revenue of $5 million for just $3 million. If Sanomedics can scale the business, the original purchase price will look like a bargain.
If Sanomedics can continue to acquire promising, revenue-generating companies like Prime Time Medical in 2013, investors are likely looking at a huge winner over the long run. In early January 2014, Sanomedics announced that it had secured a $5 million financing agreement with TCA Global Credit Master Fund that can be used to help fund future acquisitions. That agreement likely means that future acquisitions are forthcoming. Investors should expect the company to be very aggressive as far as acquisitions go.
Investors might be wondering what types of companies Sanomedics is likely to acquire. Based on its track record, the characteristics of a typical acquisition target would include:
- Healthcare product or service.
- A local brand that can be scaled nationally and possibly even internationally.
- A company with immediate impact such as lowering costs for end users like hospitals, doctors, and patients.
- Revenue generating and profitable.
As Sanomedics continues to execute its long-term growth plan, the potential is there for the company to eventually generate revenues north of $100 million per year. In order to reach that goal, investors can expect the company to pursue an uplisting to a major stock exchange like the AMEX or the NASDAQ. The uplisting will be beneficial for several reasons:
- Additional liquidity for trading.
- More convenient for raising capital to pursue attractive acquisitions.
- Likely to attract additional institutional investment.
Based on the expectations of additional revenue generating acquisitions and an uplisting, investors are likely in store for a significant increase in Sanomedics share price. To understand the future potential, investors need look no further than at a comparable company called Integra LifeSciences Holdings Corporation (NASDAQ:IART). After years of successfully acquiring profitable and growing medical companies, Integra LifeSciences has become a billion dollar company. Hopefully, Sanomedics can follow a similar path within the next 18-24 months.
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