Each of the companies you'll see today is just a few weeks old. That's why you need to know about them right now.
You see, the market for all biotech shares is heating up.
IPO action is proof of the big bucks coming into biotech, igniting a strong rally in the entire sector for the rest of the year. So far this year, we've seen the most biotech IPOs in 13 years.
And the gains are beginning to add up…
The best-performing stock in this space, as you're about to see, is up 130% in little more than a month. And three other brand-new firms are roaring.
But there's a better way to make money here…
Biotech IPOs are Soaring in Only a Matter of Days
I'm astounded by the success of biotech IPOs that have been rolling into the markets in recent weeks. These companies are teaming up with bigger pharma companies, which guarantees the capital and distribution heft for their new innovative drugs.
But it's not just the amount of IPOs that's impressive. Their results are stunning. And that signals a lot of upside potential in biotechs in general.
And it's not just happening in the IPO market but also with established niche players.
Here's what makes this such a unique opportunity to get in on this trend.
From the last week of June to the last week of July, biotech accounted for roughly one-fourth of the 28 new issues – the single largest category.
Turns out, this is no fluke. The second quarter that ended June 30 saw more biotech IPOs than any other period since 2000, says a recent report by Thomson Reuters and the National Venture Capital Association (NVCA).
These numbers point to a strong rally for the rest of this year. Bull markets continue expanding as long as fresh cash keeps coming in. And it's coming.
Nowadays, biotech IPOs are more than just exciting science – they're a source of big bucks that you can tap if you know what you're looking for.
The four biotech IPO gainers below are examples of the kind of companies I'm searching out all the time. The ones that are leading the strong sector rally:
Prosena Holdings NV (NasdaqGS: RNA) Up 130%
Based in the Netherlands and founded in 2002, Prosensa is focused on genetic disorders that affect the body's muscle system or the brain, or both.
The firm's lead drug candidate uses a novel form of bioscience to target a fast-moving form of muscular dystrophy that affects 1 out of every 3,500 boys.
Patients with Duchenne muscular dystrophy (DMD) often begin having problems walking by age 3. By around age 10, they are confined to a wheelchair and begin to have curvature of the spine. The disease progresses to the point that they need a ventilator 24 hours a day. Patients often die by age 30.
Prosensa has developed a unique process for modulating ribonucleic acid (RNA), the molecules that express and regulate genes. For cases of DMD, Prosensa produced Drisapersen, an RNA-based product that targets a critical protein.
There is no cure for DMD. But Drisapersen can convert the disease to a milder form of muscular dystrophy. Prosensa has completed Phase III in its clinical studies.
Prosensa is working with GlaxoSmithKline plc (NYSE: GSK) in an alliance where Prosensa develops the science and GSK retains the rights to sell the drugs through its huge global pipeline.
IPO date: June 28. Offering price: $13. Recent closing high: $33.28.
Onconova Therapeutics Inc. (NasdaqGS: ONTX) Up 85%
Onconova is a clinical-stage biopharmaceutical company that uses novel small molecules to create drugs that combat cancer. The term small molecule refers to one that will bind to other substances, such as proteins, to inhibit disease.
Founded in 1998, the firm relies on a proprietary chemistry platform to develop drug candidates. Onconova has created an extensive library of targeted anti-cancer agents designed to work against specific cellular pathways that are important for the growth of cancer cells.
Onconova has three product candidates in clinical trials and six active pre-clinical programs. Its lead candidate, Rigosertib, is a drug that inhibits two key cellular pathways that are over-active in cancer cells.
It has received orphan drug status though it has not yet received formal FDA approval for general sale.
At present, the company is pursuing three cancer markets with annual sales of more than $1 billion each. Cancer is an area of science the company knows well.
Turns out CEO Ramesh Kumar is a leading expert in the field. He formerly worked at the highly regarded U.S. National Cancer Institute and as an executive at Bristol-Meyers Squib Co. (NYSE: BMY). He also co-edited the 1993 book "Molecular Basis of Human Cancer."
Last September, Onconova struck a key marketing agreement with drug giant Baxter International Inc. (NYSE: BAX). Under the agreement, Onconova retains the North American rights to Rigosertib and Baxter has the European rights.
That deal could be worth up to $515 million. Baxter already made an upfront payment of $50 million and made a $50 million equity investment in Onconova.
IPO date: July 25. Offering price: $15. Recent closing high: $29.20.
3rd Place Tie:
Agios and Aratana were running neck and neck for third place among recent successful biotech IPOs.
Agios is a company driven by data as much as it is by science. On its website, it specifically talks about using computer tools known as bio-informatics to help it unlock novel cancer therapies.
The firm also says it is targeting cellular metabolism to treat rare genetic disorders known "inborn errors of metabolism" (IEMs). In other words, people are born with a predisposition to disease simply because their bodies can't metabolize certain molecules properly.
For instance, Agios scientists published a report in the Nov. 22, 2009 edition of the journal Nature that established for the first time that the mutated metabolic gene IDH1 has novel enzyme activity consistent with a cancer-causing gene.
Agios is working with big-cap biotech leader Celgene Corp. (NasdaqGS: CELG). Under the agreement, Celgene provided Agios with $130 million in funding and has the right to market and distribute Agios products.
IPO date: July 24. Offering price: $18. Recent closing high: $29.16.
Aratana Therapeutics Inc.
For its part, Aratana remains a "pure play" in the medical market for dogs and cats, what the company calls "companion pets." As such, Aratana licenses human compounds from other firms and then tailors them for animal care based on clinical science.
Last year, Aratana notes, U.S. spending on pets totaled some $53 billion. But pets are living longer and often require more veterinary care and drugs to treat their conditions.
Aratana notes that most pet drugs are originally made for humans, but have the doses adjusted based on pet models. For this reason, Aratana believes it has a large and untapped market for pet-specific compounds that owners and vets will prefer over existing medicines.
IPO date: June 27. Offering price: $6. Recent closing high: $10.12.
A Better Way (Especially If You Want to Sleep at Night)
I've got the best way to take advantage of the white hot biotech sector. This has also outperformed the overall market this year and last.
This is not your average ETF…
It's an ETF composed of proven biotech winners…iShares Nasdaq Biotechnology Fund (Nasdaq: IBB). The fund's chief holdings are a Who's Who of the biotech sector's best performers. It's a terrific proxy for this soaring sector and a less risky way to ride it on up.
iShares IBB rose a scorching 29% in the first half of the year.
That's nearly double the 15.85% return of the Standard & Poor's 500 Index over the same period. And it follows the 31% ride the IBB gave its shareholders last year – a return that was nearly triple the 11.68% gain of the overall stock market.
The bottom line: If this biotech ETF were to continue its rise … but even at a more conservative annual rate of 20% … you'd be on pace to double your money by the end of 2016.
Michael reveals the best way to find the right new issues in his guide to pricing and investing in tech IPOs. Read here.
About the Author
Michael A. Robinson is a 36-year Silicon Valley veteran and one of the top tech and biotech financial analysts working today. That's because, as a consultant, senior adviser, and board member for Silicon Valley venture capital firms, Michael enjoys privileged access to pioneering CEOs, scientists, and high-profile players. And he brings this entire world of Silicon Valley "insiders" right to you...
- He was one of five people involved in early meetings for the $160 billion "cloud" computing phenomenon.
- He was there as Lee Iacocca and Roger Smith, the CEOs of Chrysler and GM, led the robotics revolution that saved the U.S. automotive industry.
- As cyber-security was becoming a focus of national security, Michael was with Dave DeWalt, the CEO of McAfee, right before Intel acquired his company for $7.8 billion.
This all means the entire world is constantly seeking Michael's insight.
In addition to being a regular guest and panelist on CNBC and Fox Business, he is also a Pulitzer Prize-nominated writer and reporter. His first book Overdrawn: The Bailout of American Savings warned people about the coming financial collapse - years before the word "bailout" became a household word.
Silicon Valley defense publications vie for his analysis. He's worked for Defense Media Network and Signal Magazine, as well as The New York Times, American Enterprise, and The Wall Street Journal.
And even with decades of experience, Michael believes there has never been a moment in time quite like this.
Right now, medical breakthroughs that once took years to develop are moving at a record speed. And that means we are going to see highly lucrative biotech investment opportunities come in fast and furious.
To help you navigate the historic opportunity in biotech, Michael launched the Bio-Tech Profit Alliance.
His other publications include: Strategic Tech Investor, The Nova-X Report, Bio-Technology Profit Alliance and Nexus-9 Network.