Stocks to Buy: 95% Return Is Just the Start For This Biotech Play

Investors looking for stocks to buy in 2014 have had an abundance of new options as 94 companies have gone public this year, according to Renaissance Capital.

The average return for those 94 companies since their IPO date is 9%. But some stocks have far outpaced the average and are still at great buy-in points, even after huge gains.

Money Morning's Defense & Tech Specialist Michael A. Robinson has been following the best biotech IPOs of 2014. Among them he found a stock that still provides investors a great profit opportunity, even after posting a 95% return since its IPO date.

"As impressive as this stock has been, the market hasn't quite figured out just how profitable it'll be," Robinson said.

The stock is Auspex Pharmaceuticals Inc. (Nasdaq: ASPX), a biopharmaceutical company that develops treatments for very rare diseases.

Since it went public on Feb. 4, ASPX stock has gained an impressive 95%, including a 31% gain on its first day of trading. That compares to a 7% gain for the S&P 500 and a 2% gain for the Nasdaq during that period.

Meanwhile, the biotech sector has faltered. The iShares Nasdaq Biotechnology Index ETF (Nasdaq: IBB), which tracks biotech stocks, has dropped 6%. ASPX hasn't just avoided the sector's plunge; its share price has almost doubled in the same time.

And according to Robinson, ASPX stock still has room to run. Here's why…

Why Auspex Pharmaceuticals (Nasdaq: ASPX) Is on Our "Stocks to Buy" List

San Diego-based Auspex Pharmaceuticals primarily develops drugs that treat incredibly rare diseases, known as "orphan drugs" – and they are huge revenue generators in the biotech field.

Orphan drugs treat diseases that affect fewer than 200,000 people in the United States. Because the diseases are so rare, the orphan drugs developed to treat them are given a seven-year patent. That compares to the typical five-year patents all other drugs receive in the United States.

These drugs can also be incredibly expensive, with many costing more than $200,000 per year. The most world's most expensive drug, Soliris, costs approximately $440,000 per person, per year.

That's how companies that make orphan drugs post such massive revenue numbers.