Trillium Therapeutics Inc. (Nasdaq: TRIL) stock has dipped nearly 5% in the last week after the company reported a Q2 earnings loss of $0.80 on Aug. 11. Analysts had been predicting a loss of $0.75 for the quarter.
In the past three months, TRIL stock has now dipped 16.4%, and the poor earnings report only stoked the fears of nervous investors.
But despite its recent performance, TRIL stock is still one of the best biotech stocks to buy now.
In fact, TRIL has already climbed 114% in 2015, and Money Morning Biotech Investing Specialist Ernie Tremblay says this stock still has plenty of room to run...
Trillium is currently developing a new cancer treatment that could be the key to curing numerous types of cancers. Here's how it works.
When your cells get sick or damaged, the body sends scavenger cells called macrophages to devour them. This process is called phagocytosis.
"Nearby healthy cells avoid this fate because they carry significant amounts of a signal protein, CD47, on their surfaces, which acts like a flashing sign that says, 'Do not eat me!'" Tremblay explained. "Unhealthy cells lose much of their ability to express CD47 and also give off other signals that attract hungry macrophages. They quickly become lunch."
The problem is, cancer cells can produce CD47 as well. That allows them to camouflage themselves from the body's immune system.
That's where CD47 inhibitors come into play. They block the CD47 that is produced by cancer cells, but not the CD47 produced by healthy cells.
So far, CD47 inhibitor treatments have focused on blood cancers. But now scientists are developing them for other types of cancers.
"This approach to fighting blood cancers is extremely promising, but it's not the end of the story," Tremblay said. "As it turns out, CD47 blockade may be a treatment that works against all cancers - there are more than 200 variations - because all malignant tumors, no matter the type, express CD47 for survival."
Trillium's CD47 inhibitor is called SIRPαFc. It binds a protein to the CD47, preventing it from broadcasting the "don't eat me" signal.
These treatments could be the "magic bullet" to treating all types of cancers. And TRIL stock is at the forefront of this profit opportunity...
But before you invest a large chunk of your capital in TRIL stock now, here's the approach we recommend...
Finding biotech stocks with successful cancer treatments is extremely difficult. Blood cancer treatments have a success rate of just 36%. It's even lower for tumor treatments, which succeed just 10% of the time.
So when a drug is successful, it can become a major cash cow. According to the IMS Institute of Health, spending on cancer topped $100 billion globally in 2014. That was a 10% increase from 2013.
"If CD47 blockade works as well as the science predicts it should, TRIL's earning potential will be unlimited," Tremblay said.
But with a market cap of just $141 million, TRIL stock is still a speculative play. While the company's potential is undeniable, the stock will remain volatile.
Tremblay typically recommends a trailing stop of 35% on biotech stocks. Since it's a speculative play, it is smart to limit your investment to 2% of your investing capital.
Shares of TRIL opened today at $19.16. Analysts surveyed by Thomson/First Call have an average price target of $39.57 for TRIL stock. That would be a gain of 106% from today's price.
Watch the video below for five easy steps to picking the best biotech stocks to buy. Improve your returns and reduce your risk today:
Follow us on Twitter @KyleAndersonMM and @moneymorning.
Like us on Facebook: Money Morning.
Profit Alert: Since Money Morning Executive Editor Bill Patalon launched his Private Briefing program just a few short years ago, he's recommended 192 stocks that have either doubled or tripled in value. The service has completely revolutionized the way people invest. Keep reading to find out more about his extensive research and premium stock picks...