2 Biotech Companies to Spread the Risk of Investing in a New Therapy


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It should go without saying that biotech investing is a risky business. Finding winners in the plethora of small companies that lose money on a daily basis, but have a pipeline of promising drugs, is a bit like trying to find a needle in a haystack. Success, however, usually brings rewards greater than the recovery of a lost needle. In such a scenario, spreading risk is not just smart, it is essential.

If a company in the biotech field catches my attention one of the first things I will look at is who the potential competitors are. If two or more companies are in late stage trials for similar drugs it makes sense to invest in both or all of them, rather than putting all of your eggs in one basket. (After “needle in a haystack” and “all of your eggs in one basket,” maybe I should be looking for a cure for clichés, but I digress.)

In one area of research and development that is very dear to my heart as a 50-something male, there is just such a scenario right now. Both Nymox Pharmaceutical (NYMX) and Sophiris Bio Inc. (SPHS) are running stage three trials for new drugs to treat benign prostatic hyperplasia (BPH, or an enlarged prostate).

What is different from existing treatments is that both Nymox’s drug NX-1207 and Sophiris’ PRX302 are injected once directly into the prostate. Early trial results indicate that this method is more effective than oral medication, while less invasive than surgical options.

NYMX reported earnings (or rather, losses) on Friday of -$0.03 per share for the fourth quarter, bringing total losses for the year to $0.13 per share, while SPHS reported a loss of $0.37 per share for Q4 earlier in the week. Earnings, or the lack thereof, are, of course, irrelevant at this stage. What counts is the potential for future earnings, should their BPH drugs pass stage three trials and receive final approval.

I have seen estimates of around $1.5 Billion for the global market for injected BPH treatments, so the potential is there for both companies.



As you can see, neither stock is particularly roaring right now and it is likely that little will happen without news as the trials progress or maybe some speculative interest as they draw to a close. Both are reasonably close to levels that can be watched; the all time low for SPHS, which went public in August of last year, is $3.50 (Friday close $3.87), while NYMX has a 1 year low of $4.39 and closed Friday at $5.83.

As I have said before when discussing this kind of stock, however, these are really just levels to monitor. This type of trade is one of the rare instances where I believe stop-losses aren’t appropriate. Both stocks are thinly traded and likely to be extremely volatile in the coming months, so any money that is invested must be money that won’t change your life if you lose it.

Because of that risk, some may prefer even more diversification with much better liquidity, and simply invest in an ETF such as the iShares Nasdaq Biotech Index Fund (IBB) or the SPDR S&P Biotech ETF (XBI). It is hard to fault that approach as both have performed exceptionally well in the last year or so, but that in itself may be reason to take more targeted, specific bets on individual therapies this year.

I am not of the mind that biotech is in a bubble, but there is increasing chatter about it, so the sector as a whole may be vulnerable. If there is a major correction later this year, good news about either NX-1207 or PRX302 could already be out; Nymox are expected to release Phase 3 trial results in the first half of this year. If those are positive it will likely give a boost to both stocks.

Neither NYMX nor SPHS are completely dependent upon the BPH drugs in development; both have a pipeline of other things, but in the immediate future NX-1207 and PRX302 give them the best opportunity of moving to profitable operations. I cannot say enough that investing in any new therapy is inherently extremely risky, but if that is a risk you are prepared to take, investing in both companies researching that treatment makes much more sense than trying to pick a winner.

  • Which stocks are doing the best so far this year? Check out these top stocks of 2015. Data is 

as of June 23, 2015, from <a href='http://www.barchart.com/stocks/performance/ytd.php'>barchart.com</a>. Shutterstock 

  • Voltari (<a href='http://www.nasdaq.com/symbol/vltc'>VLTC</a>) is up 906.06 

percent this year. Voltari focuses on the world of mobile advtertising and provides insights for their clients. Shutterstock photo.
  • DS Healthcare Group (<a 

href='http://www.nasdaq.com/symbol/DSKX'>DSKX</a>) is up 521.62 percent this year. The DS Healthcare Group develops personal-

care products and sells them at salons and retailers. They began publicly trading in the OTC Market in 2010, and upgraded to the Nasdaq 

in 2012. Marketsite photo.
  • China Aoxing Pharmaceutical Company (<a 

href='http://www.nasdaq.com/symbol/axn'>AXN</a>) is up 509.38 percent this year. China Aoxing Pharmaceutical researches, 

develops, and distributes pain-management and drug-relief products. Shutterstock photo.
  • Anthera Pharmaceuticals (<a 

href='http://www.nasdaq.com/symbol/anth'>ANTH</a>) is up 491.46 percent this year. Anthera focuses on developing products to 

fight diseases, such as lupus and exocrine pancreatic insufficiency due to cystric fibrosis, among others. Marketsite photo.
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href='http://www.nasdaq.com/symbol/egrx'>EGRX</a>) is up 453.35 percent this year. Eagle Pharmaceuticals focuses on generic 

injectable drugs, primarily aimed at oncology care and other critical needs. Shutterstock photo.
  • Recro Pharma (<a href='http://www.nasdaq.com/symbol/reph'>REPH</a>) is up 

351.97 percent this year. Recro Pharma focuses on developing non-opoid drugs, particularly for post-operative patients. Shutterstock 

  • Natural Health Trends (<a 

href='http://www.nasdaq.com/symbol/nhtc'>NHTC</a>) is up 269.36 percent this year. National Health Trends is in the direct 

selling industry, with a focus on beauty and wellness. Shutterstock photo.
  • Durect Corp (<a href='http://www.nasdaq.com/symbol/drrx'>DRRX</a>) is up 225.32 

percent this year. Durect is a specialty pharmaceutical company that focuses on treating chronic debilitating diseases. Shutterstock 

  • InVivo Therapeutics (<a 

href='http://www.nasdaq.com/symbol/nviv'>NVIV</a>) is up 220.83 percent this year. InVivo specializes in spinal cord injury 

research. Marketsite photo.
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href='http://www.nasdaq.com/symbol/imh'>IMH</a>) is up 215.16 percent this year. Impact Mortgage offers residential and 

commercial loans. Shutterstock photo.
  • Heron Therapeutics (<a 

href='http://www.nasdaq.com/symbol/hrtx'>HRTX</a>) is up 212.92 percent this year. Heron develops products to address unmet 

medical needs; their main developmental project is a drug that fights chemotherapy-induced nausea and vomiting. Shutterstock photo.
  • Galapagos (<a href='http://www.nasdaq.com/symbol/glpg'>GLPG</a>) is up 

204.70 percent this year. Galapagos has several drugs in development, aimed at fighting rheumatoid arthritis, Crohn's disease, and 

others. Marketsite photo.
  • Mer Telemanagement Solutions (<a 

href='http://www.nasdaq.com/symbol/mtsl'>MTSL</a>) is up 184.85 percent this year. Mer Telemanagement is in the global telecom 

industry. Shutterstock photo.
  • Cellular Biomedicine (<a 

href='http://www.nasdaq.com/symbol/cbmg'>CBMG</a>) is up 181.25 this year. Cellular Biomedicine targets diseases and cancers 

through their proprietary cell-based technologies. Marketsite photo.
  • Neophotonics (<a href='http://www.nasdaq.com/symbol/nptn'>NPTN</a>) is 

up 178.11 percent this year. Neophotonics manufactures high-speed optoelectronic modules, which translates to high-speed data 

transmissions. Shutterstock photo.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Investing Ideas , ETFs , Stocks
Referenced Stocks: NYMX , SPHS , IBB , XBI

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