3 biotech stocks for your watch list

CSL (ASX: CSL) has announced positive data from a phase 2a trial of formulation CSL 112. CSL 112 utilises human plasma (like many of CSL’s products), and is aimed at treating heart attack sufferers.

Heart attack sufferers are often at high risk of subsequent heart attacks, strokes or other cardiovascular events due to “vulnerable plaque lesions”. CSL 112 aims to rapidly increase the removal of cholesterol from the arteries following a heart attack for clearance in the liver, thereby reducing the risk of further attacks.

Due to the success of the phase 2a trial, CSL has also announced that a global phase 2b trial will be undertaken involving around 1200 heart attack patients. CSL’s announcement concluded by stating: “there are currently no available therapies to reduce the incidence of early recurrent events by directly acting on coronary plaque before it ruptures.” CSL’s shareholders will be hoping that CSL 112 proves successful in filling this gap!

Despite how far medical science has come, there are still many gaps to be filled through research and development of therapies to deal with specific health issues. Given CSL’s enormous market capitalisation of $33 billion, no matter how successful CSL 112 might eventually prove to be, it’s unlikely it would make a significant difference to the CSL’s overall value.

There are however many smaller biotech firms that are attempting to produce blockbuster drugs that would be ‘game-changers’ for each company and their shareholders. Three biotech firms that investors may consider adding to their watch lists are:

  1. Acrux (ASX: ACR) has a market capitalisation of $410 million and is developing innovated technology to administer drugs through the skin.
  2. Mesoblast (ASX: MSB) has a market capitalisation of $1.8 billion and is developing medical products focussed on repairing tissue damage.
  3. Prana Biotechnology (ASX: PBT) has a market capitalisation of$210 million and is focussed on the treatment of Alzheimer’s, Parkinson’s and Huntington’s disease.


Foolish takeaway

The problem for investors in biotech stocks is that for every CSL there are literally hundreds of other start-ups that fail to ever make any profits for their investors. It is not easy to ‘pick a winner’ in this sector as determining the ultimate success or failure of drug trials and the potential outcomes of competitor offerings generally requires highly skilled scientific knowledge and a healthy dose of luck! For this reason investors in the biotech space often look to diversify and own a selection of promising stocks with the hope that one of them turns out to be a winner.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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