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2 biotech shares with explosive potential

When it comes to biotech shares on the Australian stock exchange there is one company that towers above them all. That is of course $48 billion-giant CSL Limited (ASX: CSL).

I believe the global specialty biotechnology company is one of highest quality companies on the market and is capable of delivering solid earnings growth for at least the next decade. For this reason I feel it would make a great long-term buy and hold investment.

I’m sure many smaller biotech companies will have aspirations to follow in the footsteps of CSL and become a giant in the industry. Whilst finding the next CSL when it is a small cap might be wishful thinking, I do believe these two biotechs have explosive growth prospects that make them worth keeping a close eye on today. Here they are:

Bionomics Ltd (ASX: BNO)

The shares of this Adelaide-based biopharmaceutical company have been on a tear in the last month, climbing a staggering 44% during that time. The reason for the strong gains can largely be attributed to the promising phase II trial results of its BNC210 drug for the treatment of anxiety. According to the release the drug suppressed activation of the amygdala and outperformed the current standard of care, Ativan.

This is a very promising development for the company, but only one of a number in its pipeline. In partnership with US$174 billion pharmaceutical giant Merck & Co, the company aims to bring new treatments to patients suffering from chronic pain and memory impairment. These include those with ADHD, Alzheimer’s Disease, Parkinson’s disease and Schizophrenia. Following the sharp rise in its value it might be worth waiting for a dip in its share price before making any investment.

Viralytics Ltd. (ASX: VLA)

Viralytics is a company intent on developing novel cancer treatments. On Monday the company updated the market on the use of its CAVATAK product in the treatment of both melanoma and non-muscle invasive bladder cancer. CAVATAK is a novel cancer immunotherapy based on a proprietary cold virus that has been shown to preferentially infect and attack cancer cells. It has been designed to enhance the body’s own defences in fighting cancer.

Both trials have produced positive results and it comes as little surprise to see its share price rally by over 12% since the announcement. According to a research note out of Roth Capital, its analysts estimate that CAVATAK’s use in melanoma treatment could deliver sales of US$600 million a year eventually. It is still early days and there are a number of trials and regulatory approvals needed before it hits the market, so investors may be best adding Viralytics to their watch list for the time being.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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