Investing in emerging biotechnology stocks can be a high-risk, high-reward scenario, with the three stocks we're examining today being a prime example.
Generally speaking, companies move through phases from drug discovery to phase I, II, and III clinical trials, and then on to commercialisation.
Investors who get on board early can make gains of 10 and even 20-fold, although there's always the risk that trials will fail, and send a company's shares south in a rapid fashion.
On the other hand, if companies continue to perform and successfully commercialise their products, the upside can be huge.
This one's a market darling
One of the best performers among Australian biotech shares over the past year has been 4DMedical Ltd (ASX: 4DX), whose share price has increased from lows of 22.5 cents to $4.58 currently.
4DMedical is currently right in that sweet spot of moving from cash burn to revenue generation, with several key contract wins in recent months after it secured a key US Food and Drug Administration approval in August.
Since that time, the company has secured contracts with four of the most respected academic medical centres in the US to use its CT:VQ technology for lung scans.
It will be interesting to see how quickly these contract wins translate into material revenue for the company, which reported a net loss of $30 million in its last financial year.
4DMedical founder and Managing Director Andreas Fouras said just this week that the company had "unstoppable momentum", which appears to flag further good news in the near term.
Despite its major gains over the past year, I think this is a company to watch closely.
Up and coming
A company at an earlier stage of development is heart drug company Nyrada Inc (ASX: NYR), which has also had huge share price gains over the past year.
The company just today announced it had been granted ethics approval to start a Phase II clinical trial of its heart attack drug Xolatryp.
Nyrada shares are up almost 20-fold over the past year, but the company is still valued at a modest $336.2 million.
Ethics approval for the trial is a positive for the company and pushed the shares briefly to a new 12-month high of $1.43.
It will take another nine to 18 months for this particular trial to be concluded. For investors with the right risk appetite, getting in at this stage before positive results potentially emerge could be a winning move.
And finally, there's PYC Therapeutics Ltd (ASX: PYC), which has more than doubled in value over the past year to $982.8 million.
PYC is progressing a drug candidate called PYC-003, which seeks to address the underlying cause of polycystic kidney disease, with that program currently at the Phase I stage.
The company said it expects to update shareholders on the Phase I trial this year.
PYC is also aiming to develop drug candidates for use in treating retinitis pigmentosa, other forms of vision loss, and the neurodevelopmental disease PMS.
Once again, for investors with the right risk profile, this might be one to keep an eye on.
