Despite the market trading at levels last seen around five-and-a-half-years ago, the rising tide has not lifted all boats. In fact a selection of previously popular biotechnology (biotech) companies have fallen well and truly out-of-favour with investors and are currently trading not just close to their 52-week lows but in most cases at multi-year lows.
Here are four stocks that could be worth adding to your watch list.
1) Acrux Limited (ASX: ACR) is developing an array of drugs which are administered through the skin. A major positive for Acrux shareholders is the firm's diverse portfolio of treatments which reduces the single product risk associated with many biotech companies. The share price has been as high as $4.12 in the past year, but is currently trading at just $1.86, which is one cent above its 52-week low. Interestingly the stock has attracted the attention of fund manager Allan Gray, who became a substantial holder in October 2013.
2) Pharmaxis Ltd. (ASX: PXS) is trading at just 11.5 cents which is close to its 52-week low of 10 cents and a long way from its 52-week high of 61 cents and a very long way from the $3 level the stock traded at in 2011. The company continues to develop therapies to treat respiratory diseases including cystic fibrosis, however the progression to commercialisation hasn't gone as investors were expecting.
3) Mesoblast Limited (ASX: MSB) is performing relatively well compared with the other three stocks in this list. At $5.71 the stock is well off its 52-week high, but it is still up over 600% in the past five years. With medicines aimed at repairing damaged tissue, the applications for its products provide an exciting potential pipeline for future sales.
4) Starpharma Holdings Limited (ASX: SPL) has lost 37% in the past year, but like Acrux offers investors exposure to a diversified portfolio of potential products. These products include VivaGel which has been shown to inhibit infection of sexually transmitted diseases such as HIV.
Foolish takeaway
While investing in the biotech sector will often have a low success rate – and hence position sizing needs to be carefully considered – the occasional big winners can well and truly make up for a number of small losers.
