Finding the Next Little Biotech That Could




Small biotech companies like Incyte and Nastech don’t trade on earnings -- they trade on hope. The hope that one day, one of these companies will be responsible for coming up with a drug that is really worth something.

However, the area of tiny biotech companies with promising drug pipelines is gigantic, Cramer says, so the trick is to pick out the ones that are most likely to trade higher on a surge of hopeful expectations. You need a company that develops drugs for an array of markets. Incyte fits this bill with drugs in development for HIV, inflammation and cancer, to name the best end-markets. If you’re buying a stock that trades on hope, make sure it has more than one way to get people hopeful. Biotech companies with only one end-market have less of a chance of hitting a home run than ones with their hand in several.

But it isn’t enough for a company to be developing a bunch of drugs if their potential markets are tiny. The end-markets have to be big, Cramer says, which is why Incyte fits the bill by developing treatments for HIV, inflammation and cancer.

Bottom Line: If you’re looking for a biotech company that could go a lot higher on hope, Cramer recommends Incyte.





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