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Vegas Baby: Rolling '777s' in Biotech

Three small-cap biotechs with attractive risk/reward profiles.
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It is only a few weeks until the MoneyShow in Las Vegas where I'll deliver a couple of presentations around investing successfully in the high-beta biotech sector. I also hope to have some free time to take the girl to see another Cirque du Soleil show and maybe even get a few hours of poker in too.

I will probably get long odds at the sports book as I put a hundred or two on my Arizona Cardinals to win the Super Bowl. A bet made for loyalty more than hope, although the team does have a favorable schedule and hopefully can avoid the injury bug this upcoming season. One place that will not see a dime of my money, however, will be the massive slot machine banks, where the house always has the edge.

Staying with the Las Vegas theme, let's highlight three small-cap biotechs I believe have attractive risk/reward profiles at current trading levels. All go for right around $7.00 a share and at least one should provide a "jackpot" in the years ahead.

We'll start with Amicus Therapeutics (FOLD) , which has slowly begun to recover from a big fall last November when the Food and Drug Administration did not accept the company's application for accelerated approval of its primary compound Galafold for the treatment of Fabry Disease.

This was an unexpected decision given the same drug had been approved by European authorities in the second quarter of last year. Galafold will probably now not be approved in the U.S. until 2020.

However, European approval covers 70% of the population with this rare affliction, resulting from the buildup of a particular type of fat, globotriaosylceramide, in the body's cells. Initial sales in Germany exceeded expectations and the compound is rolling out to Italy and other major European nations.

In addition, Amicus has two other late stage compounds with key trial data upcoming later this year for the rare diseases of Epidermolysis Bullosa and Pompe Disease.

Similar to Amicus, Neos Therapeutics (NEOS) has also has been on a decent roll and is currently trading at just over $7.00. The Texas-based company is targeting the Attention Deficit/Hyperactivity Disorder space, an approximate $9 billion a year market. The company has a market cap of just $160 million and appears significantly undervalued given its growth trajectory.

Neos first approved compound, Adzenys, is seeing script growth of around 15% a month. A second compound called Cotempla should be approved in late June and a third drug, NT-0201, should be green-lighted by the end of 2017. Both will be sold by the same salesforce as Adzenys, which should substantially boost revenue growth and productivity.

Finally, a new addition to my portfolio, Genocea Biosciences (GNCA) , is selling for just under $7.00. This is the type of "busted IPO" I love to target, as the stock sold for north of $20 when it first went public in 2014 and its pipeline is further along.

Genocea has a promising herpes vaccine that should start Phase III trials by the end of the year. This is potentially a $2 billion market. The Massachusetts-based company currently has a market cap of less than $200 million, giving the stock a favorable risk/reward profile.

These names have good probability of coming up "7s" for your portfolio.

At the time of publication, Jensen was long FOLD, GNCA and NEOS.