What stomach-churning roller-coaster ride it has been for ProMetic Life Sciences Inc. (TSX:PLI). The stock fell as low as 55% last year before rebounding by an impressive 49.4% in the latter part of December. There’s no question that the stock is riding huge upward momentum heading into the new year, but can it last?
Prometic Life Sciences is a Canadian pharmaceutical company that specializes in small molecule therapeutics and protein technology. The company is developing therapies in the field of fibrosis, autoimmune disease, and cancer. The company has a fantastic R&D and a nice pipeline of drugs that are set to go under clinical trials over the next few years.
It’s no mystery that Canada has been a graveyard for healthcare stocks. Two of the biggest Canadian healthcare names went down over the last two years, and the average Canadian investor must be avoiding the sector like the plague.
The infamous Canadian companies Valeant Pharmaceuticals Intl Inc. and Concordia International Corp. have both lost over 90% of their value over the past few years due to scandals. So why should you even consider another Canadian healthcare play?
Prometic Life Sciences is not another corrupt, price-gouging roll-up firm. The company actually has a legitimate R&D division and some very promising therapies that are being worked on right now. Innovation is alive and well at the company, as new first-to-market drugs are expected to be churned out over the next few years. If the drugs in the company’s pipeline prove to be successful during their clinical trials, then we could see top-line revenues soar along with the stock price.
The management team is doing what it can to minimize risk by making clinical trials short and inexpensive. This means that no time will be wasted if a therapy is not working very well, so resources can be used to for a completely different therapy. These limited clinical trial expenses result in higher efficiencies, which gives the company the ability to maximize potential reward while reducing the risk of overspending.
The company currently has two of its drugs in Phase Three clinical trials and several more in their Phase Two trials. This means that the quite a few drugs passed their Phase One clinical trials and have shown enough promise for further research. If a drug can pass its Phase Three clinical trial, then we could have a blockbuster drug that could raise the company’s profits into the stratosphere.
It’s nearly impossible to tell if a drug will pass a clinical trial. The company just has to keep its pipeline full of great drugs and hope that some of them show promise. Because of this, the stock is a speculative bet and should only be held by investors who can stomach a large amount of volatility. There’s no question that there are huge risks associated with this investment, but the potential rewards could be astronomical.
The management team is doing a great job of managing costs, and I like the pipeline right now. All it takes is one drug to pass its clinical trials, and the stock could easily double overnight. If you feel like taking a risk, then Prometic Life Sciences could be your best bet.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Joey Frenette has no position in any stocks mentioned. Tom Gardner owns shares of Valeant Pharmaceuticals. The Motley Fool owns shares of Valeant Pharmaceuticals.