Large cap biotech stocks have seen incredible stock performance over the past few years. The problem for many investors is that many of the key stocks have become so expensive that it is very difficult to see a continued strong performance. Even using call options is expensive, and the investors always run the risk that the option contract will expire worthless.

24/7 Wall St. ran a screen of the Wall Street firms we cover looking for names trading under $10 that had big upside potential for 2014. Almost all the names have either a proven and salable drug, or have had extensive success in phase II or phase III trials for their leading drug candidates.

We would of course caution readers that although many may be on the path to success, biotech investing always entails a greater deal of risk compared to established companies in most sectors. The reality is that most of these stocks are simply unsuitable for conservative investors. That being said, these are potentially the next great growth engines in a sector that can post phenomenal growth numbers regardless of how the economy is growing and regardless of Federal Reserve interest rate policy.

Arena Pharmaceuticals Inc. (NASDAQ: ARNA) is a small cap name to buy at Jefferies for 2014. Its approved obesity drug Belviq scripts have started to show signs of modest growth in the past few weeks, albeit starting from very small numbers. Partner Eisai recently announced that it will double its U.S. sales force to 400, and it has also left the door open for future expansions. The Jefferies price target for the stock is $12. The Thomson/First Call estimate is almost $8. Arena closed Thursday at $5.87.

CytRx Corp. (NASDAQ: CYTR) is a top small cap name focusing on oncology drugs. Its oncology pipeline includes two programs, aldoxorubicin and tamibarotene, which are in clinical development for cancer indications. The aldoxorubicin is in pivotal phase III preparation ongoing stage of development for patients with soft tissue sarcomas whose tumors have progressed following treatment with chemotherapy. The potential for this drug is huge, and investors could see a big payback. Aegis Capital has an $8 target on this red-hot name. The consensus price target for the stock is $7.50. Shares closed Thursday at $6.90.

Dyax Corp. (NASDAQ: DYAX) is a top name to buy at Jefferies. The company announced in early December that the U.S. Food and Drug Administration (FDA) has granted orphan drug designation to its drug candidate DX-2930, its fully human monoclonal antibody inhibitor of plasma kallikrein, for use in the treatment of hereditary angioedema. Orphan drug designation is granted by the FDA Office of Orphan Drug Products to novel drugs or biologics that treat a rare disease or condition affecting fewer than 200,000 patients in the United States. The Jefferies price target for the stock is $8.50. The consensus target is almost $8.00. Dyax closed Thursday at $7.60.

Galena Biopharma Inc. (NASDAQ: GALE) may be the home run that biotech investors are looking for. With an FDA-approved pain medication, a partnership with generic giant Teva Pharmaceuticals and a superior pipeline, the stock may be an acquisition target. Aegis Capital has a $5 price target on the stock, while the consensus is about $4.90. Galena closed on Thursday at $5.16. In recent trading, the stock has seen huge volume increases. Big investors may be building a big position.

Novavax Inc. (NASDAQ: NVAX) makes the Piper Jaffray list of top stocks to buy for 2014 and is also a buy at Lazard and FBR Capital, as well as made our Five Big analysts stock picks for 2014 list. This clinical-stage biopharmaceutical company uses recombinant nanoparticle technology to develop vaccines for a wide variety of infectious diseases. The company presently has six vaccine candidates undergoing clinical trials, with a seventh (rabies) being readied for a phase I study later this year. The Piper Jaffray price target is $7. The consensus estimate is almost $10. The stock closed Thursday at $5.21.

Synta Pharmaceuticals Corp. (NASDAQ: SNTA) is another leading oncology name to buy at Jefferies. The company is primarily focusing on developing its lead cancer drug ganetespib as a treatment for non-small-cell lung cancer, breast cancer and colorectal cancer. If approved, the drug is expected to hit annual peak sales of $425 million to $600 million. The Jefferies price target for the stock is a huge $19, and the consensus is almost $16. Synta closed Thursday at $5.26.

Zogenix Inc. (NASDAQ: ZGNX) is a top name to buy at Oppenheimer for 2014. The FDA recently approved its top new drug Zohydro. The drug is a timed release form of hydrocodone, which is one of the most highly prescribed pain medications in the world. The Zogenix drug contains no acetaminophen, which has been proven to cause liver damage. This is a boon to patients suffering from oncology related pain, as often radiation therapy weakens or damages the liver. The Oppenheimer price target for the stock is set at $5. The consensus price target is almost $5.25. Zogenix closed Thursday at $3.43.

Again, the small cap biopharmaceutical names are not for conservative accounts — an absolute avoid for the “widows and orphans” investment funds. That said, some of these stocks have drugs in the pipeline that could change the game in their respective fields. Investors looking to deploy more speculative capital may want to take a closer look at some of these stocks.

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