New drug innovations are affecting the way that physicians treat such debilitating and deadly diseases as cancer. In a new research report, Jefferies presents the top drug innovations that investors should follow for 2014. The report lists the top biotechnology stocks that can excel as these new innovations become more accepted and adopted. We have broken out the top stocks that Jefferies feels are the best ideas and have the top exposure to some of the new themes.

Arrowhead Research Corp. (NASDAQ: ARWR) is a Buy-rated stock at Jefferies. The company has dual licenses to two different biotech firms’ RNA interference (RNAi) technology and substrates. RNAi is a mechanism in cells that inhibits the expression of a specific gene and affects the production of a resulting protein. It is thought to be a method of silencing expression of disease-causing genes. This is one of Jefferies’ five top drug innovations. The Jefferies price target for the stock is $30. The Thomson/First Call consensus target is $28.75. Arrowhead closed Wednesday at $17.97.

Dicerna Pharmaceuticals Inc. (NASDAQ: DRNA) is another company with an outstanding RNAi platform, and based on price targets, it could be a huge winner if successful. Dicerna has selected its first liver-targeted clinical candidate, primary hyperoxaluria, and expects to enter the clinic by early 2015, with data in its first indication by mid-2015. The company is another Buy-rated stock at Jefferies, and its price target is $48. The consensus target is a huge $50.50. Dicerna closed Wednesday at $25.21.

Celldex Therapeutics Inc. (NASDAQ: CLDX) has several pipeline immunotherapies, including rindopepimut, a Phase 3 immunotherapy that stimulates responses against specific types of brain tumor cells. One of the most exciting areas of drug development currently is the immuno-oncology space. Potential cancer cures and the multibillion dollar sales potential that coincide with these cures have raised company valuations and acquisition interest to obtain drugs in this category. This is another one of Jefferies’ top drug innovations for 2014. Celldex is Buy-rated at Jefferies, and the price target is $31. The consensus target is a whopping $36.33. Celldex closed Wednesday at $17.79.

Compugen Ltd. (NASDAQ: CGEN) is a leading drug discovery company focused on therapeutic proteins and monoclonal antibodies to address important unmet needs in the fields of immunology and oncology. Compugen has discovered nine novel immune checkpoint targets and has partnered with European pharmaceutical giant Bayer. The company recently had a 6.9 million share secondary offering for the purpose of raising additional working capital. It is Buy rated at Jefferies, and the firm has a $17 price target. The consensus target is $14.33. Compugen closed Wednesday at $11.27.

Five Prime Therapeutics Inc. (NASDAQ: FPRX) licensed worldwide rights to two undisclosed immune checkpoint pathways to Bristol-Myers Squibb. The deal is only for the targets, as no drug candidates are in development yet, but Five Prime received a large upfront payment and an equity investment. The Jefferies price target for the stock, which is Buy rated, is $28. The consensus target is $26.67. Five Prime closed Wednesday at $18.54.

Incyte Corp. (NASDAQ: INCY) is focused on the discovery, development and commercialization of proprietary small molecule drugs for oncology and inflammation. Its new drug, INCB24360, is an oral, small molecule IDO (indoleamine 2,3-dioxyenase) inhibitor. Unlike the mechanisms for the drugs mentioned above, IDO is present in the
tumor microenvironment rather than on a cell surface. Increases in IDO appear to both decrease the effect of tumor-targeting effector T cells and increase the number of regulatory T cells that suppress the immune system. Incyte is Buy rated at Jefferies, which has an $80 price target, while the consensus target is $72.15. Incyte closed Wednesday at $54.46.

uniQure N.V. (NASDAQ: QURE) is Buy rated and the top idea from Jefferies in the gene therapy area, which is another one of the firm’s top drug innovations for 2014. The purpose of gene therapy is to add DNA into specific cells in the body in order to produce a specific type of protein. uniQure is delivering on the promise of gene therapy through single treatments with potentially curative results. It has developed a modular platform to rapidly bring new disease-modifying therapies to patients with severe disorders. The Jefferies price target for the stock is $24, and the consensus is at $28. uniQure closed Wednesday at $16.15.

These new innovations may bring medical breakthroughs that change treatments as we know them. The ongoing efforts, especially in oncology, in fighting multiple forms of cancer could be some of the most impressive that medical science has produced. These top stocks could provide risk-tolerant investors with tremendous upside.

24/7 Wall St. also noted that some of the biotech giants are now priced like old world drug stocks, which could make them very attractive for many investors. And see what the chances are that Mannkind shares can double again if it brings inhalable insulin to market.

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