Binary events are often the key element in moving a biotech stock higher. Negative binary results or actions can often move shares drastically lower, though. We scan our 24/7 Wall Street research data base on a regular basis looking for upcoming catalysts that can have the potential to move stocks. A new report from RBC focuses on top small-cap biotech stocks with key data readouts coming in 2015.

The RBC team focused on eight specific stocks with data expected in 2015. We screened those stocks for the companies with Phase 3 data that seems to be the farthest along and offers the best chance for approval. These stocks also rated Outperform at RBC, are Aerie Pharmaceuticals Inc. (NASDAQ: AERI), Ocular Therapeutix Inc. (NASDAQ: OCUL) and XOMA Corp. (NASDAQ: XOMA). It should be noted that buying and trading these stocks is only suitable for very aggressive accounts.

Aerie Pharmaceuticals

This clinical-stage pharmaceutical company is focused on the discovery, development and commercialization of first-in-class therapies for the treatment of patients with glaucoma and other diseases of the eye. The company recently announced the acceleration of the expected timeline for reporting efficacy results from its 400-patient Phase 3 registration trial (“Rocket 1”) of Rhopressa, a novel once-daily, triple-action eye drop being tested for its ability to lower intraocular pressure in patients with glaucoma or ocular hypertension.

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The RBC team is positive on the potential for the Phase 3 results and conclude that positive results could drive the stock into the $40 to $50 range. However, they caution, negative results could knock the stock to single digits. With an additional Phase 3 readout scheduled for 2016, there is a degree of binary backup.

The RBC rating for the stock is Outperform; Speculative Risk, with a price target of $45. The Thomson/First Call consensus price target is $40.40, and shares closed Wednesday at $28.82.

Ocular Therapeutix

This biopharmaceutical company is focused on the development and commercialization of innovative therapies for diseases and conditions of the eye using its proprietary hydrogel platform technology. Ocular Therapeutix’s lead product candidates are in Phase 3 clinical development for post-surgical ocular inflammation and pain and Phase 2 clinical development for glaucoma and allergic conjunctivitis.

RBC highlighted the company’s positive Phase 2 data and feel that the risk/reward is reasonably equal, given that a positive Phase 3 readout for OTX-TP is largely expected. If there are positive results in the Phase 2 study for OTX-TP in glaucoma, and a partnership for anti-VEGF IHD, the stakes and the upside could be much bigger.

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The RBC rating for this stock is also Outperform; Speculative Risk. The price target is $31, though the consensus target is set at $32. Shares closed Wednesday at $25.

XOMA

XOMA discovers and develops antibody-based therapeutics in the United States, Europe and the Asia Pacific. Its proprietary products include XOMA metabolic activating, sensitizing and antagonizing/deactivating antibodies that are in preclinical stage for the treatment of diabetes patients, a multi-antibody product for the treatment of human botulism poisoning and a topical antibacterial product for the treatment of human immune system.

The RBC team is focused on upcoming Phase 3 data for gevokizumab in two non-infectious uveitis (NIU) and one Behcet’s disease study. Behcet’s disease affects about 7500 people in the United States, and NIU about 150,000. Patient numbers outside the country could be higher. The data are expected by mid-year for the Behcet’s and the end of 2015 for NIU. The analysts feel that the risk/reward at current levels is even, and while data has been positive, trial enrollments and events are pushing out the timeline.

The RBC rating is again, Outperform; Speculative Risk. RBC pas a $9 price target, and the consensus is posted at $8.82. The stock closed on Wednesday at $3.43 a share.

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Again, these are extremely risky, and investors could see a huge drop in their investment if data are negative. However, for aggressive traders, these are companies that are through to the Phase 3 level, and the chances for success are much better. Only speculative money should be used to own these stocks.

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