3 Small-Cap Biotech Stocks You Can Buy Right Now

Few stocks have the potential to generate explosive returns like small-cap biotech stocks. Week in and week out, small-cap biotechs report pipeline updates that often send their shares into orbit.

There are too many small-cap biotech stocks to easily keep track of, though. And not all of them have a good shot at success.

Three that I think do have great prospects are Cara Therapeutics (NASDAQ: CARA), Editas Medicine (NASDAQ: EDIT), and Viking Therapeutics (NASDAQ: VKTX). Here's why these are small-cap biotech stocks that you can buy right now.

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1. Cara Therapeutics

Cara Therapeutics expects to announce results in the second quarter from a phase 3 clinical study evaluating its lead candidate, Korsuva injection, in treating chronic kidney disease-associated pruritus (CKD-aP) in hemodialysis patients. The biotech also has other late-stage studies underway to assess the efficacy and safety of Korsuva. If those results are positive, Cara could have a big winner on its hands.

The company inked a deal with a big partner last year to market Korsuva as a treatment for CKD-aP in countries other than the U.S., Japan, and South Korea. Dialysis services giant Fresenius Medical Care plans to promote the drug in its U.S. dialysis centers. At its peak, Korsuva could generate up to $500 million in sales in the U.S. alone for the CKD-aP indication.

Cara also has other growth opportunities. The company expects to report preliminary results in the second half of 2019 from a phase 2 study of an oral version of Korsuva in treating CKD-aP patients who aren't on dialysis. It will soon start a couple of other phase 2 studies of oral Korsuva in treating chronic liver disease-associated pruritis (CLD-aP) and in treating patients with atopic dermatitis and pruritis. 

Although Cara's share price has soared close to 50% so far this year, the biotech's market cap is still only around $750 million. With the significant potential opportunities for Korsuva, I think the stock has a lot of room to run if all goes well in clinical studies.

2. Editas Medicine

Editas Medicine isn't as far along as Cara is. But the company's CRISPR gene-editing platform could be game changers for several diseases. Optimism for this platform is why Editas sports a market cap of over $1 billion despite having only one early-stage drug in development.

The lead pipeline candidate for Editas is EDIT-101, which targets the treatment of genetic eye disease Leber congenital amaurosis type 10 (LCA10). Editas and its partner, Allergan, expect to begin patient dosing in a phase 1 clinical study in the second half of 2019. This will be the first in vivo (in the body) clinical trial of a CRISPR gene-editing therapy in humans.

Editas thinks that the expertise gained with EDIT-101 will enable it to rapidly move into other genetic eye diseases. Usher syndrome type 2A (USH2A) is the next target. The biotech anticipates having a candidate ready by the end of the year for testing that could lead to advancing to an initial clinical trial in humans.

Interim CEO Cindy Collins said in Editas' Q1 conference call in May that the biotech is also "advancing best-in-class medicines that may revolutionize the treatment of cancers, sickle cell disease, and other serious intractable diseases." Editas is working with Celgene on developing chimeric antigen receptor T cell (CAR-T) therapies to fight cancer and is especially enthusiastic about its approach to treating sickle cell disease and beta thalassemia, both of which are rare genetic blood disorders.