These Tiny Companies Could Cure Cancer and Make You Wealthy

A gain of 25%… 50%… even more than 100% in a single trading day?

It’s rare. But it does happen.

Take Dendreon Corp. (Nasdaq: DNDN), for example. Dendreon has a new drug called Provenge that taps into the immune system to fight prostate cancer. A single course of treatment costs $93,000.

You read that correctly. It’s $93,000 for just one cycle of one drug. Between March 2009 and April 2010 — during which Provenge was going through late rounds of trials — Dendreon’s shares rose 1,764%.

On just one day — April 14, 2009 — Dendreon’s stock shot up 132%. And it almost doubled again two weeks later on April 29, 2009, when the shares made another one-day jump of 94%.

Shares of biotechnology company Clinical Data (Nasdaq: CLDA) rose 68% on January 24, 2011, following news the Food and Drug Administration (FDA) approved its antidepressant drug.

And then there’s XenoPort (Nasdaq: XNPT), whose shares soared 56% on April 7 of this year, after the biopharmaceutical company got the nod from the FDA for its treatment of restless leg syndrome.

It’s easy to see that when major medical breakthroughs occur, the benefit can be two-fold — not only do patients get help for life-altering illnesses, but investors can also earn overnight profits.

And I don’t know if there is anywhere the opportunity is more pronounced than in the field of treating cancer.

The American Cancer Society estimates that one in two American men and one in four American women will be diagnosed with some sort of cancer in their lifetimes. More than 500,000 Americans will succumb to the disease this year alone, equal to roughly one-third of the 1.5 million new cases expected to be diagnosed in 2011.

But it wasn’t that long ago that a diagnosis of cancer was an automatic death sentence, and a terribly painful one at that. Now, a generation later, many types of cancer are curable and others are manageable. New drugs and treatments will take cancer from a killer disease to a chronic condition within my lifetime.

This means there will be companies along the way that profit from creating the drugs that beat cancer.

This is all well and good, but what’s the best way for the average investor to find the next quick gainer that will soar from the fight against cancer?

First, forget the household names. It may well be the case that the next miracle drug will come from Pfizer (NYSE: PFE), Abbott Labs (NYSE: ABT) or Eli Lilly (NYSE: LLY) — and more power to them.

But from an investing standpoint, we have to respect the law of large numbers. That is, a blockbuster drug matters a lot more to the share price of a $500 million company than a $50 billion company.

The challenge for investors, then, is knowing where to look for small companies with promise, and what to look for.

I’ve been doing a lot research into this area. I’ve found a total of 39 companies with cancer drugs in phase III of trials — this is the step before FDA approval. When a drug passes phase III trials, it is given a pretty good chance (80%) of being approved by the FDA. It was Provenge’s passage of phase III trials that started Dendreon’s run.

Now, investors must go into this situation with their eyes fully open. There are never any guarantees in the field of drug approval (many stocks have dropped sharply on news a drug wasn’t approved). But for the better part of a month I’ve been digging through the list of cancer drugs currently in phase III trials. And I think a handful of the companies are showing promise.

This means they are small companies with big potential for FDA approval, and they’re working on products that target large segments of national health care spending.

This list includes some big names, including Pfizer, Amgen (Nasdaq: AMGN), and Bristol-Myers Squibb (NYSE: BMY). But mixed in are smaller names like Halozyme Therapeutics (Nasdaq: HALO). This $700 million biopharma company has two cancer drugs in late-stage trials, one for breast cancer and the other for follicular lymphoma.

Action to Take –> If one of these drugs is approved, a big one-day jump in the shares isn’t out of the question.

And if we’re able to make money while also battling against one of nature’s most vile diseases, I can’t see a negative.

Note: As I said, for the better part of a month I’ve researched the companies that could be the next big winners in the treatment of cancer for my Game-Changing Stocks advisory. To learn more about my results — including the 5 stocks I think show the most promise — visit this link.