I'm mystified by biotech.

On the one hand, everything seems to point to the names in this space as becoming the next big "boom stocks." With baby boomers aging, more money than ever being invested in medical research and America still by far the unquestioned leader in biotech research, there is no doubt that many of today's small-cap biotech stocks will be the mega-cap pharma stocks of the future.

But how to find them?

On Stockpickr, several do-it-yourself portfolios offer phenomenal analyses that at least point toward some interesting stocks. There are two portfolios in particular that I follow religiously, which I bookmark so that every time they are updated I get an email informing me to check them out:

Both portfolios provide detailed analyses for each of their stock picks, laying out the reasons why these companies will be the winners in the biotech races.

For instance, The BioHealth Investor lists Pain Therapeutics ( PTIE) as a stock to watch. Here's what he says about it:

These days it seems doctors have more to worry about than practicing medicine. One big issue, other than lawsuits, of course, is the increasing number of drug abusers jumping from one doctor to the next seeking the wonderful effects of oxycodone, one of the best painkillers around.

The euphoric highs experienced when taking oxycodone can be addictive to a certain number of susceptible patients. But doctors have little choice in prescribing it, as some of the most popular pain killing formulations on the market include oxycodone or some variant of it.

This is where Pain Therapeutics hopes to hit it big. The company's lead drug candidate is Remoxy, which includes a reformulation of the active ingredient in oxycodone that has been shown to have substantially lower addictive effects.

Remoxy is currently in phase III trials, and chances look good that the FDA will approve the drug for the market. An FDA decision could come as soon as 2007. The catch, however, and there is always a catch, is that Pain Therapeutics will have to show that Remoxy has a statistically higher pain killing effect than oxycodone.

The phase III trial is critical. In essence, investing in Pain Therapeutics for the near future is betting on that one trial's results. The company's FDA approval history is, with no pun intended, painful. In 2005, one of the company's phase III trials for a drug treating irritable bowel syndrome failed to meet one of the FDA's primary endpoints.

I usually do not like such risks. None of BHI's stock picks so far have been unproven biotechs with significant interest in clinical trial results. But Pain Therapeutics tempts me a little for various reasons.

The company has over $200 million in cash and no debt, as last reported by Yahoo! Finance. A large part of that cash is the first $150 million payment recieved from King Pharmaceuticals ( KG), as the two companies entered into a collaborative agreement to co-develop Remoxy and other pain killing opioid alternatives. King will owe Pain Therapeutics $400 million in upfront payments and royalties pertaining to the development of Remoxy.

Oxytrex is the second phase III drug candidate being investigated as a treatment for chronic pain, such as osteoarthritic and lower back pain. In a recent phase III trial, patients reported over 50% less dependence on Oxytrex as compared to oxycodone.

Company insiders hold 33% of the outstanding shares, and have been continually buying shares since April of 2005, which is a huge sign of confidence and one parameter that is critical when evaluating biotech stocks.

Pain Therapeutics also appears in Stockpickr's Top 10 Potential Short Squeezes portfolio.

Meanwhile, Bumblebee Biotech offers this analysis of Alnylam Pharmaceuticals ( ALNY - Get Report).

Alnylam -- along with Sirna Therapeutics ( RNAI), CytRx ( CYTR) and numerous other private firms such as Calando -- is developing the most promising drug treatments based on RNAi since the discovery of recombinant DNA and the founding of Genentech ( DNA) in the '70s.

Alnylam is smart enough look to elsewhere for its drug delivery technology, and therefore ahead of the game. Inex Pharmaceuticals ... is the drug platform match to Alnylam. In our opinion, Alnylam is the only firm with a potentially workable drug delivery partner. Neither CytRx nor Sirna Therapeutics have known drug delivery partners, which is a critical issue.

This is a long-term buy.

Bumblebee also seems to like piggybacking SAC Capital's top biotech picks, including Penwest Pharmaceuticals ( PPCO) and Progen Industries ( PGLA). You can see all of SAC's top holdings on its Stockpickr portfolio page.

Stockpickr tip of the day: We've greatly expanded the functionality of our search page, and we invite you to try it out.

If you want to find all portfolios related to "biotech," go to the search page and type "bio" into the search field. Doing so will return three pages' worth of portfolios that focus on biotech stocks. If you want to find "SAC Capital," just type "SAC Capital" in there. Or if you want to find House Speaker Nancy Pelosi's portfolio, just type "Nancy Pelosi."

You can also search for other features of the site. To search all occurrences of the CNBC stock-picking contest in the forums, use the pulldown menu to select "Forums" and then search " CNBC." (Incidentally, tonight at 7:40 p.m. EST I will be on CNBC discussing how to use Stockpickr in order to do well in CNBC's Million Dollar Portfolio Challenge.)

To search blogs from all around the Internet (not just Stockpickr), select "Blogs" in the pulldown menu and search, for instance, "Cramer" to see all blogs that mention Jim Cramer. Or, to see any videos from around the Internet that mention Jim, select "Videos" from the pulldown menu and search "Cramer." We index videos from TheStreet.com, CNBC, Bloomberg, Wallstrip and many other sources.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider CytRx, Pain Therapeutics, Penwest Pharmaceuticals and Progen Industries to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

At the time of publication, Altucher and/or his fund had no positions in stocks mentioned, although positions may change at any time.

James Altucher is a managing partner at Formula Capital, an alternative asset management firm that runs several quantitative-based hedge funds as well as a fund of hedge funds. He is also the author of Trade Like a Hedge Fund and Trade Like Warren Buffett. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback; click here to send him an email.

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