Investing in biotech stocks is a challenging proposition under any economic conditions. That’s because biotechs are volatile for reasons other than the economy. Many of these are small-cap companies that burst onto the scene with promises of treatments to combat a condition or disease.
However, these companies will spend millions, if not billions, of dollars on drugs or vaccines that never make their way past clinical trials.
This year, the novel coronavirus has put the focus on biotech companies as the race toward a vaccine kicks into high gear. But this race is only going to have a handful of winners. The rest of these vaccine candidates, and in some cases the companies that make them, will drift back into obscurity.
That may be great for a quick profit, but it can be disastrous for long-term investors who are focusing on total return. However, there still is money to be made in the biotech sector if you’re a buy-and-hold investor. And it can still be done with some attractively priced small-cap players, especially after Thursday’s market rout.
Here are seven biotech stocks that you can buy now to capitalize on a post-coronavirus landscape.
- ImmunoGen (NASDAQ:IMGN)
- Kadmon Holdings (NYSE:KDMN)
- Corcept Therapeutics (NASDAQ:CORT)
- Supernus Pharmaceuticals (NASDAQ:SUPN)
- G1 Therapeutics (NASDAQ:GTHX)
- Vertex Pharmaceuticals (NASDAQ:VRTX)
- Dynavax (NASDAQ:DVAX)
Biotech Stocks: ImmunoGen (IMGN)
The first small-cap stock to look at is ImmunoGen. IMGN stock is trading flat for the year, but that may largely be because it is not a stock that stands to benefit from a coronavirus treatment. However, in the last 12 months, the stock is up almost 130%. That suggests when investors begin to turn their eyes away from the Covid-19 pandemic, ImmunoGen will get renewed attention.
The company has a market capitalization of just $790 million as of this writing. However, for a company that’s been in business since 1981, it has been able to manage its balance sheet well, especially considering it still does not have a product on the market.
One of the ways it has done this is through partnerships that leverage ImmunoGen’s technology. These partnerships include a broad range of biopharmaceutical companies including Jazz Pharmaceuticals (NASDAQ:JAZZ), Amgen (NASDAQ:AMGN), Sanofi (NASDAQ:SNY) and Bayer (OTCMKTS:BAYRY).
That doesn’t mean it doesn’t have several attractive candidates. ImmunoGen is working on cancer drugs — specifically, the development of antibody-drug conjugate (ADC) therapeutics as a form of cancer treatment.
The company has two candidates in Phase 3 trials and another two candidates in Phase 2 trials.
Kadmon Holdings (KDMN)
Kadmon Holdings is another small-cap biotech that stands to benefit from post-coronavirus scrutiny. Although KDMN stock is flat for 2020, it’s up over 140% in the last year. Kadmon has only been publicly traded since 2016, but it is developing a number of drugs to treat immune disorders, fibrotic diseases and cancers.
In addition to its pipeline candidates, the company does its Clovique, which is helping generate some revenue. However that is not enough to make the company profitable. It will need to bring these drugs that are in clinical trials to market. To that end, the company just reported favorable preliminary results in the pivotal trial stage for one of its promising pipeline candidate, KD025.
When it comes to small-cap biotech stocks like Kadmon, acquisition is always a possibility. And with several potential candidates coming to market, Kadmon may attract attention. But for now, the stock looks to have strength on its own merits. Analysts seem to agree. KDMN stock has a 12-month price target of $13 suggesting it has a long runway for investors who are willing to take the plunge.
Corcept Therapeutics (CORT)
With a market cap of just under $1.8 billion, Corcept is one of the larger biotech stocks on this list. CORT stock is up nearly 30% in 2020 and is up over 50% for the last 12 months. One reason for this is earnings. For the last five years, Corcept has been profitable, and profits and revenue are on the rise.
Corcept is a leader in the field of cortisol dysregulation. This condition plays a significant role in a variety of areas ranging from endocrine system disorders and oncology to ophthalmology and psychiatry. Since its founding in 1988, Corcept has become a leader in researching and developing selective glucocorticoid receptor antagonists.
Corcept has one drug, Korlym, which is on the market. The company also has a well-stocked pipeline with drug candidates at several stages of clinical trials.
Unlike some of the other stocks on this list, CORT stock looks fairly well valued at the present time. However, analysts are suggesting the stock may have the potential to rise an additional 16%.
Supernus Pharmaceuticals (SUPN)
Another of the larger small-cap biotech stocks to look at is Supernus Pharmaceuticals. Unlike the stocks reviewed to this point, SUPN stock is actually down over the last 12 months, although it is has recently moved into positive territory for 2020.
Supernus is one of the leaders in the treatment of central nervous system diseases. This includes candidates in the company’s pipeline for depression and ADHD.
And Supernus currently has two products on the market. Trokendi XR is a once-a-day pill for migraine prevention while Oxtellar XR is an extended-release pill for reducing or even completely preventing seizures. Based on the potential of these two drugs alone, Cantor Fitzgerald gave the stock a $60 price target back in 2019.
But the company has a candidate drug, SPN-812 that is scheduled for U.S. Food and Drug Administration review by November. The drug is a “non-stimulant” ADHD drug that may have a huge addressable market. In 2019, Jefferies analyst David Steinberg projected the drug could reach $500 million or more in sales.
Recent analyst ratings have been less favorable on Supernus. And the company does have some headwinds with Trokendi losing its patent protection. However, the stock still has a 12-month price target of over $20 that would provide nearly 7% growth from the stock’s current level.
G1 Therapeutics (GTHX)
G1 Therapeutics has a lot riding on the progress of its lead candidate trilaciclib. This cancer drug is designed to improve the outcomes for patients that have received chemotherapy. GTHX stock is down nearly 28% year-to-date. But this could change rapidly in the second half of the year.
In the fourth quarter of 2019, the company began the filing process for a new drug application (NDA) for trilaciclib. The company is on track to complete that process in the second quarter of this year. And in its most recent conference call, the company said the FDA was doing a great job of balancing existing applications with the demand for fast-track approval for potential Covid-19 treatments.
Approval of trilaciclib would be key in buying time for the company to get some of its other early stage candidates through the pipeline.
The company is not yet profitable, but analysts still love the 12-month outlook for GTHX stock. The stock has a price target of $59.67 which would be a gain of over 200% from current levels.
The last of our small-cap biotech stocks to look at is Dynavax. DVAX stock is nearly 50% in the last 12 months, which suggests investors are keenly interested in the stock. And there is good reason for that.
Unlike some of the competitors in this space, Dynavax has an approved hepatitis B vaccine on the market. Sales of Heplisav-B missed analysts’ revenue expectations of $11.3 million in the first quarter. However the company posted a respectable $10.5 million in revenue. And the miss could easily be chalked up to declining demand due to the pandemic.
And also in contrast to the other stocks in this presentation, Dynavax does have indirect exposure to the race for a Covid-19 vaccine. The company’s CpG-1018 adjuvant is being used by numerous drug makers in developing their vaccine candidates.
One of the most encouraging candidates is occurring in the company’s partnership with Sinovac (NASDAQ:SVA). The stock got a recent boost when Sinovac’s director of investor relations, Helen Yang, said that although it was impossible to predict whether the company’s vaccine would pan out, the early results looked good.
Vertex Pharmaceuticals (VRTX)
Although Vertex Pharmaceuticals is a large-cap company, it hasn’t been left out of the biotech rally. VRTX stock is up an impressive 25% so far in 2020 and is posting an even more impressive 12-month gain of nearly 60%.
Vertex’s expertise has to do with the treatment of cystic fibrosis. The company currently has four drug treatments on the market. And its most recent addition, Trikafta, helped boost the company’s revenue to a record $1.5 billion in the first quarter. What made that gain more impressive is that it came after a previous high of $1.4 billion in the previous quarter.
And Vertex has posted four consecutive quarters of revenue growth.
The catalyst for Trikafta is that it is has a potentially huge addressable market as it is capable of treating 90% of patients with cystic fibrosis. The company recently acquired Exonics Therapeutics and is leveraging that in a partnership with CRISPR Therapeutics (NASDAQ:CRSP) to work on gene editing.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019. As of this writing, Chris Markoch did not hold a position in any of the aforementioned securities.