Investing in biotech stock can provide investors with immense rewards but also substantial risks. The key is finding the right balance.
With diligent research, it’s possible to identify promising companies that appear undervalued relative to their blockbuster prospects. Their innovative therapies could be game-changers, and clinical trial successes could lead to surges in share price. However, inherent risks in biotech investing cannot be overlooked. That’s because the outcomes for these stocks rely entirely on unpredictable clinical data and regulatory decisions. This is not data that the public has full access to, meaning investing in biotech is usually a hit-or-miss game.
Still, many drug companies are currently targeting massive addressable markets and are trading at meager valuations. These stocks can provide astronomical returns, turning $5,000 invested today into $50,000 or more. While such gains are far from guaranteed, these companies’ prospects are worth considering for those seeking unlimited upside.
Abeona Therapeutics (ABEO)
Abeona Therapeutics (NASDAQ:ABEO) develops cutting-edge genetic medicines for rare diseases. The company’s lead candidate, EB-101, delivered impressive clinical data in patients with recessive dystrophic epidermolysis bullosa (RDEB). This is devastating skin disorder which is currently without treatments.
EB-101 has shown the ability to heal chronic wounds in this population. With a Biologics License Application submitted, a regulatory decision is expected by mid-2023. If approved, EB-101 would become the first gene therapy for RDEB, a potential game-changer for these patients.
Beyond EB-101, Abeona has additional gene therapy assets, including treatments for genetic eye disorders and neurometabolic diseases. However, with the stock trading around $4 per share, I believe the market underappreciates the company’s promising pipeline. An FDA approval for EB-101 could propel a re-rating of the stock to properly reflect the potential of its platform.
For investors able to stomach clinical-stage risks, Abeona offers a robust upside. I expect significant share price appreciation if the company’s programs continue advancing successfully toward commercialization. A price target of $38 by Cantor Fitzgerald points to whopping potential upside over the next year of 833%.
For investors comfortable with clinical-stage biotech volatility, Vaxart (NASDAQ:VXRT) offers massive upside potential at today’s prices. Vaxart is pioneering oral tablet vaccines, an innovative approach to delivering vaccines with potential benefits over injectables. These include easier administration and storage.
Its lead Norovirus candidate recently demonstrated strong immune responses. Phase 2 results should provide more clarity later this year, as the company approaches the latter stages of its trials. Notably, Vaxart’s COVID-19 oral vaccine also displayed strong results and is currently in Phase 2 trials. However, there isn’t likely going to be a sizeable market for this, especially as recent outbreaks have been mild and people have learned to live with this virus.
Still, Vaxart’s platform shows promise in other large markets like norovirus, flu, and HPV. Positive Phase 2 data recently reported for its norovirus tablet vaccine adds even more credibility. Additionally, with over $67 million in cash, Vaxart is funded well to advance these programs through H2 2024.
Despite this progress, the company trades at a modest $117 million valuation. The market has yet to appreciate Vaxart’s disruptive platform and sizable market opportunities. Positive late-stage data could drive rapid gains in the stock as the company’s prospects are re-valued. Currently, the consensus price targets on VXRT stock implies 563% one-year upside potential.
CRISPR Therapeutics (CRSP)
CRISPR Therapeutics (NASDAQ:CRSP) is pioneering precision gene editing therapies using Nobel Prize-winning CRISPR/Cas9 technology. Its lead candidate, exagamglogene autotemcel (exa-cel), achieved promising results for patients suffering with sickle cell disease and beta-thalassemia by functionally correcting the causative gene mutations. With a regulatory decision possible this year, exa-cel could become the first approved CRISPR therapy, validating this breakthrough platform.
Beyond these initial diseases, CRISPR has numerous preclinical gene editing therapies under development areas such as oncology, diabetes, and other indications. The possibilities for precise genetic medicine enabled by CRISPR are incredible. Indeed, this company appears positioned as a leader in the field.
Despite the enormous prospects of its platform, CRISPR trades at a $4 billion valuation. While clinical risks exist, I view this as an attractive entry point for such an innovative biotech. Investors’ upside from today’s prices could be substantial, as the company’s prospective therapies advance toward commercialization. But of course, CRISPR is still an emerging technology, and it will take a lot of patience before substantial gains can materialize.
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On the date of publication, Omor Ibne Ehsan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.