The U.S. spends approximately $450 billion every year treating rare diseases. Investing guru Cathie Wood says managing patients afflicted with these illnesses could cost $20 trillion over their lifetime. Curing these diseases would be invaluable.
The likelihood of that happening is something one can only dream of today. Yet based on research from Wood’s Ark Invest, the companies pursuing these treatments could see their enterprise value race higher by a 28% compounded annual growth rate. That means by the end of the decade their value would grow from $820 billion to $4.5 trillion!
That could be why she is investing in the stocks of the biotechs utilizing CRISPR gene editing, RNA therapeutics and targeted protein degradation. Below are three top Cathie Wood biotech stocks to consider for your own portfolio.
10X Genomics (TXG)
10X Genomics (NASDAQ:TXG) isn’t pursuing life-changing drug development itself but instead provides the tools researchers need to achieve their goals. The life sciences technology stock is quickly becoming a favorite of Wood. She sharply increased her stake in TXG stock last October and has been steadily buying more ever since.
Particularly after its earnings report two weeks ago, which disappointed the market, Wood was in there buying. The stock is down 16% since earnings but only 2% lower over the past year. She clearly believes in its equipment for single-cell and spatial biology, which it says helps researchers “understand biological systems at a resolution and scale that matches the complexity of biology.” Essentially its machines test and analyze DNA that allow researchers to study individual cells and their genetic information.
Revenue jumped 18% in the fourth quarter to $184 million but gross margins narrowed to 66% and operating losses more than doubled to $55 million. Guidance wasn’t any better as it forecast full-year 2024 revenue growth of 10% at the midpoint. That’s half the growth that it saw last year.
Yet this cutting-edge instrument maker offers the potential for substantial gains due to the sale of software and consumables that make up 76% of total revenue. As customers come back for more as it sells new, more complex equipment, 10X Genomics could gain traction and take off.
Prime Medicine (PRME)
Wood has been a buyer of Prime Medicine (NASDAQ:PRME) since its Oct. 2022 initial public offering. Two weeks ago, though, her holdings of this pre-clinical gene editing company rocketed from 2.6 million shares to over 6 million shares. This followed Prime pricing a new stock offering at $6.25 per share. The stock has been the opposite of 10X Genomics. Shares are up just 3% in 2024 but down 48% over the past year.
Prime Medicine is developing a more versatile form of gene editing called prime editing. It is seen as a more precise, safer upgrade to CRISPR gene editing. Recently, researchers led by Prime’s founder David Liu, used a prime editor to partially restore vision in blind mice. Where CRISPR editing cuts, removes and replaces genes, prime editing is more akin to swapping out DNA sequences without breaking the DNA strands. The technique was previously used by Prime to correct liver disease in primates.
This is the sort of technology Wood believes can change the world and is likely why she is investing so heavily in PRME stock.
Recursion Pharmaceuticals (RXRX)
Recursion Pharmaceuticals (NASDAQ:RXRX) is using artificial intelligence (AI) to discover new drugs. AI chipmaker Nvidia (NASDAQ:NVDA) invested $50 million in the biotech last summer through a private investment in public equity (PIPE) financing deal. It also allows Recursion access to its AI tools to assist in drug discovery.
Last month Nvidia also announced Recursion would be the first third-party biotech participating on its new generative AI BioNeMo platform for drug development.
RXRX stock got a huge boost from the earlier partnership but the stock continues climbing. Shares are up 37% year to date and 67% over the last 12 months. Wood began investing heavily in Recursion before the Nvidia deal, but started ramping up her purchases afterward. Her holdings went from around 7 million shares in November to over 22 million shares today.
AI potentially makes the long, arduous drug discovery process quicker and less expensive. Recursion delivered a bit of a dud in the earnings department the other day, though, causing RXRX stock to crumble 17%. The biotech generated less than $11 million in fourth-quarter revenue, almost half of what Wall Street was expecting, though net losses were slightly narrower than forecast.
With backing from major global pharmaceuticals like Bayer (OTCMKTS:BAYRY), Recursion Pharmaceuticals seems like a good bet to recover and move higher once more.
On the date of publication, Rich Duprey did not hold (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.
