Undervalued biotech stocks can offer some of the most explosive opportunities.
That is, if you can spot the right one at the right time.
Many times, biotech stocks can be wildly volatile. A single misstep at a clinical trial — or even a rejection by the FDA — can lead to outrageous losses. However, find a biotech stock nearing an FDA date, or Phase 3 trial results, and you can profit from anticipation. Or you can jump on the bandwagon effect that we’ve seen with obesity treatment stocks.
Look at Viking Therapeutics (NASDAQ:VKTX). For one, interest in weight loss medications is through the roof.
In fact, according to Goldman Sachs, at the current pace, the market could be worth about $130 billion by 2030. Two, the company is seeing success with its GLP-1 obesity drug trials with its injectable or oral treatments. Three, while that news already sent VKTX from $10 to 62, the stock could see higher highs with further success.
And while VKTX leads my list of undervalued biotech stocks to buy, here are more.
Altimmune (ALT)
Sitting at double bottom support, Altimmune (NASDAQ:ALT) holds a good deal of potential. It’s also another one of the top undervalued biotech stocks to buy and hold.
For one, Goldman Sachs just raised its obesity drug market estimate to $130 billion from $100 billion.
As noted by Seeking Alpha, “The estimate was revised as the firm projects the number of Americans on anti-obesity drugs could reach ~19M by 2030, up from its previous estimate of ~15M. This indicates a ~17% market penetration among U.S. adults.”
Two, citing data from its MOMENTUM trial, the company’s pemvidutide treatment led to weight loss while preserving lean mass, as noted by Seeking Alpha.
In addition, data from a 48-week trial showed that about 74.5% of weight loss was linked to fat tissue. About 25.5% was linked to lean mass, which may give it a leg up against the competition. “We believe that pemvidutide has the potential to distinguish itself broadly from other therapies for the treatment of obesity,” ALT CEO Vipin Garg added.
Structure Therapeutics (GPCR)
Another potentially hot obesity stock is Structure Therapeutics (NASDAQ:GPCR), a clinical-stage global biopharmaceutical company developing novel oral small molecule therapeutics for metabolic and cardiopulmonary diseases, including obesity. It’s also undervalued.
For one, it’s moving forward with its 36-week Phase 2b obesity study later this year. Two, GPCR believes its GSBR-1290 obesity treatment is “uniquely positioned as an oral, non-peptide small molecule GLP-1 receptor agonist that can be manufactured at scale and significantly help address the growing obesity epidemic, which current peptide GLP-1s are not able to do.”
JPMorgan also says GPCR is an overlooked weight loss play.
“We think the opportunity for oral GLP-1s is underappreciated and think this market could generate $30bn in sales by 2035,” added the firm, as quoted by CNBC. “GPCRs lead asset, 1290, is a pure-play option for this opportunity, and even a small share would support substantial upside to the stock.”
SPDR S&P Biotech ETF (XBI)
Or, if you want broader exposure to biotech stocks, there’s always an exchange-traded fund like the SPDR S&P Biotech ETF (NYSEARCA:XBI).
With an expense ratio of 0.35%, the ETF allows you to diversify at less cost with 132 top biotech stocks, including Novavax (NASDAQ:NVAX), Insmed (NASDAQ:INSM), Moderna (NASDAQ:MRNA), Revolution Medicines (NASDAQ:RVMD), Dyne Therapeutics(NASDAQ:DYN), and PTC Therapeutics (NASDAQ:PTCT) to name a few. Last trading at $91.42, I’d like to see the XBI ETF initially retest $102.50.
What’s nice about the ETF is I can buy 100 shares for about $8,900 and gain exposure to 132 holdings. Meanwhile, if I were to just buy one of its holdings – let’s say MRNA – I’d have to pay $14,255 for 100 shares. And I wouldn’t have the exposure afforded by the XBI ETF.
On the date of publication, Ian Cooper did not hold (either directly or indirectly) any positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
