Investing in biotech stocks is challenging even when you’re investing in established companies with commercially available drugs and expansive pipelines. And investing in up-and-coming biotech stocks is only for the most risk-tolerant investors.
When investing in the biotech sector, you’re speculating on future outcomes rather than a company’s financial performance. That’s because in many cases, these up-and-comers are long on potential but short on revenue and – more importantly – profit. And as anyone who’s invested in this sector knows, these stocks can have wild price swings based on news updates.
Nevertheless, history makes clear that investing in companies before they make a breakthrough can be a way to generate market-beating returns. In many cases, this is where investors can find their 2x, 5x, or even 10x opportunities.
That’s not what I’m promising you in this article. But some intriguing up-and-coming biotech stocks may be ready to break out. That means if you have a long-term outlook, now is the time to initiate or add to, an existing position.
Iovance Biotherapeutics (IOVA)
Iovance Biotherapeutics (NASDAQ:IOVA) is attempting to develop immunotherapy products that can harness the power of a patient’s immune system to identify and eliminate cancer cells. The clinical-stage company’s lead candidate, lifileucel, focuses on metastatic melanoma and cervical cancer.
This small-cap company has a market cap of just over $1.5 billion. It is not profitable and is only generating the slightest of revenue. Furthermore, the company recently announced a 20 million share offering at $7.50 per share. The company plans to use the $150 million from the offering to push lifileucel across the finish line.
Generally speaking, analysts don’t look favorably at shareholder dilution. However, since the company reported earnings in August 2023, analysts remain bullish on IOVA stock, with 12 out of 13 analysts giving IOVA stock a Strong Buy or Buy rating with a consensus price target of $24.55, which is 299% above its price of $6.15 as of this writing.
Amylyx Pharmaceuticals (AMLX)
Amylyx Pharmaceuticals (NASDAQ:AMLX) is next on this list of up-and-coming biotech stocks to buy and hold. Amylyx is focused on discovering and developing treatments for neurogenerative diseases including amyotrophic lateral sclerosis (ALS).
The reward, and potential risk, involved with Amylyx centers around its ALS drug Relyvrio, which received FDA approval in 2022. The drug also received conditional approval in Canada. Both approvals could be in jeopardy pending the results of Phase 3 clinical trial results.
It’s hard to understate how significant these results will be. Prior to the conditional approvals, Amylyx was a pre-revenue company. However, the company generated over $71 million in revenue in its most recent quarter and turned a profit.
This uncertainty contributes to the high amount of short interest on AMLX stock. It’s currently over 17% and is weighing on the stock, which is down 40% in 2023 despite encouraging financials. However, despite not being widely covered, all six analysts that offer ratings give the stock a Strong Buy with a $47.40 price target. That’s 116% higher than the stock’s price as of the market close on August 25, 2023.
Adaptive Biotechnologies (ADPT)
Adaptive Biotechnologies (NASDAQ:ADPT) is the last of the up-and-coming biotech stocks on this list. The company is a pioneer in the field of customizable medicine.
The theory behind the science is that some medicines are highly effective with one patient, but potentially lethal in others. Therefore, finding solutions that harness our body’s unique immune system is the key to finding “custom” medicine.
Adaptive has a commercially available product, clonoSeq, that can track traces of leukemia that may remain in a patient after chemotherapy. The company also has a partnership with Roche Group (OTCMKTS:RHHBY) which is helping the company build a pipeline of T-cell therapies for cancer and other diseases.
Cathie Wood’s ARK Genomic Revolution ETF (BATS:ARKG) initiated a position in ADPT stock in 2022 for those investors to whom it would matter. Today, the fund holds over 11 million shares and is currently the 10th largest holding in the ETF.
On the date of publication, Chris Markoch 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.