The past three years have been difficult for biotech stocks. Although the COVID-19 pandemic sparked optimistic interest in the industry, that interest has waned since the threat of contagion has subsided. Between the end of 2021 and now is the Nasdaq Biotechnology Index is down in the order of 25%, which is about breakeven for the board market.
However, as experienced investors can attest, the right time to buy is when quality stocks are on sale. With that in mind, here’s a look at three biotech stocks you might want to consider buying while they’re still on sale. Any of them could help you become a millionaire, provided you have enough time and a large enough upfront investment.
However, keep in mind that the biotech industry’s above-average potential is offset by above-average risk. Invest in them accordingly.
1. Iovance Biotherapeutics
Cancer treatments aren’t exactly a new idea, but the approach is Iovance Biotherapeutics (NASDAQ:IOVA) The treatment of this very diverse disease is still relatively unique – and promising.
Iovance’s core science is the development of tumor-infiltrating TILs. These are just the white blood cells that lymphocytes routinely fight against physical infections. They also kill faulty cells before they can multiply and turn into a full-blown cancer. However, sometimes lymphocyte cells can’t quite figure out how to do their job. You need a little help.
Enter Iovance Biotherapeutics. Its technology creates customized white blood cells for each individual cancer patient receiving its treatment, which can be used alone or in conjunction with other oncology medications. To date, this technology has brought to market only a single therapy called Amtagvi – or Lifileucil – which eventually received its first approval in February this year.
Although it is only approved by the FDA to treat a very small group of patients with metastatic melanoma, it is a start that can be expanded upon. And that will be it. The therapy is in five additional clinical trials.
This is not the only drug in Iovance’s portfolio. Early last year, the company acquired the rights to a drug called Proleukin or Aldesleukin, an interleukin that is already approved and even commercialized. However, Iovance wants it for more than its current and future sales. Proleukin also promotes a better response to TIL treatments such as Amtagvi.
Admittedly, things didn’t always go smoothly. Another drug in Iovance’s development pipeline called LN-145 ran into a regulatory hurdle late last year and had to temporarily halt one of its trials. It’s a reminder that the biotech business is often an all-or-nothing decision.
Given investment research firm GlobalData’s expectation that Amtagvi’s annual revenue alone will eventually exceed $800 million, the drama and associated volatility could well be worth it.
2. Recursive pharmaceuticals
Recursive pharmaceuticals (NASDAQ:RXRX) is classified as a biotech company, but the name doesn’t do it justice. It would be equally fair to say that Recursion is a technology company that happens to develop drugs. In his own words: “Our integrated recursion operating system creates a closed system that combines proprietary internal data generation and advanced computational tools to generate new insights to initiate or accelerate therapeutic programs.”
In other words, now that the technology is ready for this kind of work, Recursion is using artificial intelligence (AI) to figure out how to develop new drugs and what effect they might have. This approach is certainly cheaper, easier and faster than conducting clinical trials based only on hope.
And this isn’t just theoretical stuff. Although the majority of the company’s revenue to date has come from collaboration and consulting with more conventional pharmaceutical companies, the company also has seven clinical trials of its own underway. Three of them are in Phase 2 testing or are about halfway through the research and development process that will hopefully lead to approval. Selling access to its drug discovery platform and selling its own therapies are both parts of the company’s future.
Like Iovance, Recursion is still in the red and will likely remain so for the foreseeable future. However, don’t let this scare you too much. Research from Global Market Insights suggests that the AI-powered drug discovery industry will grow by 30% annually through 2032.
With that in mind, Recursion’s revenue is expected to improve by 26% this year before reaching a growth pace of nearly 58% next year. This revenue outlook leads the analyst community as a whole to conclude that Recursion Pharmaceuticals shares are already worth $13.00, even without having yet generated net profits. That’s almost double the current share price.
3. Viking Therapeutics
Last but not least, add Viking Therapeutics (NASDAQ:VKTX) to your list of potential millionaire biotech stocks.
As with Recursion and Iovance, Viking is not yet profitable. However, as with Iovance and Recursion, it doesn’t seem to matter. Analysts are already taking a decidedly bullish stance, with 10 of the 11 analysts following the company and rating it a Strong Buy (while the 11th rated it just a regular Buy). And like Recursion, the current consensus target of $112.26 is almost double the current Viking share price.
What makes these professionals so optimistic about a seemingly mundane company that isn’t working to cure cancer or find entirely new ways to develop drugs? That’s exactly it: there’s money to be made in the everyday, often underserved and underserved pharmaceutical markets. All it takes is the right medication.
One of Viking’s specialties is rare metabolic and hormonal disorders. There is no income yet. But there is a lot of promise. Two of the four ongoing clinical trials are on obesity treatments based on the same GLP-1/GIP agonist science as the wildly popular weight-loss drug Zepbound (by Eli Lilly) and Wegovy (from Novo Nordisk).
While it remains to be seen how Viking VK2735 can meaningfully differentiate itself from market-leading options like Wegovy and Zepbound, the onus falls on Novo Nordisk and Eli Lilly to defend their turf. Viking may win simply by bringing another competitively priced option to the obesity treatment space.
This might help clarify the bullish arguments: Goldman Sachs estimates that the global obesity drug market could grow to $100 billion by 2030 from the current $6 billion per year.
Just don’t wait too long if you want to trade. Viking Therapeutics expects to provide an important public update on the development of the oral version of VK2735 in the next few weeks. That could prove to be a catalyst for the stock.
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James Brumley has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Goldman Sachs Group and Iovance Biotherapeutics. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
3 Millionaire-Maker Biotech Stocks was originally published by The Motley Fool