In this article, we will take a look at the 10 oversold biotech stocks to buy. To skip our analysis of the recent trends, and market activity, you can go directly to see the 5 Oversold Biotech Stocks to Buy.
Oversold stocks are generally stocks of those companies that have traded lower in price and have the potential to bounce back. There are different metrics that can be used to assess whether a stock is undersold or not. Technical indicators such as relative strength index (RSI) and stochastic oscillator are the most commonly used indicators. Fundamental indicators include P/E and forward P/E ratios, among others.
The biotechnology industry, as a whole, has been through a rough period recently. The industry had some of its biggest breakthroughs after the onset of the coronavirus pandemic, including the development of mRNA-based vaccines for the COVID-19 virus. Several biotech stocks soared to new heights based on their contributions to the vaccines, including BioNTech SE’s (NASDAQ:BNTX) which saw a multifold increase to its share price.
The decline in biotech stock prices can be attributed to multiple factors including the global macroeconomic environment, slowdown in the initial public offering (IPO) markets, as well as a decline in M&A activity across the biotech industry. During the first five months of 2023, pharmaceutical and biotech companies spent $85 billion on acquisitions, compared to a measly $35.6 billion in the same period of 2022. Even though the industry has faced challenges in the recent past, there is potential for a significant recovery in the upcoming months.
SPDR S&P Biotech ETF which emulates the S&P® Biotechnology Select Industry Index, lost more than 8% of its market value during Q1 2023. After such a dismal performance in the first quarter, the industry has recently been on an uptrend with a recovery of more than 9% as of July 25. Multiple companies in the biotechnology sector, especially clinical stage biotechnology companies, are a good bet in the short to medium term, according to analysts. You can read more about this in our recent article: 12 Stocks with Biggest Upside Potential According to Analysts.
Majority of the companies on our list of 10 oversold biotech stocks to buy are clinical-stage biotechnology companies working on the development of novel therapeutics for rare diseases. The list includes Apellis Pharmaceuticals, Inc. (NASDAQ:APLS), Vir Biotechnology, Inc. (NASDAQ:VIR), Sarepta Therapeutics, Inc. (NASDAQ:SRPT), and Viking Therapeutics, Inc. (NASDAQ:VKTX), among others.
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Methodology
For this article, we compiled a list of 10 biotech stocks with the lowest 14-day Relative Strength Index (RSI) as of July 25. The Relative Strength Index is a technical indicator that tracks momentum changes in stock prices. It was developed by J. Welles Wilder, and it is calculated by determining the mean of gains and losses of a stock in the last 14 days. An RSI above 70 implies that a stock is overbought and below 30 implies that it is oversold. These levels can be adjusted if needed. The stocks in this article are listed in descending order of their RSI.
We only chose stocks of the companies that have market capitalizations of more than $1.0 billion as shares of companies with low market capitalization are susceptible to high volatility.
Viking Therapeutics, Inc. (NASDAQ:VKTX), based in San Diego, California, is a clinical-stage company focused on the development of first-in-class or best-in-class therapies for metabolic and endocrine disorders.
The clinical programs of Viking Therapeutics, Inc. (NASDAQ:VKTX) include three compounds: VK2809, a novel, selective thyroid hormone receptor beta agonist for the treatment of lipid and metabolic disorder; VK2735 for the treatment of various metabolic disorders; and VK0214 for the potential treatment of X-linked adrenoleukodystrophy (X-ALD).
On May 16, Viking Therapeutics, Inc. (NASDAQ:VKTX) announced topline results from its Phase 2b clinical trial of VK2809, in patients with biopsy-confirmed non-alcoholic steatohepatitis (NASH). The study demonstrated statistically significant reductions in liver fat for patients receiving VK2809.
On June 26, Truist Securities reiterated a ‘Buy’ rating for Viking Therapeutics, Inc. (NASDAQ:VKTX) shares with an unchanged target price of $32 per share which represents a potential upside of 120.84% based on the share price on July 25.
As of March 31, Viking Therapeutics, Inc. (NASDAQ:VKTX) was the third most commonly held stock out of the 10 stocks on our list of oversold biotech stocks to buy. Its shares were held by 40 hedge funds out with a total value of $288 million. Andreas Halvorsen’s Viking Global was its largest hedge fund shareholder with ownership of 1.95 million shares valued at $33 million.
Nashville, Tennessee-based Revance Therapeutics, Inc. (NASDAQ:RVNC) is a biotechnology company focused on providing innovative aesthetic and therapeutic offerings. Its aesthetics portfolio includes DAXXIFY® injection FDA approved for the temporary improvement of moderate to severe frown lines, RHA® Collection for dynamic facial lines, wrinkles, and folds, and OPUL® financial technology platform.
On May 9, Revance Therapeutics, Inc. (NASDAQ:RVNC) released its financial results for Q1 2023. Its revenue increased by 95% y-o-y to $49 million while net loss shrunk by 7% y-o-y to $60 million. The company expects $320 million to $340 million of non-GAAP operating expenses in FY 2023 which reflects investments in its aesthetics commercial infrastructure, including sales team expansion.
Following the earnings release, HC Wainwright & Co. raised the price target on Revance Therapeutics, Inc. (NASDAQ:RVNC) shares to $48 from $42 and maintained a ‘Buy’ rating.
Cambridge, Massachusetts-based Sarepta Therapeutics, Inc. (NASDAQ:SRPT) is a global biotechnology company focused on the development of precision genetic medicine for rare diseases. Driven by its multi-platform precision genetic engine, the company currently has a pipeline of more than 40 programs in various stages of development across Duchenne muscular dystrophy (DMD) and limb-girdle muscular dystrophies (LGMDs), and other rare diseases.
The portfolio of Sarepta Therapeutics, Inc. (NASDAQ:SRPT) includes four FDA approved therapies including ELEVIDYS for treatment of DMD in pediatric patients, EXONDYS 51, VYONDYS 53, and AMONDYS 45.
On July 5, Sarepta Therapeutics, Inc. (NASDAQ:SRPT) announced that it had completed the sale of its Rare Pediatric Disease Priority Review Voucher (PRV) for $102 million. It was awarded the PRV following the accelerated approval of ELEVIDYS. The company intends to use the proceeds from sale of the PRV for R&D purposes.
As of March 31, Sarepta Therapeutics, Inc. (NASDAQ:SRPT) was the most commonly held stock out of the 10 stocks on our list of oversold biotech stocks to buy. Its shares were held by 57 hedge funds with a total value of $2.4 billion.
Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT) is a leading late stage biotechnology company focused on the development of genetic therapies designed to correct the root cause of complex and rare childhood disorders.
Clinical programs of Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT) include multiple gene therapies targeting Fanconi Anemia, Leukocyte Adhesion Deficiency-I, Pyruvate Kinase Deficiency, Danon Disease, and Infantile Malignant Osteopetrosis.
On June 8, Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT) announced that the FDA had granted Fast Track and Orphan Drug designations to the company’s gene therapy candidate for the treatment of plakophilin-2 related arrhythmogenic cardiomyopathy.
On May 5, Chardan Capital lowered the price target on Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT) shares to $61 from $63 but maintained a ‘Buy’ rating for the shares. The target represents a potential upside of 262.28% based on the share price on July 25.
Founded in 2010, Cambridge, Massachusetts-based SAGE Therapeutics, Inc. (NASDAQ:SAGE) is a biopharmaceutical company focused on the development of novel therapies for the treatment of debilitating disorders of the brain. Its lead product, Zulresso, is approved by the FDA for the treatment of postpartum depression.
On February 6, SAGE Therapeutics, Inc. (NASDAQ:SAGE) announced that the FDA has accepted the filing of a New Drug Application (NDA) for zuranolone for the treatment of major depressive disorder (MDD) and postpartum depression. The application was granted priority review with a Prescription Drug User Fee Act (PDUFA) action date of August 5, 2023.
On May 23, BofA Securities raised the target price on SAGE Therapeutics, Inc. (NASDAQ:SAGE) shares to $61 from $56 and maintained a ‘Buy’ rating. The target price represents a potential upside of 45.79% based on the share price on July 25.
