In this article, we will be taking a look at 11 oversold biotech stocks to buy right now. To skip our detailed analysis of the biotech sector, you can go directly to see the 5 Oversold Biotech Stocks To Buy Right Now.
Dealmaking in Biotech
Healthcare has been performing well so far in 2024, and many investors are now wondering which specific areas in healthcare they should try to buy into today. Several analysts believe biotech in one area in the healthcare sector that is poised to benefit in 2024, considering the current performance of biotech stocks. However, certain areas within the biotech space may be risky as the trend of dealmaking and buyouts in the industry continues. As such, investors need to tread carefully if biotech is their preferred area of investment in 2024.
On February 28, Laura Chico, the Managing Director at Wedbush, joined CNBC's "Power Lunch" to discuss this dealmaking trend in the biotech space and what it may mean for investors. Here are some of her comments:
"I think this is a trend we've been seeing a lot of this year, and even from the end of last year. So from December to now, we've got over 11 over $35 billion in transactions. I don't think it's gonna stop anytime soon. Large-cap pharma biotechs do have exclusivity expiries that they have coming up, that they need to address. Also looking for revenue growth, a great spot to look is in the small and mid-cap biotech space, for assets that might be a little more de-risked."
Investors looking to buy into biotech stocks this year may be wondering which areas are more prone to buyouts, or if there even is any one rule applying to the buyout trend. Chico noted the following areas to keep an eye on as far as buyouts are concerned:
"Obesity has been a really big theme in 2023, will probably continue for the foreseeable future, but across the area, at least in these recent M&A transactions, it's been really broad-based, and I think that's really a testament to the innovation in the space. We have a number of deals in oncology, immunology, inflammation, neuro, and even rare diseases. So it's not just within certain verticals at this point."
A Pronounced Biotech Rally in 2024
According to Chico, investors looking to invest in biotech will surely do well by keeping up with FDA approval news, scientific and clinical risks posed by a company's products, and most importantly, what area of diseases a company is targeting with its products, as this may highlight its chances of success in terms of meeting an overlooked target population's needs alongside gaining FDA approval.
All things considered, biotech companies like Moderna, Inc. (NASDAQ:MRNA), Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN), and Gilead Sciences, Inc. (NASDAQ:GILD) may be set to benefit from a pronounced biotech rally this year. On March 6, Jared Holz, Healthcare Equity Strategist at Mizuho, joined CNBC's "The Exchange" to discuss this possibility:
"[Biotech] has been one of the worst spaces in all of the equity market since mid-2021. We've barely seen any positive activity for any pronounced period of time until very recently... When you consider the risk factors, with respect to drug prices and other elements of the business... all these risk factors are much more well understood and we can continue to move higher from here."
Holz believes that even if investors haven't been able to get into large-cap biotech stocks, that doesn't mean they can't get into them now. At the same time, he noted that there are also many well-placed small-cap options in the market that can help investors enter the biotech space. Considering this, we have compiled a list of oversold stocks in the biotech space. These companies may have been going overlooked for some time, but include some of the best biotech stocks to buy under $20 and some of the most undervalued biotech stocks to buy as well.
11 Oversold Biotech Stocks To Buy Right Now
A biotechnologist in a lab setting, examining a sample of liquid for research and development.
Our Methodology
We used the Relative Strength Index (RSI) indicator to pick oversold stocks in the biotech industry for our list. The RSI indicator is a momentum indicator used in the technical analysis of stocks by measuring the speed and magnitude of a security’s recent price changes to evaluate whether the price of that security is overvalued or undervalued. Stocks with RSI values of over 70 are traditionally considered overbought, while those with RSI values under 30 are oversold. We thus used a stock screener to find oversold stocks in the biotech industry with RSI values under 30 and then ranked them based on this metric, from the highest to the lowest RSI value. We also mentioned the number of hedge funds holding stakes in each stock, using Insider Monkey’s hedge fund data for the fourth quarter. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by over 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
Aura Biosciences Inc. (NASDAQ:AURA) is a biotech company based in Boston, Massachusetts. The company develops therapies to treat cancer and virus-like drug conjugates technology platforms to treat tumors of high unmet need in ocular and urologic oncology.
In total, 11 hedge funds were long Aura Biosciences Inc. (NASDAQ:AURA) in the fourth quarter, with a total stake value of $151.6 million.
While Aura Biosciences Inc. (NASDAQ:AURA) is on our list of oversold stocks, it is still a highly popular biotech stock, just like Moderna, Inc. (NASDAQ:MRNA), Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN), and Gilead Sciences, Inc. (NASDAQ:GILD).
A Buy rating and $30 price target were maintained on Relay Therapeutics, Inc. (NASDAQ:RLAY) by Bradley Canino at Stifel on February 22.
Based in Cambridge, Massachusetts, Relay Therapeutics, Inc. (NASDAQ:RLAY) is a clinical-stage precision medicines company, and is one of the best oversold stocks to buy. It transforms the drug discovery process with an initial focus on enhancing small molecule therapeutic discovery in targeted oncology and genetic disease indications.
Relay Therapeutics, Inc. (NASDAQ:RLAY) was spotted in the portfolios of 26 hedge funds in the fourth quarter, with a total stake value of $218.3 million.
Casdin Capital was the largest shareholder in Relay Therapeutics, Inc. (NASDAQ:RLAY) at the end of the fourth quarter, holding 7.4 million shares in the company.
We saw 21 hedge funds long Tango Therapeutics Inc. (NASDAQ:TNGX) in the fourth quarter, with a total stake value of $289.4 million.
Tango Therapeutics Inc. (NASDAQ:TNGX) discovers and develops drugs to treat cancer. Based in Boston, Massachusetts, the company offers a synthetic lethal small molecule inhibitor of protein arginine methyltransferase 5 that is being developed as a cancer treatment.
Joseph Catanzaro at Piper Sandler maintained an Overweight rating and $18 price target on Tango Therapeutics Inc. (NASDAQ:TNGX) on February 12.
Tango Therapeutics Inc. (NASDAQ:TNGX) is one of the top oversold stocks to buy, considering that it is a popular biotech stock, just like Moderna, Inc. (NASDAQ:MRNA), Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN), and Gilead Sciences, Inc. (NASDAQ:GILD)
EcoR1 Capital was the most prominent shareholder in Galapagos NV (NASDAQ:GLPG) at the end of the fourth quarter, holding 5.8 million shares in the company.
Galapagos NV (NASDAQ:GLPG) is an integrated biopharmaceutical company based in Belgium. The company discovers, develops, and commercialize various medicines for high unmet medical needs, and is among the top oversold stocks to invest in.
Morgan Stanley's Judah Frommer maintained an Equal Weight rating and $38 price target on Galapagos NV (NASDAQ:GLPG) on March 7.
Our hedge fund data for the fourth quarter shows 22 hedge funds long Galapagos NV (NASDAQ:GLPG), with a total stake value of $483.7 million.
Aurinia Pharmaceuticals Inc. (NASDAQ:AUPH) is a commercial-stage biopharmaceutical company based in Canada on our list of oversold stocks. It develops and commercializes therapies to treat various diseases with unmet medical need in the US.
Holding 9.5 million shares in the company, Armistice Capital was the largest shareholder in Aurinia Pharmaceuticals Inc. (NASDAQ:AUPH) at the end of the fourth quarter.
Aurinia Pharmaceuticals Inc. (NASDAQ:AUPH) was spotted in the 13F holdings of 18 hedge funds in the fourth quarter, with a total stake value of $121.9 million.
As of March 1, HC Wainwright & Co. analyst Ed Arce holds a Buy rating and $13 price target on Aurinia Pharmaceuticals Inc. (NASDAQ:AUPH).
There were 55 hedge funds long Immunovant, Inc. (NASDAQ:IMVT) in the fourth quarter, with a total stake value of $913.8 million.
Immunovant, Inc. (NASDAQ:IMVT) is a clinical-stage biopharmaceutical company that develops monoclonal antibodies to treate autoimmune diseases. The company is based in New York.
Corinne Johnson at Goldman Sachs holds a Buy rating and $50 price target on Immunovant, Inc. (NASDAQ:IMVT) as of March 13.
Baron Funds mentioned Immunovant, Inc. (NASDAQ:IMVT) in its fourth-quarter 2023 investor letter:
“We initiated a position in Immunovant, Inc. (NASDAQ:IMVT), a clinical-stage biotechnology company developing therapies for autoimmune diseases. During the quarter, the company announced data from a Phase 1 clinical trial of IMVT-1402, an FcRn inhibitor that has broad potential applicability to multiple autoimmune diseases. The data showed that IMVT-1402 delivered dose dependent and deep reductions in disease-causing auto-antibodies with minimal changes in albumin and low-density lipoprotein cholesterol. The company’s first generation FcRn inhibitor has shown strong efficacy but there have been questions about the safety profile of the drug. This promising data makes Immunovant a real competitor in the FcRn inhibitor drug class, though Immunovant is behind argenx in terms of timing. We think both companies can be successful given the broad array of autoimmune diseases that can potentially be treated with a safe and effective FcRn inhibitor.”
