Insider Monkey

12 Most Undervalued Biotech Stocks To Buy According To Hedge Funds

Hamna Asim
13 min read

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In this article, we discuss 12 most undervalued biotech stocks to buy according to hedge funds. If you want to skip our discussion on the biotech industry, head over to 5 Most Undervalued Biotech Stocks To Buy According To Hedge Funds. 

Fitch Ratings maintains a Neutral outlook for the global pharmaceutical and biotech industry in 2024, expecting good growth supported by a moderating inflationary environment, despite high interest rates. The industry's positive operating fundamentals are supported by factors such as a growing aging population, increased healthcare access, and a rise in chronic and specialist conditions. Many companies are streamlining their business models by exiting businesses with lower innovation content. Fitch foresees a heightened focus on drug pricing and patient value amid tighter post-pandemic healthcare budgets. 

In 2023, the pharmaceutical and life sciences sector experienced a strong year for mergers and acquisitions (M&A), reaching levels comparable to pre-pandemic times. Forecasts for 2024 suggest a continuation of this robust activity, with expectations of M&A within the $225 billion to $275 billion range across all subsectors, as per a PwC report. Executives are likely to utilize cash reserves for investments in innovative and clinically differentiated areas to address growth challenges in the latter half of the decade. In 2024, differentiated science and clinical advancements are anticipated to drive dealmaking in areas with significant incremental innovation. Precision medicine in fields like oncology and immunology will remain a focus, with a heightened emphasis on weight loss and cardiovascular, a therapeutic area that experienced a revival in 2023. In 2024, the stakes for M&A in the pharma sector are elevated, with intense competition for high-quality assets and a challenging regulatory landscape. Companies are urged to invest in a technologically enabled and agile inorganic strategy, merging both internal and external innovation approaches. The United States is expected to remain the center for global innovation in the pharmaceutical sector, with foreign buyers actively participating. Understanding the implications of the Inflation Reduction Act (IRA), innovation dollars are expected to shift towards biologics over small molecules.

In 2023, the US Food and Drug Administration (FDA) set a record by approving 71 new medicines. This marked a significant increase from the previous year's sub-40 approval tally. The approval numbers, including the first CRISPR–Cas9-edited cell therapy and the first disease-modifying Alzheimer's drug, indicate a more active FDA after the official end of the US COVID-19 public health emergency in May 2023. Several groundbreaking treatments received approval, including the first CRISPR–Cas9-edited cell therapy for sickle cell disease, four new gene therapies, and the first disease-modifying Alzheimer's drug. The respiratory syncytial virus (RSV) saw the approval of two new vaccines and one preventative therapy. Over a dozen new antibody-based drugs, including cancer-fighting bispecific T cell engagers, were also among the approvals. More than half of the approvals in 2023 were for orphan drugs targeting rare diseases, aligning with industry incentives. Additionally, there were new options for more widespread conditions, indicating renewed interest in larger markets. Oncology continued to dominate, with 15 novel therapies constituting over 20% of the approvals.

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