Investors looking for growth in recent times have piled into stocks in artificial intelligence and quantum computing. But these aren't the only areas that offer the potential for explosive revenue growth and stock performance. Another industry also offers innovation and even game-changing products -- elements that could drive long-term returns for your portfolio.
This industry is biotech. Companies in the space often focus on the research and development of cutting-edge technologies such as gene editing or messenger RNA to power the medicines of tomorrow. Sometimes these companies, due to their lack of products on the market or limited revenue, may trade at bargain levels. But they might have what it takes to soar down the road if their products reach commercialization.
The "if" in the above sentence means, yes, there is risk involved in investing in biotech players, especially if they don't yet have products on the market. But if you can accept that risk and are a growth investor, biotech stocks may be just the right addition to your portfolio. Let's check out three beaten-down players that Wall Street expects to surge between 68% to 250% in the coming 12 months.
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1. Viking Therapeutics
Viking Therapeutics(NASDAQ: VKTX) is developing drug candidates in an area with such high demand that currently commercialized drugs were in shortage for about two years. This is the weight loss drug market. Eli Lilly and Novo Nordisk make the current market leaders -- Zepbound and Wegovy -- and these products just recently came off the U.S. Food and Drug Administration's shortage list as the companies ramped up manufacturing infrastructure.
Viking is developing VK2735 in injectable format and in an oral version. The former is set to enter phase 3 studies in the second quarter and the latter is involved in a phase 2 study right now. The candidates have delivered solid results in earlier trials, and that helped boost the stock in the early part of last year. In fact, Viking surged 121% in one trading session a year ago when it first announced that VK2735 in injectable format had met primary and all secondary endpoints in its phase 2 trial. The stock has since dropped 66% from that peak.
Considering demand for safe and effective weight loss drugs and analysts' forecasts for a market worth more than $100 billion by the end of the decade, investors believe Viking could carve out share and score a win down the road. Wall Street expects the stock to climb 250% in 12 months, something that could happen if Viking continues to deliver solid clinical trial results.
2. Moderna
In a way, Moderna(NASDAQ: MRNA) is a victim of its success. The stock soared in early pandemic days as the biotech generated billions of dollars in revenue from its coronavirus vaccine. Since, as demand for the product dropped and Moderna realigned its costs to adjust for that, the stock has suffered. In fact, it's lost 65% over the past year.
Though Moderna last year won approval for a second product -- a respiratory syncytial virus (RSV) vaccine -- this vaccine failed to perform as well as expected.
It's important to remember that Moderna's explosive growth a few years ago was linked to a pandemic situation, so it's unfair to compare today's performance to those days. Instead, it's a better idea to examine Moderna's pipeline and consider what's on the near-term horizon. And here, there's some positive news.
Moderna recently submitted three candidates for regulatory approval: its next-generation coronavirus vaccine, its RSV vaccine for high-risk younger adults, and a combined flu/coronavirus vaccine. And the biotech says it's on track to deliver as many as 10 product approvals by 2027. If Moderna even makes it part of the way to that goal, it could be transformational for the company's earnings picture.
Wall Street predicts Moderna stock will jump 68% from today's level over the coming 12 months. That may be optimistic as investors might need to see more product launches and revenue gains before coming back to Moderna. But over the long term, this biotech company is set to make that happen, and that could spark a whole new era of stock performance.
3. CRISPR Therapeutics
CRISPR Therapeutics(NASDAQ: CRSP) reached a major milestone a little more than a year ago. The company won approval for its first product, Casgevy for blood disorders, which also happened to be the first ever approval for a product based on CRISPR gene editing. This is a method of "fixing" faulty genes responsible for disease. The approval was a key moment for the company as it confirms the strength of its technology -- a technology CRISPR Therapeutics uses across its pipeline.
Casgevy may not bring in bucketloads of revenue right away, as treatment involves a months' long process and the biotech also takes a smaller share of profit than partner Vertex Pharmaceuticals. But it's OK if revenue takes time to come in. Meanwhile, the company continues to advance on its pipeline and expects 2025 to be a "catalyst-rich year with key updates across several programs." For example, CRISPR Therapeutics expects updates for CTX112 in oncology and autoimmune indications by mid-year.
On top of this, CRISPR Therapeutics has consistently maintained a high level of cash -- today at about $1.9 billion -- suggesting the company has the financial strength to shepherd its candidates through development.
The stock, which has tumbled more than 45% over the past year, could climb 87% within the coming 12 months, Wall Street predicts. And if CRISPR Therapeutics reports positive trial updates, this forecast for a double-digit gain could become a reality.
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Adria Cimino has positions in Vertex Pharmaceuticals. The Motley Fool has positions in and recommends CRISPR Therapeutics and Vertex Pharmaceuticals. The Motley Fool recommends Moderna, Novo Nordisk, and Viking Therapeutics. The Motley Fool has a disclosure policy.
