Investors seeking out high growth in their investments will often turn to biotech stocks. The boom in the biotechnology industry in recent decades built on the increasing understanding we have on biology. For this reason, investors have been looking for the best biotech stocks to buy. This came as the sector turned out to become one of the most exciting growth plays in the stock market today.
Why are biotech stocks so popular among investors? It could be because they could offer some of the biggest rewards in the stock market. Many overnight breakouts come from biotech stocks. Just be prepared for big risk, too. Because unlike many companies that can slowly but steadily build up their business over time, the survival of many early-stage biotech companies hinges on just a few clinical trials. Should their drug gain approval, it would mean many years of revenue for the company. Therefore, any positive news of clinical trials can produce outsized returns for share prices. However, drug failures will send prices plummeting.
While it’s impossible for average investors to keep track of the development of a particular drug, investors could give themselves a small leg up by paying attention to what the analysts are speculating. If you find a biotech stock that’s mostly surrounded by bulls, that could signal that something rewarding is just around the corner. We know it’s hard or practically impossible to find the next Novavax (NVAX Stock Report) or Moderna (MRNA Stock Report), which generated enormous returns for their investors. That said, could these smaller-cap biotech stocks have a shot by following in their footsteps?
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Inovio Pharmaceuticals (INO Stock Report) stocks were up on Tuesday by 20.41% on an unusually high volume. While there wasn’t any groundbreaking news that sent the shares up in a double-digit percentage gain, the rally could have been a result of Dr. Joseph’s Kim’s presentation on H.C. Wainwright 22nd Annual Global Investment Conference that led investors bidding for INO stock.
Of course, investors want to see Inovio succeed in the upcoming clinical trials for its COVID-19 vaccine candidate. Now, the company’s other weapon is the immunotherapy candidate VGX-3100. Inovio is currently evaluating the candidate in two phase 3 clinical studies as a potential treatment for human papillomavirus (HPV)-related precancerous cervical dysplasia, also known as high-grade squamous intraepithelial lesions (HSIL).
There currently aren’t any drugs approved by the Food and Drug Administration for treating cervical dysplasia. As such, should the phase 3 trials be successful in the fourth quarter, it could be a huge valued driver to the company. If it receives approval, the drug could generate peak annual sales of more than $600 million. With that in mind, INO stock certainly isn’t a one-trick pony.Best Biotech Stocks To Buy Now [Or Avoid]: Vir Biotechnology
Another biggest winner among biotech stock this year has been Vir Biotechnology (VIR Stock Report). The company has partnered with pharmaceutical giant GlaxoSmithKline (GSK Stock Report) to develop its COVID-19 programs. Vir currently has two antibody treatments and a small interfering RNA treatment against COVID-19 in its pipeline. One of its antibody treatments VIR-7831 is in phase 2/3 clinical trials. Should the trial results be positive, this antibody candidate could be made available first under the Emergency Use Authorization (EUA) from the FDA in the early months of 2021. There’s a strong potential for Vir’s pipeline.
But investors should also bear in mind that there are already coronavirus treatments on the market. These include Gilead’s (GILD Stock Report) remdesivir, dexamethasone, or convalescent plasma therapy.
Vir’s hepatitis B pipeline is facing similar problems. Although its treatment candidates are well into phase 2 trials, commercial feasibility remains to be seen. Large pharmaceutical company Johnson & Johnson (JNJ Stock Report) is also developing a treatment for hepatitis B. This would significantly affect the company’s pricing power in the event of its drug’s approval. With all that in mind, it could be hard for investors to justify its existing valuation with its shaky pipeline.Best Biotech Stocks To Buy Now [Or Avoid]: Sorrento Therapeutics
For investors who have been paying close attention to COVID-19 plays, you have probably come across Sorrento Therapeutics (SRNE Stock Report). The company has had a massive rally, rising more than 1000% before plunging more than 60% from its peak on 10 August. Sure, there have been plenty of good weeks so far this year.
As of late July, the company said it had licensed a test from Columbia University. The new coronavirus test reportedly detected the COVID-19 in little as 30 minutes using saliva samples rather than unpleasant nasal swabs. The company is marketing the test under the name COVI-TRACE. This news contributed to another rally in Sorrento’s stock price in August. However, the party quickly faded.
The reality is that the viability of some of the COVID-19 treatments, vaccines, and tests in the market is in question. With investors exercising additional concern after the earlier rally, some correction in the stock price is inevitable. Nevertheless, SRNE stock certainly appears more attractive at this current price. Of course, this is still a high-risk opportunity that could swing in either direction.