Investing in biotech stocks is not for risk-averse investors. However, if you’re an investor who is serious about generating outsized gains, it’s a sector that you can’t overlook. Many companies are developing and manufacturing drugs and therapeutics that treat a range of conditions, some of which have no currently known cures.
These companies are developing therapeutic treatments for conditions ranging from amyotrophic lateral sclerosis (ALS) and Alzheimer’s disease to targeted oncology and gene editing. Just a few years ago, these treatments seemed far away, but they could become a reality much sooner than expected.
The drug development process is arduous for a reason. And, these companies could experience setbacks as they seek to move drugs out of the clinical trial phase. But if you have room in your portfolio for stocks that have the potential for huge upside, these three deserve strong consideration.
Investors can find biotech stocks with large-, mid-, and small-cap market capitalizations. Read on to get one pick from each market cap.
Amylyx Pharmaceuticals (AMLX)
AMLX received FDA approval for Relyvrio in 2022 under the agency’s accelerated approval pathway. Pending results from its Phase III clinical trial, it plans to seek European Union (EU) approval in early 2024.
Already, Relyvrio has put the company in the black. It’s generated three consecutive profitable quarters and projects a 105% earnings increase in the next 12 months. On the top line, revenue continues to show sequential growth. In its last quarter, revenue broke the $100 million mark.
Yet, all of this good news hasn’t done much for AMLX stock which is down 64% in 2023. Some of that is due to high short interest which has been affecting many small-cap stocks. Also, the company faces a potential headwind if it receives negative results in clinical trials. AMLX had to promise the FDA it would withdraw Relyvrio if the results are not favorable.
In any event, analysts seem to be encouraged. They give AMLX stock a consensus strong buy rating with a consensus price target of $39.40.
Jazz Pharmaceuticals (JAZZ)
Jazz Pharmaceuticals (NASDAQ:JAZZ) is the mid-cap stock in this group, with a market cap of $7.6 billion. The company has multiple, commercially available products in the areas of neuroscience vertex pharmaceuticals (VRTX) and oncology, leading to over $3.6 billion in revenue in 2022.
That puts the company well on track to meet its Vision 25 mission of generating $5 billion in revenue by 2025. Plus, Jazz has a robust pipeline of five novel products. These include potential breakthroughs in targeted oncology. The company expects these products to receive approvals by 2030. In addition, Jazz forecasts earnings growth of 13.97% in the next 12 months.
However, JAZZ stock doesn’t reflect this earnings growth. It’s down 23% in 2023. But this is another strong buy choice from analysts who have a price target of $198.50, which is 63.5% higher than its November 24 market close price .
Vertex Pharmaceuticals (VRTX)
Like many large-cap stocks, Vertex Pharmaceuticals (NASDAQ:VRTX) has enjoyed a solid 2023. VRTX stock is up over 22%. Much of that growth took place after Vertex received an expanded use authorization (EUA) for its flagship cystic fibrosis drug, Trikafta.
Since then, Vertex received Prescription Drug User Free Act (PDUFA) action dates from the Food and Drug Administration (FDA) regarding its exa-cel treatment. That is being developed in conjunction with CRSPR Therapeutics (NASDAQ:CRSP). This marks the company’s first foray into the area of gene editing.
But the drug that could really get the market moving is the company’s non-opioid pain drug candidate, VX-548. This would address a market that is valued in the billions of dollars with an addressable audience of over 90 million patients.
VRTX stock is another top-rated biotech stock with a strong buy rating from analysts. Wit a price target of $398.93, it shows a gain of more than 45% from the stock’s current price.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.