Plenty of stocks have cratered in recent weeks as COVID-19 overtook headlines and our way of life. However, amid the coronavirus chaos, buying opportunities have emerged for those bold enough to act. Here are three drug stocks that could provide a handsome payoff.  

Stethascope and stock chart

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1. Amneal Pharmaceuticals 

Despite being one of the biggest U.S. generic drug producers, Amneal Pharmaceuticals (NYSE:AMRX) is far from a household name. The company manufactures and sells a portfolio of 225 generic drugs, as well as maintaining a specialty division focusing on complex generics with high barriers to entry that should produce a greater return on investment. The stock rose as much as 52% in December following the approval of EluRyng, the first generic equivalent for the NuvaRing birth control product.

On March 20, Amneal hopped into the coronavirus fray when it announced it would accelerate the production and distribution of hydroxychloroquine sulfate, one of the drugs identified as a possible treatment for COVID-19. It expects to make roughly 20 million tablets by mid-April.

The company is in a repositioning phase, with its former co-CEOs having retaken the helm last August. As part of an ongoing effort to refocus on the U.S. market, Amneal sold its business units in the United Kingdom and Germany last year. This past December, Amneal acquired 65% of AvKARE, one of the largest providers of generic drugs to U.S. federal agencies including the Department of Defense and the Department of Veterans Affairs. Additionally, Amneal forged a strategic partnership with Fosun International to sell its products in the growing Chinese pharmaceutical market.

Amneal's stock has been beaten down. It had fallen more than 80% before the approval of EluRyng when it found itself in the crosshairs of a federal probe into opioid manufacturers. It could still be on the hook for a sizable settlement. This remains the greatest risk for the time being.

The company announced 2020 guidance for adjusted earnings per share ranging from $0.40 to $0.60, based on $1.88 billion to $1.98 billion in sales. The current outbreak may dampen those expectations. However, some loss may be offset by sales of the 20 million hydroxychloroquine sulfate tablets the company seeks to deliver to fight COVID-19. If the strategic turnaround continues to deliver, Amneal's $1.2 billion valuation today could look like a steal in a year or two.

2. Viking Therapeutics

Viking Therapeutics (NASDAQ:VKTX) aims to develop first-in-class or best-in-class treatments for metabolic and endocrine disorders. While it boasts three drugs in phase 2 clinical stage trials, much of the attention it receives falls on VK-2809, its drug for nonalcoholic steatohepatitis (NASH), a condition of inflammation and damage to the liver caused by a buildup of fat there.

Because of the huge potential market size for NASH -- between 3% and 12% of the U.S. population may have it -- a multitude of companies have embarked on developing treatments.  While it's not the most advanced drug in development, VK-2809 has demonstrated in prior clinical trials that it can lower LDL-C ("bad cholesterol"), decrease liver fat, and reduce plaque-causing proteins in the arteries -- all important in treating NASH.

The key trial for VK-2809 continues to enroll patients, with results expected next year. Because of the COVID-19 crisis, I would expect to see a delay in the time to complete enrollment. On the earnings conference call Feb. 28, CEO Brian Lian noted that enrollment was in the "early innings" and trial sites were still coming online, including 12 to 15 outside the U.S. to be activated in the second quarter.

Luckily for Viking, it has a strong balance sheet with plenty of cash -- $275 million to be exact. Last year, the company posted a net loss of $25.8 million. Even if that were to double next year, Viking would have enough money to fund several years of operations. This is critical in the current market, especially because its key trial will likely take longer to get results. Today it trades at a $294 million valuation or slightly more than cash value. If the trial results are positive next year, then this stock will prove to have been an absolute buy.

3. Verastem

Targeted cancer therapy company Verastem (NASDAQ:VSTM) has lots going for it. On the back of gaining worldwide rights to a promising cancer drug, Verastem raised $100 million from prominent healthcare investors. It refocused its R&D efforts, cutting back some of the trials for its already approved cancer drug, Copiktra. And it reduced sales and marketing efforts, including cutting personnel, to focus on promotional activities at high-volume clinics.

In January, Verastem licensed exclusive worldwide rights for the promising anticancer drug VS-6766 from Japanese pharma company Chugai. Verastem began human testing of VS-6766 in combination with defactinib, another one of its anticancer drugs, to treat patients with mutated forms of the KRAS protein. Cancers with KRAS mutations have proven to be some of the most challenging to treat and include lung, colorectal, and ovarian cancers.

Targeting KRAS has been a hot area for R&D investment. The stocks of Amgen (NASDAQ:AMGN) and Mirati Therapeutics (NASDAQ:MRTX) jumped in June last year following Amgen's release of positive results regarding the initial efficacy of its drug targeting mutant KRAS.

As for the $100 million, Verastem raised that on March 3 from a roster of well-regarded healthcare funds including RA Capital Management, Vivo Capital, Venrock Healthcare Capital Partners, Farallon Capital Management, Acuta Capital, EcoR1 Capital, Avidity Partners, and Logos Capital. The investors paid a 12.7% premium over the then-current price for their shares.

Biotechs with greater cash positions will be better positioned to weather the current global crisis. This financing, along with the company's downsizing of its sales and marketing efforts to focus on high-prescribing cancer clinics and its scaling back of clinical trials of Copiktra, should give Verastem more breathing room. Management said the cash reserves will be enough to fund operations into the fourth quarter of 2021. 

Biotech stocks provide investors with high-risk, high-reward scenarios. Viking and Verastem have the potential to skyrocket upon successful clinical trials. Meanwhile, revenue-producing Amneal could be viewed as a more conservative option.