Stocks in the biotechnology sector have outperformed the broader market year to date. Despite the market volatility throughout this year, there are still good prospects in this sector, especially in small-cap biotechnology stocks. These companies are often selling at attractive prices, and their cutting-edge research could make investors wealthy in the long run.

If you have cash waiting to be put to work, you might want to take a look at these biotechnology stocks that are set to dominate in 2020 and beyond. Both companies are pioneers in their respective spaces and offer robust pipelines, with lead products nearing the middle of the drug-development process.

Let's take a closer look.

3D rendering of a cancer cell.

Image source: Getty Images.

Atara Biotherapeutics

Atara Biotherapeutics (ATRA -7.04%) is a hidden gem poised to move higher. Down 18% year to date, this T-cell immunotherapy specialist has a novel platform addressing Epstein-Barr-virus (EBV) T-cells that could be a game-changer in the development of therapies for patients with solid tumors, hematologic cancers, and autoimmune and viral diseases.

The science: Atara's platform leverages properties of EBV T-cells to treat a variety of EBV-associated diseases using engineered chimeric antigen receptors (CARs) and T-cell receptors (TCRs). Early studies of Atara's lead product candidate, tab-cel (tabelecleucel), have shown it to be effective in improving survival for patients with a deadly and ultra-rare form of cancer known as EBV-associated post-transplant lymphoproliferative disease (EBV+ PTLD). This product is currently in phase 3 of the drug-development process, and Atara is in the process of submitting a biologics license application (BLA) for tab-cel to the U.S. Food and Drug Administration (FDA) near the second half of 2020.

The potential: What is exciting about tab-cel is that it could be the first approved therapy for these ultra-rare diseases. Several companies such as Viracta Therapeutics, AlloVir, and Tessa Therapeutics are still in the early phases of development. If Atara stays ahead in the race to market, it could potentially have first-mover advantage in this space. Management sees plenty of expansion opportunities in the ultra-rare-disease market and has launched additional studies in a variety of EBV-associated diseases such as nasopharyngeal carcinoma (a type of throat cancer) and other cancers.

The promise of Atara's platform has investors bullish on the stock, with more than 87.8% of the shares held by institutional firms. The stock has a price-to-book ratio of 3.2, which is undervalued compared with peers including Heron Therapeutics (4.9) and Mirati Therapeutics (7.5) as well as the broader biotech sector (about 6). The stock is trading near the midpoint of its 52-week range and could easily move closer to its high of $21.45. There's plenty of upside in the long term based on Atara's unique capabilities and applicability in the EBV-associated ultra-rare-disease market.

Aprea Therapeutics

Aprea Therapeutics (APRE) is another under-the-radar pick poised to excel in the long run. The stock is down 17% year to date. The company is developing novel cancer therapeutics that target p53, a protein expressed from the TP53 gene, a common mutation seen across a range of cancer types. These mutations are resistant to treatment and have poor overall survival rates, so a therapy that addresses them represents a major development in the treatment of cancer.

The science: Aprea has a promising lead product candidate known as eprenetapopt (APR-246) that is in phase 3 clinical trial development as a front-line treatment of TP53 mutant myelodysplastic syndromes (MDS, a type of blood cancer). The APR-246 therapy reactivates mutant and inactivated p53 protein to allow the immune system to effectively target and destroy cancer cells.

Early studies have shown APR-246 to be effective in combination with anticancer agents and safe in patients with blood cancers and solid tumors with mutations in the TP53 gene. Management believes that APR-246 has the potential to be a first-in-class therapy.

The potential: The MDS market is expected to grow at a compound annual growth rate (CAGR) of 5.5% and to reach 1.8 billion by 2025. There are an estimated 200,000 MDS patients worldwide, with 68,000 in the United States. Several companies are in the early and middle stages of drug development for MDS treatments, including AbbVie, argenx, Karyopharm Therapeutics, and Takeda Pharmaceuticals.

Aprea has an advantage among competitors, as it has received several designations for APR-246 from the FDA to expedite development, including orphan-drug and fast-track status for MDS. The company is on pace to report data at the end of 2020. Additionally, APR-246 has received an orphan drug designation from the European Medicines Agency for MDS, acute myeloid leukemia (AML), and ovarian cancer. Management plans to submit a New Drug Application (NDA) and Marketing Authorization Application (MAA) for the drug to the European Medicines Agency (EMA) in 2021.

Aprea's market value is $807 million, and the stock is nowhere near their 52-week high of $53.11. In the most recent quarter, 34 institutional investors increased their share holdings, and 13 opened new positions in Aprea Therapeutics. This suggests investors are bullish on the prospects of APR-246 and its potential to be commercialized. Aprea has a price-to-book ratio of 7.1, which is undervalued compared with peers including Karyopharm Therapeutics (8.1) and IGM Biosciences (9.4). Investors should consider buying shares of Aprea Therapeutics during the next dip as a long-term opportunity.