Choosing the best biotech stocks can sometimes seem like gambling. Trying to figure out which company's drug candidates are more likely to work, or whether your ownership stake will get diluted as the company tries to secure funding to keep a trial going, can often feel like a guessing game.
That's why it's a good idea to buy a small stake in several companies to reduce the risk that any single company will be a total bust. With that in mind, we can evaluate the science, the business, and the opportunities of three of the best biotech stocks to buy right now.
After reporting highly positive phase 3 results on Monday for the potential coronavirus vaccine it's working on with Pfizer (PFE -1.57%), BioNTech (BNTX -0.87%) may forever be known for that partnership. The results showed that the vaccine candidate is 90% effective and will be ready to receive an emergency use authorization (EUA) from the U.S. Food and Drug Administration (FDA) when the required two months of data are complete, which should be in the third week of November.
One big unknown remains: Since no one in the trial developed a severe case of COVID-19, it's unclear how well the vaccine prevents the worst outcomes, like hospitalization and death. Still, BioNTech has consistently demonstrated its expertise in using messenger ribonucleic acid (mRNA) to create treatments for diseases. With its stock at all-time highs, the company has distinguished itself as a leader in cutting-edge gene-based drugs that deserves a place in any biotech investor's portfolio.
Like BioNTech, this German biotech recently released positive results using an mRNA vaccine candidate to combat the coronavirus. Unlike BioNTech, CureVac's (CVAC -3.06%) candidate is only in phase 1 trials, so it has a long way to go before demonstrating efficacy in humans. But the company has the backing to get there.
Its high-profile funders include the German government, the founder of software company SAP (NYSE: SAP), Eli Lilly (LLY 0.34%), and the Bill & Melinda Gates Foundation.
Tesla (TSLA 4.14%) and its CEO, Elon Musk, are also partners in the effort. The carmaker manufactures the RNA bioreactors that boost and streamline production of the company's vaccine. After the positive phase 1 data, the vaccine will now move into phase 2/3 testing, during which 36,000 participants are expected to enroll.
CRISPR Therapeutics (CRSP -0.05%) is one of a handful of public companies leveraging the "clip-and-paste" function associated with bacterial immune responses to edit genes as a treatment for disease. Such bacteria "clip" portions of virus DNA and "paste" them into their own genes so they can recognize the attacker in the future. Scientists can harness this function to edit the genetic sequence of organisms and change the function of cells. This is especially helpful for diseases with a single gene defect, such as sickle cell anemia and cystic fibrosis.
So far, management has leveraged this approach to target cancers and blood disorders, with positive results in early trials. The science is proven, and with a founder who recently won a Nobel Prize, funding for research is unlikely to be a problem.
At a market cap of just $7 billion, once the method proves to be safe in humans, CRISPR Therapeutics could turn into one of the most important disease-fighting companies out there over the next decade. That said, any early-stage biotech is likely to be volatile. Buying shares of CRISPR is a bet on gene-editing technology, which could take years to prove itself. Investors should keep this timeline in mind when they buy.