Last week was a pretty good one across the board for biotech stocks. The industry-tracking iShares Nasdaq Biotechnology Index (IBB -0.61%) took some steps forward on Wednesday and held on to finish the week 2.3% higher.

These three stocks didn't just help push the entire index higher, they reached new peaks while they were at it. Read on to see why investors are so excited about new drugs rolling through their development pipelines.

Company (Symbol) Price Change During Week Ended Sept. 3, 2021  Market Cap
Adagio Therapeutics (IVVD -5.88%) 40% $4.6 billion
Bicycle Therapeutics (BCYC -4.09%) 20% $1.0 billion
Cerevel Therapeutics (CERE) 16% $5.1 billion

Data source: Yahoo! Finance.

Adagio Therapeutics

This stock jumped on Monday and again on Wednesday after a handful of investment bank analysts began covering the biotech stock with a positive rating. The company just completed its initial public offering in August, but its work on antibody-based COVID-19 treatments is already turning some heads.

Trader explaining stock market movements.

Image source: Getty Images.

Analysts are excited about ADG20, the company's lead candidate for the prevention and treatment of COVID-19. This is an injectable antibody that targets a different portion of the virus' spike protein than available treatments from Eli Lilly and Regeneron.

While the competition has a huge head start, ADG20's differentiated mode of action could allow it to keep up with new variants. We'll know if this is the case soon. The company's already conducting two pivotal trials with ADG20, one as a treatment and another as a prophylactic.

Bicycle Therapeutics

Shares of this biotech stock have already doubled in 2021 thanks to growing interest in the company's bicyclic peptides, which can deliver a therapeutic payload to cells that display a specific target. There isn't much clinical evidence that proves they work as intended, but in theory, they should have a lot of advantages over antibody-drug conjugates that perform a similar function. 

Biotech investors have been driving this stock higher in anticipation of phase 1 clinical trial results with BT8009, a bicycle that delivers mini-chemo grenades to tumor cells that express a protein called nectin-4 on their surface. That's the same target as Padcev, an antibody-drug conjugate from Seagen the FDA approved to treat bladder cancer patients in 2019.

Padcev sales are expected to peak at around $4.5 billion annually even though it's a difficult drug to tolerate. During trials leading to its approval for the treatment of bladder cancer, 61% of patients on Padcev interrupted their dosing schedule because of side effects. If Bicycle's bicycles live up to expectations, we should see significantly better results in part because patients are less likely to skip doses.

Cerevel Therapeutics

Cerevel Therapeutics stock has more than doubled already this year. Much of that gain happened in June, when the company reported positive results for CVL-231, an experimental schizophrenia treatment that could have a much better side-effect profile compared to today's antipsychotic drugs.

In a phase 1 trial, patients exhibited significantly improved symptoms of psychosis after six weeks of treatment with CVL-231. The improvements weren't very big, but discontinuation rates for patients who received CVL-231 weren't any worse than discontinuation rates among the placebo group.

Cerevel Therapeutics estimates the market for antipsychotic drugs at more than $7 billion annually. With an easily tolerated option to offer, a great deal of those sales could end up in the hands of this company's shareholders. 

Before piling into Cerevel Therapeutics with your own hard-earned money, it's important to realize just how risky this stock is. Without any revenue to speak of, any hint of trouble ahead could cause this company's enormous $5.1 billion market cap to come crashing down.

Cerevel, Adagio, and Bicycle are probably good stocks to buy now, but you don't want to risk heavy losses. If you do end up buying any of these stocks, make sure they form a very small part of a well-diversified portfolio.