Biotech stocks are in a bear market right now. Both the iShares Biotechnology ETF and the SPDR S&P Biotech ETF are trading near multiyear lows at the moment. This negative sentiment toward biotech, though, doesn't mean that investors should avoid this high-growth space completely. There are a few biotech companies with major catalysts in 2022 that could cause their share prices to double or possibly triple.
Which biotech growth stocks have the best chance at breaking out of this bear market? Arrowhead Pharmaceuticals (ARWR 0.04%), Madrigal Pharmaceuticals (MDGL -3.87%), and Viking Therapeutics (VKTX -3.23%) are three beaten-down biotechs that could generate life-changing returns for shareholders in 2022. Here is a rundown of the key points investors should know about each company.
Arrowhead Pharmaceuticals: A plethora of major catalysts
Arrowhead is a developmental-stage biotech specializing in RNA interference (RNAi) drugs. Apart from its novel drug development platform, the company is unique in terms of its value proposition to potential investors for a couple of reasons.
To start with, it isn't focused on one or two core drugs, like many other clinical-stage biopharmas. Instead, Arrowhead has a whopping 10 drug candidates under development at the moment, and several more on the way soon, for a wide variety of high-value indications. The biotech is able to pursue numerous pipeline candidates simultaneously due to its ability to attract deep-pocketed big-pharma partners. At last count, Arrowhead had major partnership agreements in place with Amgen, GlaxoSmithKline, Horizon Therapeutics, Johnson & Johnson (JNJ -0.72%), and Takeda Pharmaceutical. J&J is even a major shareholder.
Why is Arrowhead's stock a screaming buy right now? The biotech is slated to report top-line results from several important clinical programs this year. Chief among these updates, Arrowhead and J&J are scheduled to provide multiple clinical updates over the course of 2022 for their joint hepatitis B RNAi therapeutic known as JNJ-3989; mid-stage trial results are expected by mid-2022 for the Takeda-licensed liver disease drug TAK-999; and mid-stage trial results are also due out by the middle of the year for the Amgen-partnered ApoA RNAi therapeutic dubbed AMG-890. A hit on any or all of these clinical updates ought to light a fire undernearth Arrowhead's shares.
Madrigal Pharmaceuticals: A leading liver disease play
Wall Street certainly has high hopes for Madrigal's stock in 2022. The company's share price is projected to possibly appreciate by a whopping 122% this year, per Wall Street's 12-month consensus price target.
The big deal is that the company's lead asset, resmetirom, has mega-blockbuster potential (greater than $5 billion in annual sales) as a novel treatment for two serious liver conditions, nonalcoholic fatty liver disease (NAFLD) and nonalcoholic steatohepatitis (NASH). The drug is on track to yield top-line data for its late-stage NAFLD trial (presumed to be NASH) in the first quarter of 2022. A second late-stage trial for biopsy-confirmed NASH is expected to produce top-line data around the third quarter of 2022.
All that being said, NASH has proved to be a tough nut to crack for the biopharmaceutical industry. Several promising NASH drugs have flamed out in the past three years. And as a result of these various clinical failures, some liver disease experts have suggested that a monotherapy approach to NASH simply won't work. Big pharma, in fact, has been steadily moving toward a combination-therapy approach for NASH in the clinic.
On the flip side, resmetirom has produced some intriguing data over the whole of its NASH program. So while this small-cap biotech is indeed risky due to the intrinsic difficulty of developing a drug for this indication, Madrigal does have an outside shot at delivering some truly stunning gains for shareholders in 2022 and beyond.
Viking Therapeutics: Another top NASH stock
Viking is another NASH play. Wall Street's average 12-month price target implies that the biotech's stock could skyrocket by nearly 400% this year. The key will be the upcoming top-line readout for Viking's mid-stage NASH asset known as VK2809. The drug is currently in a phase 2b trial in patients with biopsy-confirmed NASH and liver fibrosis. Viking hasn't been able to pin down an exact top-line readout date yet due to issues stemming from the pandemic. But management expects a readout to occur sometime in 2022.
The lowdown is that VK2809 might turn out to be a best-in-class oral therapy for NASH. Again, though, investors and industry insiders clearly aren't convinced that this drug can succeed where so many others have failed. Viking's shares, after all, have lost over a third of their value in the prior year. If VK2809 defies the odds in NASH, however, this beaten-down biotech stock will undoubtedly soar. Viking, in fact, ought to be a top buyout candidate if VK2809 hits the mark in this all-important mid-stage trial.