Don't think that the current malaise for biotech investors will last forever. There are some biotech stocks that have tremendous long-term potential.
We asked three Motley Fool contributors to identify biotech stocks they think could deliver 5x returns by 2030. Here's why they chose CRISPR Therapeutics (CRSP 1.68%), Maravai LifeSciences (MRVI 2.01%), and Twist Bioscience (TWST 0.64%).
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This biotech boasts explosive growth potential
Prosper Junior Bakiny (CRISPR Therapeutics): Despite groundbreaking technological and medical advances in the past few decades, there remains plenty of room for innovation. And one group of companies looking to make breakthroughs are those that focus on gene editing, which refers to a set of techniques that allow scientists to modify an organism's DNA.
Gene editing could help unlock therapies for illnesses that have thus far eluded the brightest scientists, and one notable company in this field is none other than CRISPR Therapeutics. This clinical-stage biotech is currently working on several programs, including three potential gene-editing cancer therapies called CTX110, CTX120, and CTX130. But the company's most promising candidate is CTX001.
CRISPR Therapeutics is developing this potential treatment for sickle cell disease (SCD) and transfusion-dependent beta-thalassemia (TDT) in collaboration with biotech giant Vertex Pharmaceuticals. Both SCD and TDT are rare blood-related conditions that cause severe hardships to patients and have very few safe and effective treatment options.
Patients with TDT typically receive regular blood transfusions. CTX001, if effective, would be a one-time curative treatment. It's not hard to see the potential here. In a clinical trial, 15 patients with TDT were transfusion-independent after being treated with CTX001, with follow-up ranging from four to 26 months. These patients needed anywhere between 20 and 61 blood transfusions per year before the treatment.
Vertex and CRISPR Therapeutics plan to submit CTX001 to regulators by the end of this year. This and other promising programs could end up becoming highly successful if approved. That's why the company has the chance to deliver 5x gains by 2030.
Of course, there are risks involved. CRISPR Therapeutics could run into clinical or regulatory issues. But for investors with an above-average risk tolerance looking for biotechs with amazing growth potential, CRISPR Therapeutics is worth serious consideration, especially since its shares have significantly lagged the market recently.
An underrated biotech that has some big-name customers
David Jagielski (Maravai LifeSciences): If you're looking for a stock that can deliver 5x profits within a decade, you'll want to focus on a sector where there's significant growth potential. And one of the most promising opportunities for a biotech company right now is in helping to develop messenger RNA (mRNA) vaccines and therapeutics. According to analysts at Brandessence Market Research, that industry is likely to grow at a compound annual rate of more than 28% until 2026.
One company that can benefit from that growth potential is Maravai LifeSciences. The biotech company makes products that are used in mRNA vaccines and therapeutics. In particular, its nucleic acid production segment has been thriving amid the pandemic. For the nine-month period ending Sept. 30, 2021, the company's revenue just from that segment alone has topped nearly $500 million -- a 288% year-over-year increase. That business unit alone now accounts for 87% of the company's top line, compared with 69% a year ago.
And when you look at who the company's top customers are, it's no surprise why Maravai is doing so well. COVID-19 vaccine makers BioNTech and Pfizer have accounted for 32% and 23% of the company's revenue over the past nine months, respectively. Although that's a hefty amount of revenue for just two customers to generate, it signals to investors that Maravai is a trusted company among some of the bigger players in the industry. It also leads to the possibility that down the road, especially as mRNA development advances, one of these companies may just buy out Maravai completely due to its low price and their familiarity with the business.
At a market cap of just over $3 billion, Maravai wouldn't cost much for a top healthcare company to acquire it. And that's also one of the reasons it could potentially deliver 5x gains for investors. It's a lot easier for a mid-cap stock to rise in value than it is for a larger one, especially given the exciting growth opportunities it possesses. Maravai looks like it could be the real deal and an underrated stock to hold over the long haul.
DNA with a twist
Keith Speights (Twist Bioscience): $3 billion. That's the annual market for synthetic DNA and next-generation sequencing (NGS) that Twist Bioscience is targeting. It's certainly an enticing opportunity.
Twist's market cap already stands at around $2.6 billion. For a company that made $132.3 million in revenue in fiscal 2021, it's a sky-high valuation. Obviously, a lot of Twist's growth prospects are already baked into its share price.
However, I still think that Twist could deliver a 5x return by the end of this decade. I wouldn't be surprised if the stock becomes a 10-bagger during the period. But it's not the synthetic DNA and NGS markets that make me so bullish. My optimism about Twist stems from another big market opportunity for the company that's only in its infancy.
An unbelievably huge amount of data is created every second. All of that data must be stored somewhere. And that storage is expensive at the high volumes we're talking about. Twist, though, is working on storing data in DNA. It's cheap. And DNA lasts practically forever.
Twist believes that the DNA data storage market could be worth around $35 billion per year. Granted, Twist has plenty of hurdles to jump. If its DNA data storage technology is successful, though, the company doesn't have to come anywhere close to capturing all of the market for its stock to soar 400% or more by 2030.
