Investing in the stock market won't make you rich overnight. But with a patient approach to investing, coupled with several promising picks that could perform well in the long run, you can become much wealthier by investing in stocks over time.
Let's address the second part of this strategy: picking the right stocks, which isn't always an easy task. If you need some inspiration, here are two biotech stocks that are currently down and out with investors -- and while they carry some risk, I believe they have the potential to deliver strong returns to the patient shareholder: Bluebird Bio (BLUE) and Exelixis (EXEL -2.59%). Here's why.
1. Bluebird Bio
To say that Bluebird Bio has lagged the market in the past year would be an understatement. The gene-editing specialist has lost over 70% of its value in the trailing-12-month period, a horrible performance by any metric. The company owes this poor showing to a combination of factors, but as is usual with biotech companies, clinical and regulatory setbacks played a significant role.
On the positive side, Bluebird has proven that it can earn regulatory nods for multiple therapies -- few other gene-editing companies can say the same. Both Skysona, a treatment for a pediatric neurodegenerative disorder called cerebral adrenoleukodystrophy (CALD), and Zynteglo, a therapy for the blood disorder transfusion-dependent beta-thalassemia (TDT), were approved in Europe.
However, the company opted to leave the European market after failing to land a good deal with third-party payers for its approved gene-editing treatments. It also has had to pause a couple of clinical trials because of suspected adverse reactions. And it recently spun off its oncology business into a separate entity called 2Seventy Bio.
Where does that leave Bluebird? It leaves the biotech with a pipeline focused on rare illnesses and some promising programs on the way. In September, the company submitted an application to the U.S. Food and Drug Administration for beti-cel, a treatment for TDT that was branded as Zynteglo in Europe.
There are few treatments for TDT. But Bluebird's version of the therapy that was approved in Europe costs a hefty 1.58 million euros. The biotech will almost certainly set a high price in the U.S. as well if beti-cel gets approved. There is no denying the value it would bring to patients: a one-time, curative treatment for a disorder that would otherwise require regular blood transfusions for survival.
The company has also submitted a U.S. application for eli-cel, a treatment for CALD that was approved in Europe this past December as Skysona. The FDA granted eli-cel priority review, which is reserved for therapies that could be an improvement over existing treatments. CALD is the most severe form of adrenoleukodystrophy (ALD).
ALD itself is pretty rare, and 40% of boys diagnosed with it end up developing CALD. The only known treatment for this illness is a stem-cell transplant. Eli-cel and beti-cel could both be approved this year with the potential to generate at least several hundred million dollars in peak annual sales -- if not significantly more.
Bluebird looks a bit on the risky side. It currently has no products on the market and is consistently unprofitable. And the biotech could run into even more regulatory headwinds, which would sink its stock even further.
However, Bluebird's current market cap is barely over $500 million. The market isn't putting much value in the company's programs at all. That's what makes this biotech a potentially attractive option. If the company's master plan actualizes, its shares could skyrocket.
Exelixis is best-known for its cancer medicine Cabometyx, approved for renal cell carcinoma (RCC) and hepatocellular carcinoma (HCC). In fact, it represents the bulk of the company's sales. But the biotech's reliance on its crown jewel doesn't bode well for many investors, which partly explains why the company has lagged the market -- down some 18% over the past year.
Still, there is hope for Exelixis, which will report its full financial results on Feb. 17.
First, Cabometyx has continued to increase its sales while grinding out more indications. Exelixis recently announced preliminary results for last year. For the fourth quarter, it expects an 11.1% year-over-year increase in revenue to $300 million -- a solid performance. For the full year, it's estimating $1.08 billion in revenue, an increase of 9.4%. And for 2022, it's predicting $1.3 billion to $1.4 billion in revenue.
Cabometyx is also still being tested in dozens of clinical trials. Results from several phase 3 studies should come in this year, so the cancer medicine could once again earn label expansions. That's good news for Exelixis and its shareholders.
The biotech is now looking to replicate the success it's had with Cabometyx. It's advancing several pipeline candidates through early-stage clinical trials, including a trio of cancer therapies: XL092, XL102, and XB002. The company will update investors on the progress of these programs this year, and these updates could help send its stock price higher.
Within the next couple of years, these products should be moving into late-stage studies. Exelixis' forward price-to-earnings ratio of about 15 -- while higher than the industry average of 11 -- is about as low as it has been in over two years. In the long run, Exelixis should rebound from its recent woes, and it might be worth adding shares of the company right now.