Biotech stocks are going through a historic drawdown at the moment. Nearly 400 publicly traded biotech companies have lost 40% or more of their value in just the past six months. The market's irrational behavior toward all things biotech, however, isn't necessarily a bad thing for patient investors. Many of these beaten-down biotech stocks will ultimately rebound.

Which unloved biotech stocks are the most compelling buys amid this industrywide downturn? While there are scores of intriguing bargains in biotech right now, Gritstone bio (GRTS -0.36%) and Sorrento Therapeutics (SRNE.Q) both have the potential to deliver life-changing gains for risk-tolerant investors. Here is a brief overview on the key value drivers associated with each stock.

Doctor fanning out money.

Image source: Getty Images.

Gritstone bio: A hidden gem

Gritstone's shares are down by almost 70%, relative to their 52-week high, at the time of this writing. This is one falling knife that investors might want to catch, however.

Despite the market's dour take on this clinical-stage immunotherapy company, Wall Street has remained steadfast in terms of its uber-positive outlook toward Gritstone. The average analyst price target on this stock, after all, implies a whopping 276% upside potential from current levels. 

What's behind Wall Street's super bullish outlook? One big reason for this glowing optimism is Gritstone's next-generation messenger RNA (mRNA) tech. This tech, known as self-amplifying mRNA, has the potential to substantially boost the effectiveness of mRNA vaccines across a wide swath of indications. Gritstone hopes that its cutting-edge mRNA platform will ultimately lead to novel therapies for a variety of infectious diseases such as COVID-19 and HIV, as well as a host of cancers. 

What's the next big catalyst? While Gritstone's COVID vaccine work has garnered a fair amount of attention, the biotech's clinical program for microsatellite-stable colorectal cancer might be its crown jewel. Patients with this malignancy have few effective treatment options. Gritstone, as a result, could deliver a truly meaningful advancement in this space with its personalized RNA therapy known as Granite. The biotech is slated to update investors on its lead oncology program later this year; any positive developments on this front should be a healthy catalyst for Gritstone's shares.   

Sorrento Therapeutics: A galaxy's worth of value drivers

Shares of Sorrento Therapeutics are presently down by a jaw-dropping 80% from their 52-week high. Wall Street, though, thinks this beaten-down biotech stock could rise as much as 596% over the next 12 months.  

What's behind Wall Street's bullish forecast? A few things. First up, Sorrento is on the cusp of building out a robust product franchise for COVID. Keeping with this theme, the biotech already has an Emergency Use Authorization for its Covistix test in Mexico. This high-value franchise ought to net multiple additional product approvals over the course of 2022. 

Next up, Sorrento's pipeline now harbors a potential franchise-level drug with its recently acquired immunotherapy abivertinib. The highlight here is that the drug posted exceptionally strong efficacy in advanced non-small cell lung cancer, an indication that could garner blockbuster-level sales within a few short years. What's more, Sorrento is gearing up for trials of abivertinib in a broad range of high-dollar indications such as lupus, multiple sclerosis, prostate cancer, and graft-versus-host disease. Abivertinib, in turn, might eventually morph into a mega-blockbuster drug (greater than $5 billion in annual sales).

All things considered, Sorrento's hefty downturn doesn't appear to be warranted. Bargain hunters, therefore, might want to capitalize on the stock's recent weakness.