Biotech stocks were among the first group of equities to head southward late last year. Since the midway point of 2022, however, the biotech equity market has shown clear signs of forming a bottom.

The closely watched iShares Biotechnology ETF and SPDR S&P Biotech ETF are up by 2.56% and 7.62%, respectively, since July 1. What's more, these bellwether biotech exchange-traded funds have both outperformed all of the major U.S. stock indexes over the prior 15-day trading period. 

Which beaten-down biotech stocks might come roaring back in the second half of 2022? Although there are scores of compelling cases, my two favorite turnaround plays are BioCryst Pharmaceuticals (BCRX -2.94%) and Intellia Therapeutics (NTLA 0.19%). Here's why. 

A person draws a yellow arrow indicating a flow in the opposite direction against a wave of white, downward pointing arrows.

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BioCryst Pharmaceuticals: Growth inbound

BioCryst's shares are presently down by 16% for the year. The company's stock has been hit by the biotech bear market as well as a partial clinical hold on its lead clinical candidate, BCX9930.

BCX9930 is an oral Factor D inhibitor indicated initially for paroxysmal nocturnal hemoglobinuria, a rare but potentially life-threatening disease of the blood. The drug was put on partial clinical hold earlier this year by the Food and Drug Administration (FDA) due to some patients exhibiting elevated serum creatinine levels following treatment with BCX9930. High creatinine levels in the blood can lead to kidney damage. As things stand now, BioCryst's braintrust expects the FDA to decide on the drug's fate by the of end of the third quarter of this year.  

While this clinical hiccup isn't great news, Wall Street has arguably overreacted to this setback. The long and short of it is that BioCryst's growth story truly centers around its FDA-approved oral hereditary angioedema drug, Orladeyo.

Orladeyo has been taking this multi-billion-dollar drug market by storm since its launch. BioCryst's management believes Orladeyo will achieve $1 billion in annual sales within a few short years. Wall Street, on the other hand, has a far more conservative peak sales estimate for the drug of $570 million. Either way, though, BioCryst's shares are undoubtedly undervalued right now. 

As rare-disease stocks have traditionally traded at no less than five times peak sales, BioCryst's shares -- at a bare minimum -- are likely worth around $16 a share right now. This lowball valuation estimate indicates an upside potential of over 37% for the company's stock from current levels. Now, if BioCryst's internal revenue forecast for Orladeyo is correct, this mid-cap biotech stock ought to more than double in value by the middle of the decade. 

Intellia Therapeutics: A potential goldmine in gene editing

Shares of the CRISPR-based genome editing company Intellia Therapeutics have shed 46% of their value so far this year. However, the biotech's stock price has rallied by an eye-popping 47% over the prior 30 days of trading. Intellia's sudden rebound has been spurred by impressive long-term data for its lead therapy, NTLA-2001, an in vivo genome editing candidate for transthyretin (ATTR) amyloidosis. ATTR amyloidosis is a rare liver disorder characterized by the build up of a misfolded protein (transthyretin) in various organs.

What's the big deal? Intellia's platform could turn out to be a best-in-class approach toward gene editing in general. The company's latest clinical update, which showed a mean reduction of 93% in serum transthyretin levels among patients treated with NTLA-2001 at the six-month mark, indicates that this next-generation therapy is indeed durable over the long haul. NTLA-2001, in turn, is starting to look a lot like a possible one-time treatment for this rare liver disorder.

What's important to understand is that Intellia's in vivo gene-editing platform may harbor multiple blockbuster candidates. With this insight in mind, it's not surprising to see investors piling into this biotech stock in the wake of these strong follow-up data for NTLA-2001. 

The bottom line with Intellia is that this mid-cap biotech has the very real potential to evolve into a large-cap titan of the gene-editing space before the end of the decade. The company does come with a fair amount of clinical and regulatory risk due to the early-stage nature of its platform. But aggressive investors may want to buy at least a small position in this CRISPR play before its shares get too expensive.