In stock investing, it's easy to focus on big names and blue-chip companies since they are frequently reported in financial media. Conversely, smaller companies, but with promising businesses, tend to be ignored. The latter have smaller market capitalizations and usually trade at more affordable per-share prices -- often for less than $25 a share. Unfortunately, you just have to look a little harder to unearth such solid investment opportunities.

Three such businesses in the pharma and biotech industries are Ironwood Pharmaceuticals (IRWD -1.81%), Exelixis (EXEL 0.78%), and Editas Medicine (EDIT -3.43%). While these may not be household names, all three have promising drug therapies, either in the market or in the pipeline. With market caps under $6 billion, all three trade at less than $25 a share. Two of these healthcare companies are profitable, while the third one's long-term potential makes it worth a second look.

1. Ironwood is ready to expand

Ironwood specializes in generic and specialty drugs that focus on areas of unmet need, such as irritable bowel syndrome (IBS), vascular and fibrotic diseases and hyperuricemia (high uric acid level) from uncontrolled gout.

The company's shares trade at around $11.50, a little more than 12 times its trailing 12-month earnings. Over the past year, the stock is up a little more than 1%, which is impressive given the S&P 500 is down 8% while the small-cap index S&P 600 is down 3% over the same period.

Ironwood's lead product is Linzess (linaclotide), the market leader to treat adults with IBS with constipation or chronic idiopathic constipation (CIC). The company said it expects $1 billion in sales this year from the drug, counting sales by partner AbbVie.

In the third quarter, Ironwood reported net income of $50.3 million, down 9% year over year, and earnings per share (EPS) of $0.28, down from $0.34 in the same period last year.

Ironwood recently tightened annual guidance to say it expected $411 million in 2022 revenue. That represents a small drop of 0.06% over last year.

However, the company said it expects 2% to 3% revenue growth in 2023. And if Linzess becomes the only therapy approved by the Food and Drug Administration (FDA) to treat functional constipation in children ages 6 to 17, that adds from 4 million to 6 million people to the drug's potential patient group. The company said it could begin marketing Linzess for pediatric patients by midyear, pending FDA approval.

The company has two other programs in its pipeline. IW-3300 just began a phase 2 trial to treat interstitial cystitis and bladder pain syndrome, which it said affects an estimated 4 million to 12 million people in the U.S. And CNP-104 is in early trials as a therapy for primary biliary cholangitis, an autoimmune disease of the liver that affects approximately 130,000 people in the U.S., the company said.

2. The Cabometyx franchise carries Exelixis

Exelixis' shares are trading at just under $18, roughly 19 times earnings. The stock is down a little over 2% over the past year but up more than 7% in 2023.

The company released preliminary fourth-quarter and full-year results on Jan. 8 and said it expected full-year revenue of $1.6 billion, up 11.5% over 2022, with a forecast of 2023 revenue between $1.575 billion and $1.675 billion. Through nine months, the company reported net income of $212.5 million, or $0.66 in EPS, up year over year by 56.2% and 54.7%, respectively.

Exelixis specializes in oncology therapies, including its leading drug Cabometyx, approved as a first- and second-line treatment for kidney cancer. Cabometyx is expected to be responsible for 87.5% of the company's revenue this year.

The addressable market for kidney cancer therapies is significant. A report by 360 Market Updates puts that market at nearly $6.2 billion in 2021, with an expected compound annual growth rate (CAGR) of 5% between 2023 and 2027, reaching $8.3 billion market.

In time, the company's growing pipeline should make its revenue more diversified. Exelixis has several oncology therapies in clinical trials, led by XL092 (zanzalintinib), which is in a phase 3 trial as a combination therapy with atezolizumab to treat colon cancer. XL092 is also in a phase 3 combination trial with nivolumab to treat non-clear cell renal carcinoma, a type of kidney cancer.

3. Editas is retooling for the future

Editas' shares fell more than 35% over the past year and now trade for under $12. However, the stock has climbed significantly since Jan. 9, when it announced cuts to its staff and programs.

That move, along with the sale of its allogeneic natural killer (iNK) cell therapies to Shoreline Biosciences on Jan. 19, should allow the clinical-stage gene-editing company to concentrate on more promising programs in blood therapies and in-vivo gene editing. And that should let it lengthen its cash runway into 2025. 

Editas isn't profitable because it doesn't have any marketed therapies yet. It said, as of the third quarter, that it had $478.5 million in cash after a loss of $55.7 million in the quarter, including $41.3 million in research and development expenses. It brought in only $42,000 in collaboration and research-and-development revenue in the quarter.

The company's lead therapy is EDIT-301 to treat transfusion-dependent beta thalassemia (TBT) and sickle cell disease (SCD), which are rare inherited blood disorders. The company said the gene therapy is faring well in its Ruby phase 1/2 trial to treat SCD. The disease affects roughly 100,000 people in the U.S., according to the Centers for Disease Control and Prevention.

The company said it plans to dose 20 patients in the Ruby trial by the end of the year. The drug is also expected to begin its Edithal phase 1/2 trial to treat TBT this quarter.