The market listens when Wall Street analysts talk, and you probably should too, even if you don't buy or sell the stock analysts might suggest. That's especially true when the professionals are calling for stocks to experience ludicrous run-ups in the near future.
Of course, Wall Street's estimates are often ridiculously inaccurate, because it's impossible to predict the particulars of the future. But it is still possible to make a prediction that a stock will hit the moon and then for it to subsequently miss and still reach the stars.
Let's examine a pair of biotechs that the analysts have incredibly high hopes for to see if they're up your alley.
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1. Precigen
Wall Street analysts have incredibly high hopes for Precigen (PGEN -1.41%), anticipating on average that its shares will rise by about 725% this year. The biotech's claim to fame is its chimeric antigen receptor T-cell (CAR-T) platform, which it claims can be manufactured more cheaply and much more rapidly than the industry's standard methods.
For the uninitiated, you can think of CAR-T cells as genetically engineered white blood cells that are designed to fight maladies such as cancers. Although the cells are sometimes excellent for their intended purpose compared to existing therapies, the catch is that they're almost always quite cumbersome to use.
The six CAR-T therapies on the market to date require using a patient's T-cells as a starting material, thereby introducing a significant logistical burden that delays treatment and racks up costs in the meantime. Precigen is currently using its CAR-T platform to develop three of its pipeline projects in early-stage clinical trials, which aim to treat ovarian cancer, solid tumors, and other conditions.
So if it can prove that its technology is the key to solving one of the field's longest-standing problems, it should reach new and unmatched horizons of profitability that other developers couldn't even dream of, at least not for now. Furthermore, the more successes the company makes in its own clinical trials, the more that other biotechs will want to license its technology platform and collaborate with it to develop therapies.
Given that its technology licenses and collaborations brought in $26.9 million in 2022 alone, it's also possible that the company can continue to grow by being a platform business even in the absence of successes in the clinic. And with its $99.7 million in cash and equivalents at the start of the year getting bolstered by a $73 million stock offering in January, management thinks it has enough money to continue with its development efforts through roughly late 2024.
One issue with Precigen is that its shares have actually fallen more than 30% so far this year rather than taking off like Wall Street expects. Plus, with total expenses of $101.5 million in 2022, it might need to cut costs to keep the lights on later this year or next year. And because it's a cutting-edge biotech company, the investment risks are high, even if the analysts think that it'll soar.
Until you see strong evidence that supports Precigen's claims of cheap, fast CAR-T production, hold off from buying.
2. Zai Lab
Analysts expect the Chinese biotech Zai Lab's (ZLAB 0.51%) stock to rise 152% or more in the next couple of years, and investors can have a bit more confidence in their estimate than with Precigen because there's a clear chain of catalysts that will likely power the stock to rise.
In particular, over the next three years, management claims that it'll commercialize more than eight new therapies in China, all of which are either the first therapy in their class or the best known therapy in their class. That's a nearly unmatched pace of development. The icing on the cake is that it estimates several of the new therapies will have the potential to earn more than $1 billion per year.
In total, those new products should help the biotech to become profitable before the start of 2026. But while those programs are cooking in preparation for regulatory review, the company will also be raking in cash from the four new medicines it got regulators to approve over the past two years.
Those projects include Zejula for ovarian cancer, whose launch in China brought in $145.2 million in 2022, an increase of 55% year over year, and also a large portion of the company's top line totaling $215 million. With growth like that in hand, there are likely a couple more quarters of rapid growth to come before significant deceleration.
Before the end of 2023, expect Zai Lab to get one new medicine approved in China and deliver three critical late-phase readouts from its clinical trials. That's a handful of catalysts that could be massive for shareholders. But, be aware that it's possible for clinical trials to have unfavorable results, and for regulators to have issues with a company's requests for approval.
In the long run, Zai Lab's tremendous pipeline is likely to win out over bumps in the road along the way, but this isn't a stock for conservative investors nonetheless.
