What happened

U.S. stock markets are under heavy pressure today after two reports on job openings and factory orders came in weaker than expected. The key issue at play is a growing concern that the Federal Reserve's rate hiking campaign may spark a deep and long-lasting economic downturn later this year. Topping it all off, OPEC+'s decision to reign in oil supplies this May has stock investors worried that the central bank may have to keep raising rates to tamp down inflation. Further rate hikes, in turn, may accelerate an economic downturn. 

These concerns spilled over into risk-laden biotech equities today. Shares of clinical-stage cancer immunotherapy company Agenus (AGEN 14.86%) were down by 7%, cardiovascular care specialist Amarin (AMRN -0.53%) saw its stock dip by 4.3%, and the stock of central nervous system drug developer Axsome Therapeutics (AXSM -2.61%) was down by 4.8%, as of 3:19 p.m. ET Tuesday afternoon. 

So what

Why are these macroeconomic concerns weighing on small and mid-cap biotech stocks today? The long and short of it is that investors simply aren't in the mood to take on any form of risk right now. The core reason is that risk-free assets such as U.S. Treasury bills are offering near decade-high yields. Biotech stocks like Agenus, Amarin, and Axsome, by contrast, are essentially high-risk, high-reward stocks that don't offer a dividend (a form of downside protection). 

Turning to the specifics, Amarin is in the midst of a management turnover that may -- or may not -- result in a better long-term outlook. Agenus, for its part, sports some truly intriguing cancer assets that could become blockbusters upon approval, but these therapies may also stumble along the way.

Axsome is a newly minted commercial-stage biotech. The company's major depressive disorder medication Auvelity holds enormous commercial potential, but it's likely to take a few years to realize this potential. Unfortunately, investors haven't shown any interest in the so-called "deep value" play in this volatile market.  

Now what

Are any of these biotech stocks worth buying on the dip? Agenus and Axsome both sport compelling risk-to-reward ratios for investors with a long-term mindset. Agenus, in fact, might be incredibly undervalued in light of its high-value immunotherapy pipeline. Similarly, Axsome is targeting a high unmet medical need with Auvelity, implying that this drug has a good chance of meeting -- and possibly exceeding -- investor expectations. 

Amarin, on the other hand, is in prove-it mode at this point. The company's cardiovascular drug Vascepa is still generating handsome levels of revenue on an annual basis, but it will be important to see where the new leadership team ultimately takes the company before buying shares.