The biotech industry tends to be highly volatile, because of the hit-and-miss nature of the products they are developing. And yet it only takes a few blockbuster products for a biotech to become an industry titan. Moderna is a recent example, having grown from a $4 billion company to a $59 billion company thanks in large part to the pandemic and the successful rollout of its coronavirus vaccine.
As investors look for the next biotech hitmaker, they might want to take a closer look at two under-the-radar biotech firms that have some outstanding products up their sleeves. One is already putting some successful products on the market, and the other has some on the way. Each has real potential to become a thriving business in the near future.
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1. CRISPR Therapeutics
Biotech company CRISPR Therapeutics (CRSP 0.34%) treats diseases with cutting-edge gene-editing therapies. The company has no successful products to its name just yet, and it remains unprofitable. However, it appears that its fortunes are about to improve.
The company recently made headlines over the launch of its first product. Vertex Pharmaceuticals announced on March 27 that it has entered into a nonexclusive licensing agreement to use CRISPR Therapeutics' gene-editing technology (CRISPR-Cas9) for its type 1 diabetes (T1D) program. Vertex anticipates producing "fully differentiated, insulin-producing hypoimmune islet cells for T1D."
CRISPR Therapeutics will earn royalty and product revenues soon if Vertex launches a product based on this technology. This could also encourage other businesses to collaborate with it. In 2022, the company had no product revenue, but it earned $913 million in collaboration revenue.
CRISPR Therapeutics signed another agreement with Vertex for its exa-cel program. This is a gene therapy that is intended to treat both beta-thalassemia and sickle cell disease. Both companies intend to complete regulatory submissions in Europe, the U.K., and the U.S. by the first quarter of 2023, implying that a new therapy could be approved by the end of the year.
In addition, CRISPR Therapeutics has a few other candidates in the works. When these hit the market, they could boost its revenue and cause its stock to skyrocket.
2. Exelixis
Oncology drugmaker Exelixis (EXEL 0.72%) already has a successful product in its portfolio that is driving growth. Cabometyx, its star cancer drug, generated $1.3 billion in revenue in 2022. The company ended the year strong with 12% year-over-year growth in total revenue to $1.6 billion.
Cabometyx is used to treat advanced renal cell carcinoma (RCC), as well as other types of cancer. It's also used in conjunction with Bristol-Myers Squibb's Opdivo (nivolumab) to treat advanced RCC in patients who haven't had any previous treatment.
Cometriq, a variation of Cabometyx used to treat thyroid cancer, also made a contribution of about $25.3 million during the year. The adjusted net profit for the quarter, however, declined year over year to $265 million in 2022.
Exelixis recognizes that it can't thrive in this highly competitive industry by relying solely on one product. Management stated in a February press release: "We progressed three promising biotherapeutics, XB010, XB014, and XB628, from internal discovery into preclinical development."
Risky but worthwhile investments
Both companies continue to spend heavily on research and development (R&D) to build a strong pipeline of products. For the full year 2022, Exelixis spent around $891 million on R&D, and CRISPR Therapeutics spent $462 million.
Biotech companies tend to be risky investments because clinical trials may fail or regulatory approvals may be delayed, affecting stock performance. Biotechs may also incur short-term losses until their products are approved and hit the market. For now, both companies are financially stable enough to take on the burden. Exelixis ended the year with $2 billion in cash while CRISPR ended the year with $1.8 billion.
Healthcare is also an industry that will always be in demand, regardless of economic conditions. Companies like CRISPR Therapeutics and Exelixis, which use innovative therapies to address difficult-to-treat diseases, will continue to generate revenue. This may be the most significant advantage of investing in healthcare and biotech stocks.
Both stocks, according to Wall Street analysts, are a buy right now. Over the next year, analysts forecast a 71% increase in the share price for CRISPR Therapeutics and a 28% increase in the price of Exelixis.
A small investment in either of these stocks might be the best way to begin, and it could eventually lead to long-term massive returns.
