Despite a sizzling start to the year, growth stocks have suddenly found themselves on the outs with investors. Concerns about the global economy, persistently high interest rates, and stubborn levels of inflation have weighed heavily on pure-play growth stocks in the second half of the year.
Biotechnology stocks have taken a particularly hard hit over this period. The gene-editing pioneers Beam Therapeutics (BEAM -1.02%) and Caribou Biosciences (CRBU -1.33%) are prime examples. Both of these developmental-stage biotech stocks have shed a significant amount of value this year. Here's why patient investors with a long-term outlook might take advantage of the prolonged weakness in these two biotech equities.
Beam Therapeutics: The next step in genetic medicine
Beam Therapeutics lives on the cutting edge of human medicine. The biotech is a base-editing pioneer, a groundbreaking technique that could unlock scores of functional cures for a range of inherited conditions. Beam Therapeutics currently has two base-edited candidates in early-stage trials: BEAM-101 for sickle cell disease and BEAM-201 for T-cell malignancies. A little further down the line, the biotech is also working toward trialing BEAM-302 for an uncommon protein disorder known as alpha-1 antitrypsin deficiency. The company expects to request approval from regulators in the first quarter of 2024 to start an early-stage study for BEAM-302.
Why is it a good time to start nibbling on this beaten-down biotech? To be upfront, Beam Therapeutics probably won't be a market-beating vehicle in the short term. This tech has yet to be validated in a pivotal stage trial, and the markets don't appear ready to speculate on cash flow, negative research, and development operations just yet. But if you have an investing horizon of at least five years, Beam Therapeutics could be an incredible bargain at current levels. If base-editing proves to be a best-in-class platform, after all, Beam Therapeutics stock ought to deliver outstanding returns over the next five to 10 years.
Caribou Biosciences: An overdone sell-off
Caribou Biosciences is another novel genomic-medicine play. The biotech's value proposition centers around its novel CRISPR hybrid RNA-DNA (chRDNA) technology, which is designed to improve the accuracy and efficiency of CRISPR. The company has two candidates in early-stage clinical trials: CB-010 for B-cell non-Hodgkin lymphoma and CB-011 for multiple myeloma. Both indications are types of hard-to-treat blood cancers.
The investment thesis for Caribou Biosciences rests on three major pillars: It has a strong cash position of approximately $400 million, an equity investment from Pfizer, and a pipeline of potential breakthrough therapies for multiple high-value indications. What's more, the company expects to have several clinical-data readouts in the next two years, which could drive significant value creation in the years ahead.
In the long term, the company's chRDNA platform could prove to be a game-changer for scores of hard-to-drug diseases. Now, the company does face considerable clinical and regulatory risks at this early juncture, but its value proposition is compelling, to put it mildly. Wall Street analysts, in fact, think the stock could appreciate by a whopping 373% in the next 12 months.
Although this lofty price target may prove difficult to achieve in an increasingly risk-averse environment, Caribou Biosciences does hold considerable deep-value potential based on its differentiated platform and pipeline focus.
