The year 2023 was a great one for large cap growth stocks, which outperformed the rest of the market by a wide margin. However, the opposite was true for most small to mid-cap innovation companies, which struggled to raise capital amid a tight monetary and risk-averse environment.
But things could change in 2024. The Federal Reserve is expected to lower interest rates this year, which may create a compelling buying opportunity for investors who are willing to take on more risk and invest in early stage innovation companies.
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Although they are on the riskier end of the spectrum, Wall Street is extremely optimistic about the prospects of several clinical-stage biotech stocks this year. Below is a nuts and bolts overview of three developmental biotech stocks analysts think could deliver exponential returns over the next 12 months.
3 innovation stocks poised to rebound
1. AbCellera Biologics (ABCL 3.58%), a Canadian biotech, focuses on developing antibody-based medicines. The drugmaker's stock price has plummeted by more than 90% since it went public in late 2020, reflecting the risk-averse environment of the broader markets over this period.
However, some analysts believe that AbCellera's stock could bounce back by a whopping 212% in 2024. The main reason for this bullish outlook is the potential for AbCellera to secure one or more major collaboration deals soon.
Still, AbCellera is an extremely risky investment because the company does not expect to start clinical trials for its two most advanced programs -- ABCL575 and ABCL635 -- until 2025.
Patient investors, though, might be richly rewarded by buying and holding this antibody drug specialist for the long haul. After all, antibody-based medicines represent one of the largest and fastest growing segments of biopharmaceutical industry right now.
2. Cerus Corporation (CERS 0.59%), based in California, is a leader in blood filtration. The company's unique product, the Intercept Blood System, lowers the risk of infections by removing pathogens from blood components such as platelets and plasma.
Cerus has been struggling to achieve profitability for a long time, which has weighed heavily on its share price.
But it ought to hit breakeven within the next 24 months. After all, the company's revenue has been growing by double-digits in the past few years.
Analysts think Cerus' stock has the potential to soar by an impressive 144% in the next 12 months, thanks to its rapidly growing top-line.
On a final note, Cerus has also received significant investments from several life science-oriented hedge funds, including the well-known Baker Bros. Advisors fund. That fact doesn't guarantee success, but it is intriguing that the company's story seems to be landing with top-shelf investors.
3. Taysha Gene Therapies(TSHA 3.91%) is a Texas-based AAV gene therapy company. The biotech's lead product candidate is TSHA-102, which is being evaluated in a combined phase 1/2 trial in adult female patients with Rett syndrome, a rare neurological disorder characterized by the progressive loss of motor abilities.
The condition isn't expected to yield blockbuster level sales for Taysha, but the commercial opportunity is large enough to be a major value driver for the company in the years ahead. Underscoring this point, Wall Street thinks this gene therapy stock could deliver returns in excess of 240% over the next 12 months.
That being said, Taysha may have to contend with competition from both more traditional medicines, as well as other gene therapies, in its quest to carve out a profitable niche.
