With a fresh bull market in full swing, there's an opportunity to pick up shares of biotechs that were until recently, during the bear market, shedding their value like there was no tomorrow.
While young biotechs will still be as risky as ever, as the shift in sentiment can't drive revenue or help companies to nail their clinical trials or attempts to develop therapies, it's still a welcome change. And notching a positive catalyst might lead to much more upside for investors now than it did during the bear market.
So let's take a peek at two risky stocks that have as bright a future as is possible at their current level of maturity.
NASDAQ: CRBU
Key Data Points
1. Caribou Biosciences
Caribou Biosciences (CRBU +1.27%) is still in the early innings as a company, and its pipeline has only three clinical-stage programs, all of which are in phase 1. Its lead program, CB-010, is a genetically edited cell therapy that's being tested for treating relapsed or refractory B-cell non-Hodgkin lymphoma (R/R B-NHL), and it's also the single biggest argument for buying this stock.
There's reason to believe that CB-010 has a better shot at success than comparable programs from competitors. First off, the Food and Drug Administration (FDA) has already given the thumbs-up to the company's petitions for the Regenerative Medicine Advanced Therapy (RMAT), fast track, and orphan drug designations, all of which indicate that regulators see the program as having real value for patients despite its early stage.
In July of last year, the biotech reported some preliminary results from the phase 1 clinical trial, which showed that 44% of patients experienced a complete response to the treatment that lasted for more than six months. The data suggest that the candidate is, at least so far, performing in a way that appears to be both as safe as expected, and also quite effective at its intended purpose.
Plus, the FDA is on board with Caribou's plans for CB-010's phase 3 trial examining its merit as a second-line treatment even though phase 1 has not been completed yet. Due to safety concerns and risk-benefit trade-offs, cutting-edge investigational cell therapies are typically relegated to being tested as the last line of treatment after all other attempts have been ineffective.
So in this case, it looks like regulators have high enough confidence in the candidate's safety characteristics to be willing to proceed with testing it in a somewhat less dire context. The trial is anticipated to start before the end of 2024, and if it happens, it'll mean that Caribou already successfully racked good phase 2 data, which would provide a tidy return to investors.
The business also has enough money to continue developing CB-010 for at least the next two years. While its trailing-12-month operating expenses were $144 million, it had $338 million in cash, equivalents, and short-term investments as of the third quarter of 2023. So it won't need to raise capital anytime soon, which is yet another point in favor of investing.
2. Verve Therapeutics
Verve Therapeutics (VERV +0.00%) takes a different approach than Caribou, aiming at hereditary conditions like heterozygous familial hypercholesterolemia (HeFH) with the intention of using genetic editing to (hopefully) permanently cure patients by correcting the dysfunctional genes responsible for their illnesses.
Its one clinical-stage program is for HeFH, a disorder that leads to dangerously high cholesterol levels, and it's presently in phase 1b trials. The early data look very favorable; after one dose of Verve-101, its lead program, patients saw their LDL-C cholesterol decline by as much as 55%.
NASDAQ: VERV
Key Data Points
The next 12 months are bound to be exciting, and there are a few catalysts for investors to look forward to from here. Early this year, Verve will launch a phase 1 trial for a parallel program to Verve-101; called Verve-102, it will also treat HeFH. Then, in 2025, the company will examine which of the two programs is better for patients, and advance it into the next stage of trials.
Verve may be able to demonstrate that both programs can work as advertised. That wouldn't have any direct financial impacts, as only one would advance, but it would give investors confidence that the biotech's research and development (R&D) capabilities are well-honed.
Importantly, in the long run, programs similar to Verve-101 and Verve-102 could be used to treat other forms of atherosclerotic cardiovascular disease (ASCVD). They might have a gargantuan market to penetrate as there are tens of millions of people globally with ASCVD. And while that possibility is still far off, it could richly reward investors if it happens.
In terms of financial resources, Verve has more than $600 million in cash, equivalents, and short-term investments, which management says will last it through most of 2026. Given that its cash burn over the past 12 months was $154 million, that seems reasonable. So if you buy shares during the bull market you probably won't be diluted by new share issuance for at least a while.
Of course, the risks of failure along the way are still high, so tread carefully. But among early biotech stocks with strong setups for further success, Verve is certainly a contender for being near the top of the pile.
