2 Stocks That Could Turn $1,000 Into $2,500 in 5 Years

Technically, there is no upper limit to how much money investors can make from stocks in five years, but turning $1,000 into $2,500 is no easy task. That requires a compound annual growth rate (CAGR) of 20.1%, more than double the S&P 500's historical growth rate.

But turning to the biotech industry to accomplish this feat could be a great idea. Biotech stocks, especially relatively small ones, can earn explosive returns quickly, provided they make regular clinical and regulatory progress.

Let's look at two biotech companies that might be able to get this done in the next half a decade: Viking Therapeutics (VKTX 7.92%) and Krystal Biotech (KRYS 0.77%). These two mid-cap biotechs will have plenty of catalysts that could send their stocks soaring in the years ahead.

1. Viking Therapeutics

Viking Therapeutics is looking to disrupt a booming industry: the market for weight-loss drugs. Some analysts expect spending in this area to hit $44 billion by 2030, up from just $2.5 billion in 2022. Pharma giants Novo Nordisk and Eli Lilly lead the pack here, with many other major drugmakers from AstraZeneca and Pfizer to Amgen looking to mount a challenge. If Viking Therapeutics can carve out even a small niche, that would be enough for a mid-cap, clinical-stage biotech.

However, there is still a long way to go. Viking Therapeutics' obesity candidate, VK2735, is currently in mid-stage testing. VK2735 is a dual GIP and GLP-1 inhibitor; both classes of medicines help control patients' hunger. Here's the kicker: Only one dual GIP/GLP-1 treatment has ever been approved by the U.S. Food and Drug Administration (FDA).

That medicine is none other than Eli Lilly's tirzepatide (Zepbound), a clinical compound that could hit peak annual sales of $25 billion and become one of the best-selling therapies in history. That's not to say that Viking Therapeutics' VK2735 will necessarily have the same level of success, but the potential is undoubtedly attractive, especially when looking at a recent data readout.

In a phase 2 study, VK2735 led to a statistically significant reduction in body weight compared to a placebo. The news sent the stock soaring through the roof. These kinds of developments with VK2735 will have that effect on Viking Therapeutics' performance. Furthermore, Viking has another therapy in phase 2 testing: VK2809, a potential treatment for nonalcoholic steatohepatitis (NASH). The biotech expects results in the first half of the year.

NASH is another therapeutic area with excellent prospects. If Viking Therapeutics can deliver positive data readouts this year, its stock could skyrocket. And the company could maintain this momentum -- and get the required CAGR of 20.1% -- provided it continues to deliver positive clinical and regulatory news over the next five years.

2. Krystal Biotech

Krystal Biotech earned FDA approval for Vyjuvek, a gene therapy for a rare skin disease called dystrophic epidermolysis bullosa (DEB), last year. Though this was a significant breakthrough -- there is no other DEB medicine on the U.S. market -- the U.S. patient population is small. The company estimates there are 9,000 people in the world who suffer from DEB.

Krystal Biotech estimates a greater than $750 million market opportunity in the U.S., with pending approvals in Japan and the European Union potentially improving the medicine's prospects. But movement on this project might not move Krystal Biotech's shares a whole lot in the right direction.

The real opportunity is in the company's pipeline. Krystal Biotech is running multiple early-stage clinical trials that could make substantial progress in the next few years. These include studies testing treatments for cystic fibrosis; solid tumors; and autosomal recessive congenital ichthyosis, a group of rare, sometimes life-threatening skin-related conditions that affect patients typically from birth. Several more candidates should enter the clinic soon.

The company's shares have soared by nearly 400% in the past five years, so a CAGR of 20% is not beyond its reach if it can make consistent pipeline progress.

These aren't sure bets

Viking Therapeutics and Krystal Biotech have what it takes to earn explosive returns. But the flip side is that negative data readouts or regulatory headwinds would sink their stock prices. So these companies are a bit on the risky side, though both look promising.

Remember that before even thinking about investing: These stocks are best for those with above-average risk tolerance who are willing to be patient and don't mind a little volatility.