Investors looking for stocks that can produce dramatic gains over the next 12 months want to turn their attention to the biotechnology industry. Wall Street analysts tasked with following a synthetic biology company called Ginkgo Bioworks (DNA +2.80%) think it can more than double your money.
Investment bankers also have high hopes for Agenus (AGEN +0.77%). The latest price targets on the cancer drug developer suggest it can shoot more than 700% higher.
Ginkgo Bioworks
Shares of Ginkgo Bioworks are down about 54% from a peak they hit last summer. Investment bank analysts at TD Cowen think it can rebound. In March, the bank lowered its price target on the stock to $3 per share. The lowered target still implies a gain of over 150% from the stock's recent price.
NYSE: DNA
Key Data Points
Ginkgo Bioworks' main operation involves breeding new microorganisms for clients that include the U.S. government. For example, the Defense Advanced Research Projects Agency recently gave the company a $6 million contract to develop new materials that control the physical properties of ice crystals in cold work environments.
Ginkgo makes money through a combination of upfront fees, milestone payments, and royalties. Lofty Wall Street estimates regarding its future involve the eventual realization of heaps of downstream revenue from third parties.
Ginkgo could eventually receive around $2.4 billion in potential downstream payments from its clients, but don't hold your breath waiting for this revenue to materialize.
In 2021, Ginkgo Bioworks raised $1.6 billion in its stock market debut. It used that cash to begin dozens of foundry projects for a cornucopia of different clients, but this isn't translating into increasing downstream revenue. Last year, downstream value share decreased significantly even though the company finished 2023 with 80 completed programs, plus 162 programs that are still active.
Despite signing up lots of new clients, Ginkgo Bioworks lost a stunning $893 million last year. No matter how high your risk tolerance, it's best to keep this stock on a watch list until after its foundry service begins reporting significant downstream revenue growth.
Agenus
Agenus stock is down about 72% from the high water mark it set last spring. B. Riley analyst Mayank Mamtani thinks it can rebound in a big way. Mamtani recently adjusted his price target on the stock to $5 per share. Despite being a downward adjustment, the new target implies a huge gain for the stock. It's been trading for less than $1 per share.
NASDAQ: AGEN
Key Data Points
Agenus isn't your typical clinical-stage drugmaker. It doesn't own any approved products that it can sell, but its proprietary adjuvant is a component of several successful vaccines, including Shingrix from GSK.
Agenus sold its Shingrix royalty stake in 2018, and these days its lead program is a CTLA-4 blocking antibody called botensilimab. Last year, treatment with botensilimab shrank tumors for 24% of advanced-stage colon cancer patients who received it in a phase 1 clinical trial.
On one hand, a 24% tumor response rate is better than you would expect for patients who already relapsed after previous lines of therapy, but there wasn't a control group for comparisons. A larger phase 2 trial with similar patients is expected to read out results in the second half of 2024.
Agenus has encouraging data from an investigator-sponsored trial with botensilimab in combination with an experimental anti-PD1 antibody called balstilimab for the adjuvant treatment of colon cancer. The company is also testing botensilimab in combination with standard chemotherapy as a treatment for advanced-stage pancreatic cancer.
The market's expectations for botensilimab and the rest of Agenus' pipeline are extremely low. The company's market cap has fallen to around $240 million at recent prices. Expectations are low partly because the FDA approved a CTLA-4 therapy called Yervoy from Bristol Myers Squibb about 13 years ago.
By the end of 2024, we should have data from multiple trials with botensilimab. If any of them convince the stock market that botensilimab has a future, the stock could soar. That said, cancer drug development is more than a little unpredictable. It's best to keep a safe distance from this biotech stock unless you have an extremely high tolerance for risk.
