The biotechnology (or biotech) sector is a crystal-clear illustration of risk and reward. Many biotech companies work on drugs and therapeutics for some of the most pernicious conditions affecting our society and healthcare system. But finding the best biotech stocks to buy is not always simple.
Many biotech companies work on drugs for years. And these biotech stocks will swing wildly on the news. Positive results from a clinical trial can send stocks soaring. Conversely, disappointing results can cause a sharp selloff.
Unfortunately, some biotech companies never get FDA approval. Even if they do, small cap companies may have to dilute stock many times throughout the clinical trial process.
Investing in biotech stocks is for risk-tolerant investors. But the reward is also clear. Investors only need to think back to the Covid-19 pandemic for examples of biotech stocks that soared after the company successfully launched a vaccine or therapeutic.
In 2023, there are several biotech companies that are on the verge of significant breakthroughs. Even though a couple of them have already made significant gains this year, each of these biotech stocks has room to run higher.
Biogen (BIIB)
Biogen (NASDAQ:BIIB) stock shot higher in October 2022 on the news that one of its Alzheimer drug candidates, Lecanemab received better than expected results in a clinical trial. Lecanemab is a monoclonal antibody that targets amyloid. The drug works with the body’s immune system to clear amyloid protein from the brain.
The stock moved about 10% higher after the drug received accelerated approval by the FDA in January. But BIIB stock didn’t hold those gains as some investors were concerned about the accelerated approval process. Currently, the Centers for Medicare and Medicaid Services (CMS) only cover the Lecanemab (which is marketed under the name Leqembi) to patients enrolled in clinical trials.
The agency says that could change if the drug receives standard FDA approval. A decision is expected by July 6. At that time, BIIB stock could surpass analysts’ forecast for 7% stock price growth. And trading at just 14x earnings, Biogen is offering good value for risk-tolerant investors.
Vertex Pharmaceuticals (VRTX)
Next on this list of biotech stocks to buy is Vertex Pharmaceuticals (NASDAQ:VRTX). The biotech giant is an undisputed leader in cystic fibrosis treatments. On April 26, 2023, the company received an expanded use authorization for Trikafta, its flagship cystic fibrosis drug. The drug can now be used for children with CF ages 2 through 5 provided they meet certain conditions.
VRTX stock climbed about 10% higher on the news. But there could be even more catalysts coming for the stock in 2023. Vertex has a partnership with CRISPR Therapeutics (NASDAQ:CRSP) to develop treatments in the areas of gene therapy and gene editing.
The companies have been working on breakthrough treatments for sickle cell disease (SCD) and transfusion-dependent beta thalassemia (TDT) in addition to Type-1 Diabetes. In April, several key milestones were reached that are pushing the companies closer to getting priority review of the drugs.
VRTX stock is butting up against its consensus price target but recent analyst ratings give the stock significant upside.
ImmunoGen (IMGN)
ImmunoGen (NASDAQ:IMGN) was a mere penny stock until it received encouraging news on its Phase 3 trial for its antibody-drug conjugate (ADC) for treating platinum-resistant ovarian center. This type of ovarian cancer doesn’t respond to the current standard of care in chemotherapy which are platinum-based. Patients may respond favorably in the short term, but the cancer will recur. This is only the second ADC approved for cancer treatment and the first for ovarian cancer.
Immediately after the report, IGMN stock surged and is up over 230% percent. The drug is currently being marketed under accelerated approval by the FDA. There is always the risk that the drug will not get approval.
But the positive results make it more likely that the drug will receive approval by the FDA at some point. If that approval happens, the drug will likely be covered by Medicare and other health insurers. That would likely give IMGN stock an additional catalyst for stock price growth.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.