Biotech stocks soared high during the COVID-19 pandemic, as they were our only hope for new drugs and vaccines to fight the virus. However, the biotech sector received little thanks from the market when the pandemic was over. Biotech stocks as a whole have dropped considerably from their pandemic-era highs. Although these stocks have been hit hard lately, some of these investments present long-term opportunities for a savvy investor.
Biotechnology is still the wave of the future, with new discoveries helping to treat once-untreatable diseases. New biotech labs still need new equipment to make tomorrow’s new discoveries. As our population ages and diseases become more prevalent, the healthcare industry is set to outpace the economy. The biotech industry will be growing right alongside it.
The best-undervalued biotech picks are those that have likely been oversold due to investor skittishness amid rising interest rates. While speculative drug plays aren’t a guarantee of success, many companies are much more well-positioned than people realize. Companies that hold critical patents in their industries or produce vital equipment can still profit in a high-interest rate environment.
Because the key to the biotech sector in the coming years will be the speculative becoming commonplace. Antibiotics and genetic modification were once the stuff of science fiction. Now, they’re part of our everyday lives. So, too, will it be with some of the most exciting up-and-coming technologies in the biotech space. So remember that past performance doesn’t predict the future, and keep an eye out for these undervalued biotech picks.
Moderna (NASDAQ:MRNA), once a star during the COVID-19 pandemic, has not fared well since the pandemic ended. The tremendous success of its mRNA COVID-19 vaccine catapulted Moderna into the limelight. Since then, the company has encountered setbacks in clinical trials, causing its stock price to take a hit.
Clinical trial failures are a common part of the pharmaceutical industry. They don’t necessarily signal a scientific failure but rather underscore the challenges of bringing new drugs to market. What made Moderna shine during the pandemic was its pioneering of mRNA vaccine technology. The company is even named after the words “modified” and “RNA.” This technology still holds the greatest promise to vaccinating against a whole host of diseases. A few clinical trial setbacks don’t change that.
Moderna remains a strong contender in the mRNA vaccine arena. Its pipeline remains strong and it is still likely to come out ahead with some winners in the near future. Most importantly, it has a strong position to continue its pipeline until it starts finding more winners. Moderna’s Q2 2023 earnings report shows $3.8 billion in cash and $4.7 billion in investments. That gives them a lot of room even with a quarterly loss of $1.3 billion.
At the end of the day, mRNA vaccines are set to revolutionize the medical landscape, offering faster, safer, and more effective prevention of many common diseases. Moderna’s journey may have encountered turbulence, but it’s too early to write off its potential. If you’re looking for an opportunity in beaten-down biotech stocks, this is definitely one for your watchlist.
Bio-Rad (NYSE:BIO) is a major player in the high-throughput equipment space. They have had a challenging year in the stock market, marked by a huge sell-off following disappointing earnings results in Q1 2023. Their Q1 earnings showed declining revenue and a poor sales mix. Customers weren’t buying enough of the reagents and consumables that make up the most profitable segments of Bio-Rad’s sales.
Part of this skewed sales mix could be attributed to ongoing supply chain disruptions that have plagued laboratories, causing price hikes and affecting Bio-Rad’s sales and cost-of-sales. There are still some lab products that cannot easily be gotten for any amount of money. However, if supply issues continue to abate, the company may see a reduction in costs and find it easier to sell its products in bulk. A temporary setback shouldn’t be misunderstood as a permanent quagmire.
But by comparison, Bio-Rad has shown recovery in Q2 2023. In Q1 2023, net sales were $677 million and income from operations was $62 million. In Q2 2023, net sales were $681 million and income from operations was $90 million. Although revenue is not increasing fast, Bio-Rad has made the adjustments to bring more to the bottom line. The overall earnings are not comparable as in Q2 2023 they declared a loss from the change in fair value of equity securities. While that is important, it’s not part of their core revenue.
Bio-Rad could be the poster child of an upcoming recovery in biotech stocks which have continued to lag the broader market. Their high-throughput products are still some of the best ways a lab or drug company can increase productivity. So don’t count them out after one bad earnings report. Bio-Rad may still prove to be the undervalued biotech pick of 2023.
CRISPR Therapeutics (CRSP)
CRISPR Therapeutics (NASDAQ:CRSP) has been a lonely bright spot in the biotech industry this year, with its stock gaining over 20% year-to-date. But it remains more than ⅔ below its pandemic-era highs, and some doubt it can ever reclaim them. However, CRISPR Therapeutics still holds significant promise if its groundbreaking technology continues to deliver.
CRISPR Therapeutics’s recent earnings reports have brought encouraging news. Operating costs are on a downward trend, while collaboration revenue is on the rise. In Q1 2023, CRISPR Therapeutics had collaboration revenue of $100 million and operating expenses of $164 million. That was down from operating expenses of $175 million in Q1 2022. And in Q2 2023, they reported collaboration revenue of $70 million and operating expenses of $165 million, down from $183 million in Q2 2023. With revenue becoming more regular, CRISPR Therapeutics may be on the path to profit.
And that path seems much more secure as well. The FDA is currently evaluating Exa-cel, a CRISPR/Cas9-based treatment for sickle cell anemia and beta-thalassemia. A decision is expected December 8th and if approved, CRISPR Therapeutics stands to earn 40% of the profits from Exa-cel, sharing them with Vertex Pharmaceuticals (NASDAQ:VRTX).
The success of this treatment could potentially pave the way for a wave of new drugs based on CRISPR/Cas9 technology. And as CRISPR Therapeutics holds so many key technology patents for CRISPR/Cas9, they stand to be the biggest beneficiary.
The bottom line is that CRISPR Therapeutics is a beaten-down biotech opportunity that is already making its comeback. FDA approval and a new wave of CRISPR/Cas9 drugs could bring it back to its pandemic highs in a heartbeat.
On the date of publication, John Blankenhorn did not hold (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.