While 2022 was not too kind across the stock market, biotech stocks seem to have—for the most part—held their ground. These small-cap clinical-stage biopharmaceutical stocks are doing better than the average marker across the healthcare sector.
These three stocks, in particular, have the potential for big things in the year ahead, even as some may have felt the pandemic pinch. So don't let some of their less-attractive traits deceive you: analysts believe these stocks are among those that could see significant growth in 2023.
NOTE: All figures reported in this article are up-to-date as of January 12, 2023.
Arvinas, Inc.
Market Capitalization: $1.64 billion
Arvinas, Inc. (NASDAQ: ARVN) is a clinical-stage biopharmaceutical company focusing on treatments that combat the degrading proteins that cause disease. While the stock is down more than 55% over the last 52 weeks, analysts believe the bottom is nigh, and a rebound is on the horizon. The current share value may be only $30.79, but analysts have given the stock a price target of $73.19.
That represents an encouraging upside of $141.0%. And although earnings are not yet in the green, the latest numbers suggest that this could change quickly, especially on the back of early results from the recent VERITAC trial(s). Reports suggest the drug could offer a nearly 40% benefit rate for breast cancer patients, signaling a potential future sales—and revenue—boost. This also encourages outlooks for other “PROTAC” products already in the company's pipeline.
Analysts have been wavering up and down over the severity of the stock's rating, but the majority have voted for a Buy of some kind. Arinas' next earnings report will come on February 27, 2023, and this should provide more context as to just how accurate the rating is and how much growth can be anticipated.
Rocket Pharmaceuticals Inc.
Market Capitalization: $1.63 billion
Rocket Pharmaceuticals, Inc. (NASDAQ: RCKT) is an emerging, clinical-stage biotechnology company. They focus on developing first-in-class gene therapy options for rare—and particularly undertreated—diseases. The current share price is $21.49, which is in the top 15% of its 52-week range. Much like ARVN, however, RCKT has an exceptionally high upside—157.2%—with a price target of $53.55.
It is also similar in that neither is currently paying out dividends, probably because earnings are both still in the red. In addition, the stocks for both RCKT and ARVN missed their most recent earnings targets by -$0.10 and -$0.26, respectively. In terms of future earnings, though, RCKT is slightly different, as analysts expect earnings to continue increasing. But, again, we should learn more about this when they release their next report towards the end of February.
Despite its current negativity, its earnings growth trend perfectly aligns with this stock's overall trend this past year. While the stock experienced some dips in 2022, its current value is up more than 13% year-over-year.
And since all other metrics are on a similar upward trend, there is a good chance RCKT could break through this threshold any day. After all, the stocks' value is up more than 24% in the quarter. So if—and when—this breakthrough happens, it should easily justify the Buy rating analysts have given.
Xencor, Inc.
Market Capitalization: $1.68 billion
Based in California, Xencor, Inc (Nasdaq: XNCR) is a clinical-stage biopharmaceutical company. They focus on the discovery and development of lab-engineered monoclonal antibodies and cytokine therapeutics to treat cancer and autoimmune disease, patients. The stock's current $27.96 value sits comfortably near the 52-week median and shows much promise.
Q3 2022 revenue was up 38.7% YoY, outperforming estimates by $6.25 million. As we approach their full fiscal year earnings, Xencor expects liquidity between $575 million and $600 million. In addition, it is possible that Xencor could generate as much as $3 billion in revenue over the next ten years by increasing milestone and royalty payments.
That said, the stock has a P/E ratio of 58.25, which is abnormally high for this sector, especially with -$0.55 EPS. Even though last quarter's earnings beat the estimate by $0.22, this could imply it is heavily overweight. And with earnings expected to decrease—and remain in the red—the stock may not appear as attractive as its BUY rating, at least for now. However, the $48.99 represents a 74.9% upside that will undoubtedly [attempt to] make up for whatever challenges they could face moving forward.
