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After being mostly down over the past three years, the biotech sector rallied hard to end 2023. The SPDR S&P Biotech ETF (NYSEARCA:XBI) is up 31% in the last three months. From 2010 through 2019, investing in the XBI was a good proxy for the biotech sector. However, the monetary and regulatory landscape around biotech stocks continues to be challenging. Nevertheless, several biotech breakthroughs may allow the rally to continue, at least for certain individual stocks.
As any biotech investor knows, you must be in it with a long-term mindset. Getting a drug into clinical trials is a key milestone. But once a drug candidate is in clinical trials, it could be years before it receives Food & Drug Administration (FDA) approval.
However, as drug candidates move through clinical trials, they have to keep regulators (and investors) informed on their progress. Positive news can also be a catalyst for the company’s stock as it means that future approval is more likely.
With that in mind, there are several potential biotech breakthroughs likely to occur in 2024. And here are three biotech stocks that could see substantial gains no matter how the broader sector performs.
Eli Lilly and Company (LLY)
Eli Lilly and Company (NYSE:LLY) was one of the best-performing biotechnology stocks in 2023, soaring over 70%. One catalyst was the anticipated approval of the company’s new obesity drug Zepbound which occurred in November 2023. That means that investors will get their first read on the drug’s effect on revenue when Lilly reports earnings in February.
But the reason Lilly is on this list of companies with biotech breakthroughs is for its clinical-stage drug, donanemab which would represent a breakthrough treatment for Alzheimer’s disease that targets the amyloid protein that builds up in the brain of patients. The U.S. Food & Drug Administration (FDA) is expected to make a decision in early 2024.
With a forward price-to-earnings (P/E) ratio of around 97x, LLY stock is expensive relative to its historic value. Still, the company is expecting earnings growth of 91% in the next 12 months. Recent analyst upgrades suggest that the consensus price target of $652.68 is likely to move higher through the year.
Amylyx (NASDAQ:AMLX) is a company that got on my radar in 2022 when it received FDA approval for Relyvrio, its flagship treatment for ALS. That changed the company from a “clinical stage” company to a “commercial stage” company.
Amylyx has already generated three profitable quarters and the company forecasts about a 79% increase in earnings in the next 12 months. That hasn’t done much to help the AMLX stock price which is down 64% in the last 12 months. The issue could be dismissed as the stock still has heavy short interest. But investors may also be concerned about the slowing pace of revenue growth.
However, the latter may start to be addressed in the second quarter of this year when the company presents Phase 3 trials results of its PHOENIX clinical trial. This will provide additional safety and efficacy data that may support approval by the European Medicines Agency (EMA).
Agenus (NASDAQ:AGEN) is a penny stock that won’t be appropriate for every investor. But if you have a speculative bent, then Agenus may represent one of the best opportunities for biotech breakthroughs in 2024.
This is a 29-year-old company that is still a clinical-stage company. But cancer treatments take time, particularly for a company that is trying to address cancer treatment by way of immunotherapy. As many people know, traditional cancer therapies have come a long way but still result in killing healthy cells along with cancer cells. Agenus is developing cancer immunotherapies that “harness the immune system to specifically kill cancer cells.”
The potential breakthrough comes in the form of a Biologics License Application (BLA) for accelerated approval of its lead candidate botensilimab, the company’s next-generation CTLA-4 antibody, for patients with HER-positive metastatic colorectal cancer.
Like many penny stocks, Agenus is not widely covered by the analyst community. But it’s instructive to note that four out of five analysts that have issued a rating on AGEN stock give it a Strong Buy rating.
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.