In this article, we will be taking a look at the 10 best small-cap healthcare stocks to buy now.
Healthcare Sector: A Defensive Investment with Growth Potential in 2024
In difficult economic times, healthcare equities are sometimes regarded as a defensive investment. This is because, even in recessions, people usually do not reduce their usage of prescription drugs or other necessary medical services. The Centers for Medicare and Medicaid Services (CMS) estimate that healthcare spending in the United States will grow at an average annual growth rate of 5.6% from 2027 to 2032.
Healthcare stocks are defensive, which means that investing in them can yield regular and stable returns for investors People will always require healthcare and medical services, regardless of the state of the economy or the performance of the stock market.
In the US, the healthcare industry is expanding rapidly. A recent estimate shows that the country’s healthcare spending grew by 7.5% in 2023, outpacing the nominal GDP growth rate for the same year. The record high of 93.1% of Americans having health insurance was largely to blame for the significant increase in healthcare spending last year. The global healthcare industry is projected to grow from $583 billion in 2022 to over $800 billion by 2027, with a 7% CAGR, according to McKinsey. Despite 2023 challenges like labor shortages and inflation, 2024 is expected to bring recovery and create attractive investment opportunities.
According to a December 2023 WHO report, global healthcare spending hit a record $9.8 trillion in 2021, or 10.3% of global GDP. However, spending distribution was uneven, with public health spending increasing globally except in low-income countries, where government health spending declined due to reliance on external aid. High-income countries spent about $4,000 per capita, while 11% of the global population lived in countries spending less than $50 per person annually on health. Despite the increase in public health spending during the COVID-19 pandemic, this growth is unlikely to continue due to economic challenges like slowing growth, high inflation, and increased debt.
As 2024 progresses, optimism in the healthcare sector is rising. Despite underperformance in 2023, financial analysts are expecting stronger results this year. BlackRock’s 2024 outlook highlights a “favorable risk-reward environment” for healthcare, noting that last year’s underperformance has created an attractive entry point for investors.
A healthcare professional wearing a lab coat, holding a vial of medication.
Our Methodology
For our methodology, we focused on selecting healthcare stocks with market capitalizations ranging between $300 million and $2 billion, characterized by high institutional ownership and positive analyst sentiment. After identifying the stocks that met these criteria, we ranked them according to the number of hedge fund holders as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Small-Cap Healthcare Stocks To Buy Now
10. Corbus Pharmaceuticals Holdings, Inc. (NASDAQ:CRBP)
Number of Hedge Fund Holders: 30
Corbus Pharmaceuticals Holdings, Inc. (NASDAQ:CRBP) is a precision oncology company focused on developing innovative treatments for cancer and other serious illnesses. At its core, Corbus is dedicated to advancing scientific approaches that target well-understood biological pathways to help patients overcome challenging diseases.
Corbus Pharmaceuticals Holdings, Inc. (NASDAQ:CRBP) is focused on developing treatments that target well-understood biological pathways, with a promising pipeline that includes CRB-701, a next-generation antibody-drug conjugate (ADC) targeting Nectin-4 on cancer cells; CRB-601, an anti-integrin monoclonal antibody blocking TGF activation in cancer cells; and CRB-913, a second-generation peripherally restricted CB1 receptor inverse agonist for obesity treatment.
As of Q2 2034, around 30 hedge fund holders held a stake in the stock with Cormorant Asset Management being the largest stakeholder with 2,025,000 shares worth $91,631,250. The stock sports a Strong Buy rating based on 7 Wall Street Analysts. The average price target for Corbus Pharmaceuticals Holdings, Inc. (NASDAQ:CRBP) is $85.67, with forecasts ranging from $74.00 to $105.00, representing a 40.03% increase from the current price of $61.18.
9. Scholar Rock Holding Corporation (NASDAQ:SRRK)
Number of Hedge Fund Holders: 30
Scholar Rock Holding Corporation (NASDAQ:SRRK), based in Cambridge, Massachusetts, is a biopharmaceutical company focused on developing innovative treatments for severe diseases influenced by protein growth factors. Its primary products, Apitegromab and SRK-181, target conditions like spinal muscular atrophy (SMA) and resistant cancers.
A major catalyst for Scholar Rock Holding Corporation (NASDAQ:SRRK) is the upcoming topline data from the pivotal Phase 3 SAPPHIRE trial for apitegromab, expected in Q4 2024. Positive results could significantly boost investor confidence and potentially lead to FDA approval, dramatically increasing the company’s value. Beyond SMA, Scholar Rock’s pipeline includes SRK-439 for obesity and metabolic disorders.
Jay Backstrom, the President and CEO of Scholar Rock Holding Corporation (NASDAQ:SRRK) stated in the Q2 earnings call transcript:
“Starting with our anti-myostatin programs, Scholar Rock was instrumental in bringing myostatin back into the forefront as a therapeutic target. With apitegromab SMA, we’ve reestablished as a neuromuscular target and our emerging data with SRK-439 suggest the best-in-class potential to address the muscle loss associated with GLP-1 receptor agonist treatment, leading to sustainable healthy weight management in obesity. In our TGFβ1 programs with SRK-181 in immune oncology, we have pierced the immunosuppressive armor to overcome checkpoint inhibitor resistance. And for our latent TGFβ1 selective monoclonal antibody for fibrosis, now referred to as SRK-373, we applied our deep structural insights and antibody engineering expertise to solve a riddle that has not been done before”.
As of Q2 2024, around 30 hedge fund holders held stakes in the stock with Samsara BioCapital being the largest stakeholder with 6,788,609 shares worth $$56,549,113. The average price target is $28.00, with forecasts ranging from $23.00 to $31.00, representing a 201.08% increase from the current price of $9.30.
8. Avid Bioservices, Inc. (NASDAQ:CDMO)
Number of Hedge Fund Holders: 31
Avid Bioservices, Inc. (NASDAQ:CDMO) is a contract development and manufacturing organization (CDMO) specializing in biologics. The company provides services to pharmaceutical and biotech firms to develop and manufacture biological drugs, helping them bring their products to market.
A significant catalyst for Avid Bioservices, Inc. (NASDAQ:CDMO) is the completion of its three-year expansion program. The company has successfully brought online new mammalian and cell and gene therapy facilities, substantially increasing its production capabilities. This expanded capacity positions Avid to take on larger contracts and serve a broader range of clients in the rapidly growing biopharmaceutical market. The global trend towards outsourcing biopharmaceutical manufacturing is a key driver for Avid Bioservices’ growth. As more biotechnology companies focus on research and development, they are increasingly relying on CDMOs like Avid for production, creating a favorable market environment.
Dan Hart, the Chief Financial Officer at Avid Bioservices, Inc. (NASDAQ:CDMO), said in the Fiscal 2024 earnings call transcript:
“For the 2024 full fiscal year, revenues were $139.9 million, a decrease of approximately 6% compared to $149.3 million in the same prior year period. The decrease in revenues for the fiscal year that ended April 30, 2024, compared to the same prior year period was primarily attributed to fewer manufacturing runs, a reduction in process development services primarily from early-stage programs, and a reduction of revenue for changes in estimated variable consideration under a contract where uncertainties have been resolved. Gross profit for the fourth quarter of fiscal 2024 was $5.5 million or 13% gross margin compared to $8.4 million or 21% gross margin in the fourth quarter of fiscal 2023. Gross profit for the 2024 full fiscal year was $7.3 million or 5% gross margin, compared to a gross profit of $31.5 million or 21% gross margin for the 2023 full fiscal year.”
As of Q2 2024, around 31 hedge fund holders held stakes in the stock with BlueCrest Capital Mgmt. The stock holds a Strong Buy rating based on 3 Wall Street Analysts. The average price target is $11.00, with forecasts ranging from $8.00 to $14.00, representing a 4.36% increase from the current price of $10.54.
7. Akero Therapeutics, Inc. (NASDAQ:AKRO)
Number of Hedge Fund Holders: 31
Akero Therapeutics, Inc. (NASDAQ:AKRO) is a clinical-stage biopharmaceutical company focused on developing innovative treatments for serious metabolic diseases, particularly non-alcoholic steatohepatitis (NASH). The company’s primary focus is on efruxifermin (EFX), its lead product candidate, which is currently in Phase 3 clinical trials. EFX is designed to protect against cellular stress and regulate the metabolism of lipids, carbohydrates, and proteins throughout the body.
A major catalyst for Akero Therapeutics, Inc. (NASDAQ:AKRO) is the positive clinical trial results for EFX in treating NASH. In September 2022, the company reported that EFX met its primary endpoint in the Phase 2b HARMONY study, demonstrating significant improvements in liver fibrosis without worsening of NASH. This breakthrough has positioned Akero as a frontrunner in the race to develop an effective NASH treatment, a market estimated to reach $21.5 billion by 2025.
As of Q2 2024, around 31 hedge fund holders held stakes in the stock with Alkeon Capital Management being the largest stakeholder with 3,327,220 shares worth $78,056,581. The stock holds a Strong Buy rating based on 6 Wall Street Analysts. The average price target is $48.33, with forecasts ranging from $38.00 to $60.00, indicating a 77.68% increase from the current price of $27.20.
6. Cogent Biosciences, Inc. (NASDAQ:COGT)
Number of Hedge Fund Holders: 31
Cogent Biosciences, Inc. (NASDAQ:COGT) is a biotechnology company focused on developing precision therapies for genetically defined diseases. At its core, the company specializes in creating targeted treatments for rare genetic disorders, particularly those affecting the blood and immune systems. Cogent’s primary focus is on developing novel therapies for conditions like systemic mastocytosis and gastrointestinal stromal tumors (GIST).
A significant catalyst for Cogent Biosciences, Inc. (NASDAQ:COGT) is its ongoing clinical trials and the potential success of its therapies. The company is actively involved in several clinical trials, such as the SUMMIT, PEAK, and APEX trials, which focus on different genetically defined diseases. The completion and success of these trials could lead to new drug approvals, significantly boosting the company’s earnings and share price. Additionally, the company recently completed an oversubscribed $225 million private placement, which is expected to fund its operations into 2027. This financial strength allows Cogent Biosciences to continue its research and development efforts without immediate financial constraints.
As of Q2 2024, around 31 hedge fund holders held a stake in the stock with Soleus Capital being the largest stakeholder. The stock holds a Strong Buy rating based on 7 Wall Street Analysts. The average price target is $17.00, with forecasts ranging from $8.00 to $20.00, representing a 58.29% increase from the current price of $10.74.
5. Arcutis Biotherapeutics, Inc. (NASDAQ:ARQT)
Number of Hedge Fund Holders: 32
Arcutis Biotherapeutics Inc (NASDAQ:ARQT) is a biopharmaceutical company focused on developing and commercializing treatments for dermatological diseases. At its core, Arcutis creates topical treatments for various skin conditions, including plaque psoriasis, atopic dermatitis, hand eczema, vitiligo, scalp psoriasis, alopecia areata, and seborrheic dermatitis.
A significant catalyst for Arcutis Biotherapeutics Inc (NASDAQ:ARQT) is its lead product candidate, ZORYVE (roflumilast cream), which has successfully completed pivotal Phase 3 clinical trials for plaque psoriasis. This product demonstrated symptomatic improvement and favorable tolerability, positioning it well for market success. The approval and commercialization of ZORYVE could significantly boost Arcutis’s revenue and market share, driving future earnings growth.
The President and CEO at Arcutis Biotherapeutics Inc (NASDAQ:ARQT) said in the Q2 earnings call transcript:
“Once again, we saw strong growth during the quarter in our expanding ZORYVE portfolio as healthcare providers and patients see how ZORYVE cream and ZORYVE foam address real needs in the treatment of psoriasis and seborrheic dermatitis, respectively. Solid growth in prescriptions for both the cream and the foam, coupled with additional gross-to-net improvements during the quarter, drove strong revenue growth in the second quarter both year-over-year and compared to Q1 2024, with net revenues of $30.9 million, 56% of which was cream and 44% was the foam. We’ve now generated more than 351,000 prescriptions for the cream and the foam combined from over 14,000 unique prescribers to date as our product delivers a positive clinical experience for healthcare professionals and their patients”.
As of Q2 2024, around 32 hedge fund holders held stakes in the stock with Suvretta Capital Management being the largest stakeholder with 10,004,492 shares worth $93,041,776. The stock has a Strong Buy rating based on 6 Wall Street Analysts. The average price target is $16.80, with forecasts ranging from $12.00 to $20.00, indicating a 54.41% increase from the current price of $10.88.
4. Kura Oncology, Inc. (NASDAQ:KURA)
Number of Hedge Fund Holders: 33
Kura Oncology, Inc. (NASDAQ:KURA) is a clinical-stage biopharmaceutical company focused on developing precision medicines for the treatment of cancer. The company’s primary focus is on developing small-molecule inhibitors that target specific genetic and epigenetic abnormalities in cancer cells.
One of the primary growth catalysts for Kura Oncology, Inc. (NASDAQ:KURA) is its focus on developing targeted cancer therapies, particularly its lead product candidate, ziftomenib, which is in clinical trials for the treatment of NPM1-mutant acute myeloid leukemia (AML). The company has reported successful enrollment in its KOMET-001 trial and is progressing with the KOMET-007 combination trial. Additionally, Kura Oncology recently completed a $150 million private placement, which is expected to fund its operations into 2027. This financial boost will support ongoing research and development efforts, potentially accelerating the path to market for its therapies.
Troy Wilson, the Co-Founder of Kura Oncology, Inc. (NASDAQ:KURA), stated the following about Ziftomenib in the Q2 2024 earnings call transcript:
“I’m pleased to report that the safety, tolerability, and clinical activity of ziftomenib continue to support advancement into both the FIT and UNFIT frontline populations. Two of the four cohorts have cleared the 600-milligram dose and advanced into the Phase 1b expansion study. The two remaining cohorts are expected to clear the 600-milligram dose and advance shortly. The Phase 1b expansion study includes multiple combination cohorts, most notably ziftomenib plus Ven/Aza, in newly diagnosed NPM1-mutant or KMT2A-rearranged AML, as well as ziftomenib plus 7+3 in newly diagnosed NPM1-mutant or KMT2A-rearranged AML, removing the requirement for patients to have high-risk disease. Each combination cohort is enrolling independently, and we expect to enroll approximately 20 patients per cohort.”
As of Q2 2024, around 33 hedge fund holders held stakes in the stock with Suvretta Capital Management being the largest stakeholder with 7,069,627 shares worth $145,563,620. The stock has a Strong Buy rating based on 10 Wall Street Analysts. The average price target is $30.89, with forecasts ranging from $22.00 to $37.00, indicating a 46.68% increase from the current price of $21.06.
3. Arvinas, Inc. (NASDAQ:ARVN)
Number of Hedge Fund Holders: 33
Arvinas, Inc. (NASDAQ:ARVN) is a clinical-stage biopharmaceutical company that specializes in developing innovative protein degradation therapeutics for the treatment of various diseases, including cancer and neurodegenerative disorders. At its core, Arvinas focuses on creating PROTAC (proteolysis targeting chimera) protein degraders, which are designed to harness the body’s natural protein disposal system to selectively eliminate disease-causing proteins.
A major catalyst for Arvinas, Inc. (NASDAQ:ARVN) is its robust clinical pipeline, particularly its lead candidate vepdegestrant (ARV-471). This PROTAC protein degrader is being developed for the treatment of patients with locally advanced or metastatic ER+/HER2- breast cancer. Vepdegestrant has shown promising results in clinical trials. In a Phase 1b trial in combination with palbociclib, it demonstrated a clinical benefit rate of 63% and an overall response rate of 41.9% in heavily pretreated patients. These results have led to the initiation of multiple Phase 3 trials, including VERITAC-2 and VERITAC-3, which could potentially lead to regulatory approval if successful.
As of Q2 2024, around 33 hedge fund holders held a stake in the stock with EcoR1 Capital being the largest stakeholder with 6,726,491 shares worth $179,059,190. The stock sports a Strong Buy rating based on 10 Wall Street Analysts. The average price target is $61.63, with forecasts between $48.00 and $87.00, indicating a 135.59% increase from the current price of $26.16.
2. Nurix Therapeutics, Inc. (NASDAQ:NRIX)
Number of Hedge Fund Holders: 37
Nurix Therapeutics, Inc. (NASDAQ:NRIX) is a clinical-stage biopharmaceutical company focused on developing novel therapies for cancer and inflammatory diseases. At its core, Nurix specializes in protein degradation and modulation technologies, creating small-molecule drugs that can selectively target and eliminate disease-causing proteins.
A significant catalyst for Nurix Therapeutics, Inc. (NASDAQ:NRIX) is its strategic collaborations and promising clinical data. The company has established partnerships with major pharmaceutical companies like Gilead Sciences, Sanofi, and Seagen, which help in co-development and co-commercialization of multiple drug candidates. Additionally, Nurix has reported positive clinical data, such as the promising results from its NX-5948 trial for chronic lymphocytic leukemia, which demonstrated an objective response rate of 69.2%. This clinical success supports the potential best-in-class profile for NX-5948, which could drive future growth and increase earnings. The future growth of Nurix Therapeutics is likely to be driven by its continued success in clinical trials and expansion of its drug pipeline. The company’s focus on developing novel therapies for B-cell malignancies and autoimmune diseases positions it well in a growing market.
As of Q2 2024, around 37 hedge fund holders held stakes in the stock with Redmile Group being the largest stakeholder with 4,423,616 shares worth $92,320,866. The stock has a Strong Buy rating based on 12 Wall Street Analysts. The average price target is $29.00, with forecasts ranging from $15.00 to $36.00, indicating a 15.08% increase from the current price of $25.20.
1. Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX)
Number of Hedge Fund Holders: 46
Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX) is a clinical-stage biopharmaceutical company focused on developing innovative cancer therapies. The company’s primary focus is on creating novel treatments for various types of cancer, including leukemia and chronic graft-versus-host disease (cGVHD).
A significant catalyst for Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX) is its robust drug pipeline, featuring two promising candidates. Axatilimab is currently under priority review by the FDA for treating refractory chronic graft-versus-host disease (cGVHD), with a PDUFA action date of December 26, 2024. Additionally, Revumenib has received Priority Review for its New Drug Application (NDA) in relapsed/refractory KMT2Ar acute leukemia, with a PDUFA action date of September 26, 2024.
Michael Metzger, the Chief Executive Officer of Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX) said the following on the FDA’s extension of the PDUFA action date for Revumenib in the Q2 2024 earnings call transcript:
“With Revumenib, our menin inhibitor being reviewed by the FDA for patients with relapsed or refractory KMT2A-rearranged acute leukemias, we have a PDUFA action date of December 26, 2024. As we announced earlier this week, the FDA recently extended the PDUFA action date for Revumenib NDA from September 26 to December 26, 2024, a standard three-month extension to allow for additional time to conduct a full review of supplemental information we provided in response to their requests. Importantly, we are confident that the information we have provided supports approval and continues to demonstrate the meaningful benefit Revumenib brings to patients. We look forward to continuing to closely engage with the FDA as they complete the review under the real-time Oncology Review Program or RTOR, and we stand ready to launch Revumenib with strength as soon as we receive the anticipated approval.”
As of Q2 2024, around 46 hedge fund holders held stakes in the stock with Kynam Capital being the largest stakeholder with 5,722,057 shares worth $117,473,830. The stock has a Strong Buy rating based on 10 Wall Street Analysts. The average price target is $30.67, with forecasts ranging from $2.00 to $42.00, indicating a 49.25% increase from the current price of $20.55.
Overall, SNDX ranks first among the best small-cap healthcare stocks to buy now. While we acknowledge the potential of healthcare stocks, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than the stocks mentioned on our list but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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