In this article, we will take a look at the 10 Most Promising Biotech Stocks According to Hedge Funds.
Biotechnology stocks are known for their high risk, making them some of the most volatile in the market. Their prices can swing dramatically, driven by the results of FDA clinical trials and the real-world performance of their treatments. In 2020, the biotech sector surged to prominence with the rollout of COVID-19 vaccines. By late 2023 and early 2024, investor interest revived as Big Pharma began spending on acquisitions. However, the momentum slowed, and biotech stocks remained stagnant for months. In the second quarter, biopharma deal activity sharply declined, with only a few M&A deals and IPOs breaking the otherwise quiet period. This slowdown came after a lively first quarter, where pharma finally started deploying its massive cash reserves for acquisitions.
On the other hand, despite industry anticipation for a federal interest rate cut, the response has been surprisingly muted. Earlier this September, the Federal Reserve reduced rates by half a percentage point, a larger cut than expected. While a positive move, Jared Holz, an analyst at Mizuho Securities, says a surge in fundraising, M&A deals, or IPOs isn’t likely. Many biotech companies have taken drastic measures to survive in turbulent markets, cutting programs and implementing significant layoffs to conserve cash. While the rate cut might encourage a revival of some scientific projects, Holz believes it’s difficult to measure the impact. Still, the analyst pointed out that there’s been “a bit more momentum” for small-cap equities since the rate cut, which is a positive sign for the biotech sector:
“When I look at biotech, I just view it as a nichey, highly academic kind of component of small-cap equities. If small-cap stocks continue to trade well, biotech will probably do fine. And if not, then maybe there’s a point in which there’s a little bit of stagnation in terms of the index.”
Holz also noted the heightened focus on the recent rate drop, explaining that the idea of interest rates being a predictor of biotech success is a relatively new concept. Before 2020, interest rates had little influence on biotech stocks. However, the pandemic shifted the landscape, with investors flocking to the industry and substantial funding pouring into therapeutics-focused companies.
According to Precedence Research, the global biotech market will grow at a compound annual growth rate of 11.5% through 2034, reaching a value of $4.61 trillion. This growth is expected to be fueled by favorable government policies, rising investment, demand for synthetic biology, and an increase in chronic disorders like cancer, heart disease, and hypertension. Government initiatives to modernize regulations and enhance reimbursement policies are also fueling market expansion. According to IQVIA, global medication spending is projected to reach $2.30 trillion by 2028, growing at a compound annual growth rate (CAGR) of 5% to 8%. Oncology and obesity treatments are expected to be key drivers of this growth, while immunology spending may slow as biosimilars enter the market. Biotech is predicted to account for 39% of total spending, surpassing $892 billion by 2028, with rapid growth seen in cell and gene therapies.
Our Methodology
For our list of the 10 most promising biotech stocks, we scoured through stocks that are involved in the biotechnology sector by sifting through ETFs’ holdings and media reports. We narrowed down notable names that have an average analyst upside of more than 30%. From that list, we selected the top companies with the highest number of hedge fund investors, according to Insider Monkey’s database of 912 hedge funds as of the end of Q2 2024.
At Insider Monkey, we are obsessed with 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. Taysha Gene Therapies, Inc. (NASDAQ:TSHA)
Average Upside: 224.19%
Number of Hedge Fund Holders: 21
Taysha Gene Therapies, Inc. (NASDAQ:TSHA) is an innovative gene therapy company focused on developing treatments for rare genetic disorders of the central nervous system. Founded in 2020, the company aims to address significant unmet medical needs, including conditions like Rett syndrome.
Taysha Gene Therapies, Inc. (NASDAQ:TSHA) has made notable progress with its TSHA-102 gene therapy program for Rett syndrome, reporting positive safety and efficacy data from the low-dose cohort in its Phase 1/2 trials. The company has also started testing the high-dose cohort and expanded the pediatric trial into Canada.
Despite reporting a net loss of $20.9 million for the quarter, Taysha Gene Therapies, Inc. (NASDAQ:TSHA) remains financially stable with $172.7 million in cash, supported by a public follow-on offering that extends through Q4 2026. BMO Capital Markets reaffirmed its Outperform rating and $5 price target following Taysha’s Q2 2024 financial results, citing both strategic progress and financial stability.
According to Insider Monkey’s data, 21 hedge funds held stakes in Taysha Gene Therapies, Inc. (NASDAQ:TSHA) as of Q2, with a combined value of $119.85 million. VenBio Select Advisor, the largest shareholder, owned 18.65 million shares worth $41.776 million as of June 30.
9. Legend Biotech Corporation (NASDAQ:LEGN)
Average Upside: 72.54%
Number of Hedge Fund Holders: 24
Legend Biotech Corporation (NASDAQ:LEGN) is a mid-sized biotechnology company focused on developing treatments for cancers such as lung and pancreatic cancers. Its key product, Carvykti, targets multiple myeloma and is central to the company’s growth strategy.
BMO Capital remains optimistic about Legend Biotech’s prospects, reiterating an Outperform rating with a $90 price target. BMO forecasts strong quarter-over-quarter growth for Carvykti, estimating a 50-60% increase, reflecting its strong market potential. These projections assume an 11% net-to-gross discount and that 85-90% of total sales will come from the U.S., consistent with past trends.
Legend Biotech Corporation (NASDAQ:LEGN) recently announced plans to build a new 31,000-square-foot research and development (R&D) facility in Philadelphia, PA. This center, part of the company’s global expansion strategy, will enhance its cell therapy portfolio and support its growing R&D team, which already includes over 350 employees worldwide. The facility is expected to be operational by Q3 2025.
According to Insider Monkey, 24 of the 912 hedge funds surveyed in Q2 2024 held stakes in Legend Biotech Corporation (NASDAQ:LEGN). The largest stake, valued at $332.4 million, was owned by Peter Kolchinsky’s RA Capital Management.
TimesSquare Capital U.S. Focus Growth Strategy stated the following regarding Legend Biotech Corporation (NASDAQ:LEGN) in its first quarter 2024 investor letter:
“We began buying shares in Legend Biotech Corporation (NASDAQ:LEGN), a biotechnology developer of cell therapies to treat blood cancers such as multiple myeloma and leukemia. The European Union approved the use of Legend’s Carvykti treatment of multiple myeloma and later the FDA followed suit. Some investors may have been concerned about possible delays as Legend ramps up production, and its price declined. Though with a long-standing agreement with Johnson & Johnson and a new partnership with Novartis, we see a long runway of growth ahead, so we initiated a position.”
8. CRISPR Therapeutics AG (NASDAQ:CRSP)
Average Upside: 62.22%
Number of Hedge Fund Holders: 29
CRISPR Therapeutics AG (NASDAQ:CRSP), based in Zug, Switzerland, with operations in the U.S., is a biotechnology company leveraging the CRISPR gene-editing platform to develop treatments for both rare and common diseases. The company is advancing its pipeline with two key programs: CTX131, in Phase I trials for relapsed/refractory hematologic malignancies, and CTX112, also in Phase I for Systemic Lupus Erythematosus (SLE).
Needham recently lowered the price target on CRSP from $88 to $84 but maintained a Buy rating. The adjustment followed the company’s report of no Casgevy sales in Q2 2024. Despite the absence of sales, CRISPR Therapeutics AG (NASDAQ:CRSP) made strides in patient engagement, with about 20 patients undergoing cell collection for treatment—up from five in Q1. Additionally, more than 35 Authorized Treatment Centers (ATCs) are now operational.
The firm also revised its sales projections for Casgevy, reducing the 2024 forecast to $17 million from $43 million, and the 2025 forecast to $182 million from $304 million.
According to Insider Monkey, 29 of the 912 hedge funds profiled in Q2 2024 held positions in CRISPR Therapeutics AG (NASDAQ:CRSP). Cathie Wood’s ARK Investment Management was the largest shareholder, with $420.1 million in holdings.
7. Intellia Therapeutics, Inc. (NASDAQ:NTLA)
Average Upside: 258.81%
Number of Hedge Fund Holders: 29
Founded in 2014, Intellia Therapeutics, Inc. (NASDAQ:NTLA) is a U.S.-based clinical-stage biotechnology company focused on developing potentially curative therapies using CRISPR-based technologies.
The company recently announced successful Phase II results for its hereditary angioedema (HAE) treatment, achieving both primary and secondary endpoints. Following these positive outcomes, Intellia Therapeutics, Inc. (NASDAQ:NTLA) plans to launch a pivotal Phase III trial for HAE in the second half of 2024. It has also initiated a pivotal trial for treating transthyretin amyloid cardiomyopathy (TTR-CM) across 35 global sites.
RBC Capital Markets continues to rate Intellia’s stock as Outperform, despite a slight revision in its price target. RBC’s confidence is driven by the potential of Intellia’s TTR and HAE therapies to impact two multi-billion-dollar markets. Additionally, Intellia Therapeutics, Inc. (NASDAQ:NTLA) is preparing for a potential U.S. filing for transthyretin amyloid polyneuropathy (TTR-PN), using data from the ongoing TTR-CM study in its discussions with the FDA.
Additionally, Intellia Therapeutics, Inc. (NASDAQ:NTLA) remains in a strong financial position, with $939.9 million in cash reserves, expected to sustain operations through late 2026.
At the close of Q2 2024, 29 of the 912 hedge funds tracked by Insider Monkey held shares of Intellia Therapeutics, Inc. (NASDAQ:NTLA), with Catherine D. Wood’s ARK Investment Management being the largest investor.
6. Moderna, Inc. (NASDAQ:MRNA)
Average Upside: 78.93%
Number of Hedge Fund Holders: 39
Moderna, Inc. (NASDAQ:MRNA) is a biotechnology company focused on the discovery, development, and commercialization of mRNA-based therapeutics and vaccines, targeting infectious diseases, immuno-oncology, rare diseases, autoimmune disorders, and cardiovascular conditions.
Piper Sandler recently lowered its price target for Moderna, Inc. (NASDAQ:MRNA) shares from $157 to $115 while maintaining an Overweight rating. This adjustment follows Moderna’s annual R&D Day, where the company outlined its goal to secure approvals for 10 mRNA products by 2027. The biotech company plans to submit filings for multiple vaccines, including its next-generation COVID vaccine (mRNA-1283), a combined flu and COVID vaccine (mRNA-1083), and mRESVIA for high-risk adults.
Additionally, the company expects to report interim Phase III data for its mRNA-1647 candidate later this year and is preparing to start a Phase III trial for its norovirus vaccine (mRNA-1403). Moderna, Inc. (NASDAQ:MRNA) is also advancing pivotal cohorts for its mRNA-3927 treatment for PA and mRNA-3705 for MMA. The company projects product sales of $3 to $3.5 billion for the current year and between $2.5 to $3.5 billion for 2025.
However, the timeline for reaching cash flow breakeven has been pushed to 2028, with anticipated revenues of around $6 billion. Despite this, Moderna, Inc. (NASDAQ:MRNA) remains financially strong, with $10.8 billion in cash reserves as of Q2 2024, which is expected to support the company until it achieves cash flow breakeven.
By the end of Q2 2024, 39 out of 912 hedge funds tracked by Insider Monkey held stakes in Moderna, Inc. (NASDAQ:MRNA).
5. Jazz Pharmaceuticals plc (NASDAQ:JAZZ)
Average Upside: 65.11%
Number of Hedge Fund Holders: 44
Jazz Pharmaceuticals plc (NASDAQ:JAZZ) is a biopharmaceutical company focused on developing treatments for neurological disorders and oncology.
Stifel recently reaffirmed its Buy rating on Jazz Pharmaceuticals plc (NASDAQ:JAZZ), maintaining a price target of $230. The firm highlighted Jazz’s promising oncology drug, zanidatamab (Zani), which is being developed for HER2-resistant cancers. Zani has the potential to become a first-line therapy due to its strong anti-HER2 profile. An upcoming FDA decision on its use for second-line bile duct cancer (BTC), with a Prescription Drug User Fee Act (PDUFA) date set for November 29, 2024, is especially important, as no approved therapies currently exist for this condition, giving Zani the chance to lead in this space.
In Q2 2024, Jazz Pharmaceuticals plc (NASDAQ:JAZZ) reported its highest-ever quarterly revenue, exceeding $1 billion. This record performance was largely driven by its key neuroscience products, Xywav and Epidiolex/Epidyolex. Xywav, a treatment for narcolepsy and idiopathic hypersomnia, saw a 13% year-over-year increase in sales, while Epidiolex, used for seizure conditions, posted a 22% year-over-year sales growth.
By the end of Q2 2024, 44 hedge funds held stakes in Jazz Pharmaceuticals plc (NASDAQ:JAZZ), with Vester Point Capital holding the largest position of 1.5 million shares, valued at over $160 million.
4. Sarepta Therapeutics, Inc. (NASDAQ:SRPT)
Average Upside: 63.05%
Number of Hedge Fund Holders: 55
Sarepta Therapeutics, Inc. (NASDAQ:SRPT) is a biopharmaceutical company focused on developing therapies for rare genetic disorders, with a particular emphasis on neuromuscular conditions such as Duchenne muscular dystrophy (DMD).
Raymond James recently resumed coverage of Sarepta Therapeutics, Inc. (NASDAQ:SRPT) with an Outperform rating and a price target of $150. This follows the company’s full approval of Elevidys, a treatment for DMD in both ambulatory and non-ambulatory patients. Despite this milestone, Sarepta’s stock has been trading lower than before Elevidys’ approval, largely due to reduced speculation around mergers and acquisitions. However, Raymond James expects the launch of Elevidys to outperform expectations, potentially boosting the stock over the next year.
Sarepta Therapeutics, Inc. (NASDAQ:SRPT) is also advancing its treatment for limb-girdle muscular dystrophy (LGMD), which is currently in Phase 3 trials. The company believes the success it has achieved with DMD could be replicated with LGMD, adding further growth potential.
As of Q2 2024, 55 hedge funds tracked by Insider Monkey held positions in Sarepta Therapeutics, Inc. (NASDAQ:SRPT), with stakes totaling $2.4 billion. VenBio Select Advisor holds the largest stake, valued at $474 million.
3. Neurocrine Biosciences, Inc. (NASDAQ:NBIX)
Average Upside: 48.02%
Number of Hedge Fund Holders: 56
Neurocrine Biosciences, Inc. (NASDAQ:NBIX), based in San Diego, California, is a biopharmaceutical company focused on neuroscience. It aims to develop transformative treatments for patients with under-served neurological, neuroendocrine, and neuropsychiatric disorders.
RBC Capital recently reiterated its Sector Perform rating on Neurocrine Biosciences, Inc. (NASDAQ:NBIX), maintaining a price target of $133. The firm’s outlook addressed the recent challenges facing the stock, citing disappointing Phase II trial results for its schizophrenia drug candidate ‘568 and a slowdown in prescription trends for Ingrezza, Neurocrine’s key revenue driver. Despite these setbacks, RBC Capital remains optimistic about Ingrezza’s long-term growth potential and expects the company to meet its 2024 sales targets.
Neurocrine Biosciences, Inc. (NASDAQ:NBIX) also reported positive interim results from the KINECT-HD2 study, showing sustained improvements in treating Huntington’s disease chorea with Ingrezza capsules through Week 104, regardless of patients’ use of antipsychotic medication. Ingrezza sales also grew over 30% year-over-year, prompting the company to raise its sales guidance to between $2.25 billion and $2.3 billion for 2024.
By the end of Q2 2024, 56 hedge funds tracked by Insider Monkey had invested in Neurocrine, with Jim Simons’ Renaissance Technologies holding the largest stake at $339.79 million.
2. Cytokinetics Inc. (NASDAQ:CYTK)
Average Upside: 48.02%
Number of Hedge Fund Holders: 64
Cytokinetics Inc. (NASDAQ:CYTK) is a biopharmaceutical company focused on developing muscle activators and inhibitors as treatments for diseases involving impaired or declining muscle function.
The company has made notable strides in its clinical trials. Its drug candidate, aficamten, showed promising results in the SEQUOIA-HCM Phase 3 trial, prompting H.C. Wainwright to reaffirm their Buy rating. Additionally, Goldman Sachs maintained a Neutral rating after a successful Phase 1 trial of CK-586, a drug candidate targeting Heart Failure with preserved Ejection Fraction (HFpEF).
These positive trial results have set the stage for a Phase 2 clinical trial, expected to begin in Q4 2024. Cytokinetics Inc. (NASDAQ:CYTK) has also bolstered its financial standing through a strategic partnership with Royalty Pharma, securing a $575 million investment alongside a $500 million follow-on offering.
According to Insider Monkey’s second-quarter data, 64 hedge funds held bullish positions in Cytokinetics Inc. (NASDAQ:CYTK) Abhishek Trehan’s Darwin Global Management emerged as the largest stakeholder, holding 4.57 million shares valued at $246 million.
1. Novo Nordisk A/S (NYSE:NVO)
Average Upside: 33.15%
Number of Hedge Fund Holders: 67
Novo Nordisk A/S (NYSE:NVO) is a global healthcare company based in Bagsværd, near Copenhagen, Denmark. It focuses on treatments for obesity, diabetes, and other rare diseases. With a presence in over 168 countries and a workforce of 48,000 employees, Novo Nordisk’s well-known products include Ozempic, Rybelsus, and Wegovy.
Novo Nordisk A/S (NYSE:NVO) had a strong start to 2024, reporting a notable 25% increase in sales and a 19% rise in operating profits during the first half of the year. This performance was largely driven by a 32% surge in GLP-1 diabetes product sales, along with a 10% growth in insulin sales, particularly in North America.
TD Cowen reiterated its Buy rating on Novo Nordisk A/S (NYSE:NVO) shares, setting a price target of $155 on October 7. The firm’s positive outlook is based on Novo Nordisk’s innovative strategies and strong leadership, which are expected to drive above-average growth. Its dominant position in the expanding diabetes market further supports this projection. Additionally, TD Cowen emphasized the strength of the company’s product pipeline, which is poised to deliver new treatments and fuel continued growth.
Insider Monkey’s data for Q2 2024 revealed that 67 hedge funds held investments in Novo Nordisk A/S (NYSE:NVO), an increase from 60 in the previous quarter.
While we acknowledge the potential of biotechnology companies, 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’re seeking an AI stock with even more promise than NVO and trading at less than 5 times its earnings, check out our report about the cheapest AI stock.
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