We recently published a list of the 12 Biotech Stocks with the Biggest Upside Potential. In this article, we are going to take a look at where CRISPR Therapeutics AG (NASDAQ:CRSP) stands against other biotech stocks with the biggest upside potential.
Improving Trends for Biotech Stocks
While 2024 was a “challenging” year for biotech stocks, JPMorgan is of the view that some names in the industry may be poised for considerable upside in the coming months. On November 28, Johan Hueffer, senior partner and principal of investments at Novo Holdings, appeared on CNBC to discuss his macro perspective on investments in life sciences. He said that biotechs faced difficulty raising capital in the last couple of years. However, that trend has started to improve in the last quarter or two.
Still, there have been impacts on companies that particularly service the pharmaceutical industry, such as contract research organizations (CROs), contract manufacturing organizations (CMOs), and companies that provide tools for research and development. Similar trends have been observed for companies that manufacture tools for production in the pharmaceutical and biotech industries. While these sectors have had ups and downs in the past two years, the trends are starting to normalize now. Hueffer was of the view that the industry is now showing considerable opportunity.
The Fed’s Rate Cuts and Biotech Stocks: Could There Be a Connection?
Similarly, Goldman Sachs shed light on biotech as an often overlooked sector in the investing space. In a note to clients, John Flood, Goldman’s Head of Americas Equities Sales Trading, said that biotech stocks posed an under-the-radar opportunity for investors looking to capitalize on the Fed’s recent rate cuts. Changes in interest rates uniquely affect biotech stocks as they are sensitive to them and often rely on projected future profits. These stocks are also heavily impacted by the cost of capital. Although there is little to no current profitability, these stocks have significant upside potential and pose an “option-like structure” if clinical trials succeed. This makes them especially responsive to changes and movements in interest rates.
Since September, the Fed cut a full point off the funds rate. According to CNBC, the current market pricing is showing just one or two more moves lower in 2025. On January 8, CNBC reported that the Federal Open Market Committee (FOMC) members voted to reduce the central bank’s benchmark borrowing rate to the 4.25%-4.5% target range. However, they also slashed their outlook for expected rate cuts for 2025, bringing it down to two from four and assuming quarter-point increments. These changes are expected to affect biotech stocks.
Flood’s note also highlighted that the biotech industry has recently shown improved fundamentals, attributed to a more favorable regulatory environment and positive clinical outcomes. Despite these tailwinds, Goldman’s data reflects that biotechnology remains under-owned by hedge funds. The sector ranked in the 13th percentile in hedge fund long/short positioning over the past year. Furthermore, it ranked in the 4th percentile over the past five years.
Our Methodology
We used the Finviz stock screener to compile a list of 40 biotech stocks. We then selected the top 12 stocks with the highest analyst upside potential as of January 15, 2025. We have also included the market capitalization of the stocks as of the same date. The list is sorted in ascending order of analysts’ average upside potential. These stocks are also popular among elite hedge funds, as of fiscal Q3 2024.
Why do we care about what hedge funds do? 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).
A laboratory cultivating cells for the development of gene and cell therapies.CRSP
CRISPR Therapeutics AG (NASDAQ:CRSP)
Analyst Upside: 90.66%
Number of Hedge Fund Holders: 27
Headquartered in Zug, Switzerland, CRISPR Therapeutics AG (NASDAQ:CRSP) develops transformative gene-based medicines for serious diseases through its proprietary CRISPR/Cas9 platform. The CRISPR/Cas9 platform allows precise changes to genomic DNA by employing gene editing technology. The company’s product portfolio spans therapeutic programs across various disease areas, including oncology, rare diseases, regenerative medicine, etc.
The FDA approval and launch of CASGEVY, a gene therapy for the treatment of sickle cell disease (SCD) and transfusion-dependent beta-thalassemia (TDT) in patients 12 years and older, have created considerable momentum for the company. CRISPR Therapeutics AG (NASDAQ:CRSP) has also received regulatory approval for the drug in various countries across the globe, including Canada, Switzerland, Great Britain, the European Union, and others, with product launches underway.
CRISPR Therapeutics AG (NASDAQ:CRSP) is focusing on strategically advancing its portfolio of clinical trials across autoimmune, diabetes, oncology, and cardiovascular indications. As of September 30, 2024, it has a strong balance sheet with around $1.9 billion in cash, cash equivalents, and marketable securities. Thus, supported by an approved commercial product, a strong balance sheet, and a rich pipeline, it is in a suitable position to expand its pipeline in 2025.
Overall, CRSP ranks 8th on our list of the 12 biotech stocks with the biggest upside potential. While we acknowledge the potential of biotech stocks, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CRSP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stock To Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
