We recently published a list of the 10 Best Mid Cap Biotech Stocks to Buy. In this article, we are going to take a look at where Cytokinetics, Incorporated (NASDAQ:CYTK) stands against the other best mid cap biotech stocks to buy.
Is the Biotech Sector Oversaturated?
On March 6, Jared Holz, Mizuho health care equity strategist, appeared on CNBC’s ‘Power Lunch’ to discuss investing in biotech and the oversaturation in the sector. He said that looking at the denominator of biotech stocks in the public market, we’re standing at the 700-800 range, depending upon the day. Almost a quarter of these have enterprise values in negative territory. That basically means that investors and companies, in some respects, have exhausted options. For any value to be created, it is necessary to shift focus and devise another plan of attack through an asset they don’t currently own, and resuscitate the company.
In some respects, investors and analysts are always looking for a clear pathway for biotech as a sector to perform better. However, Holz said we are in a tough place if a quarter of the index is filled with companies with more cash than the market cap. That is why he suggested, which some people consider somewhat hyperbolic, getting rid of the tail here, as there are too many assets out there.
Thousands of biotech companies are competing against each other for tiny market or revenue opportunities. Holz opined that venture funds should stop making so many companies that end up superseding each other in a few years. It would be helpful to dissolve all the biotech stocks with negative values and return the cash to shareholders.
READ ALSO: 12 Best Diagnostics Stocks to Invest In Right Now and 7 Most Undervalued Biotech Stocks To Invest In.
How Can One Make Money in Biotech?
Biotechs pose a tempting scenario, as a company’s stock could be worth $5 with a potential blockbuster drug in the pipeline that could cure even cancer. The company’s stock could surge to hundreds of dollars if the clinical trial succeeds. However, at the same time, it could plunge down to $0 if the trial doesn’t. Holz thus says that the sector is incredibly tempting, and thousands of investors put their careers on the line daily to attempt to figure this out.
He characterized biotech as one of the only sectors in all of equities where single stock picking is the only way to make money. Building on his years-long experience covering the industry, he said that the index has barely been up since the past decade. It has been essentially flat. Meanwhile, every other index that one can find has doubled or more. Therefore, there is an obvious issue with the broader complex. But if you find the right asset, you can kill it in the sector.
Our Methodology
We sifted through stock screeners, financial media reports, and ETFs to compile a list of 30 biotech stocks with a market cap between $2 billion and $10 billion. We then selected the top 10 with the highest number of hedge fund holders, as of Q4 2024, and ranked them in ascending order. We sourced the hedge fund sentiment data from Insider Monkey’s database.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A lab technician using a microscope to examine the biopharmaceutical company’s molecules.
Cytokinetics, Incorporated (NASDAQ:CYTK)
Market Cap: $5.28 billion
Number of Hedge Fund Holders: 66
Cytokinetics, Incorporated (NASDAQ:CYTK) is a biopharmaceutical company that discovers, develops, and commercializes muscle inhibitors to treat diseases that affect muscle performance. It develops small-molecule drug candidates particularly engineered to affect muscle function and contractility. Its clinical-stage drug candidate portfolio includes omecamtiv mecarbil, a novel cardiac myosin activator, CK-136, a novel cardiac troponin activator, reldesemtiv, a novel fast skeletal muscle troponin activator, aficamten, a novel cardiac myosin inhibitor, and CK-3772271, a novel cardiac myosin inhibitor.
Cytokinetics, Incorporated (NASDAQ:CYTK) is financially well-positioned. As of September 30, 2024, it has around $1.3 billion in cash and cash equivalents and investments, which supports the execution of its commercial strategies and pipeline development. The company has plans to continue the go-to-market goals for aficamten in Germany in 2025. Cytokinetics, Incorporated (NASDAQ:CYTK) also aims to expand commercial readiness activities in Europe this year to prepare for the expected approval by the European Medicines Agency (EMA) in H1 2026.
The company recently announced its ‘Vision 2030’ plan built on a strong 5-year roadmap focusing on significantly enhancing immediate and future value. A significant component of these plans is the anticipated FDA approval and commercial launch of aficamten in 2025. The launch of this leading asset holds the potential to bolster Cytokinetics, Incorporated’s (NASDAQ:CYTK) position in the hypertrophic cardiomyopathy (HCM) market.
On March 17, analyst Joseph Pantginis from H.C. Wainwright reiterated a Buy rating on Cytokinetics, Incorporated (NASDAQ:CYTK) and kept the price target at $120.00. Carillon Eagle Small Cap Growth Fund also expressed bullish sentiments for Cytokinetics, Incorporated (NASDAQ:CYTK) in its fourth quarter 2023 investor letter:
“Cytokinetics, Incorporated (NASDAQ:CYTK) is a clinical-stage biopharmaceutical company focusing on the discovery and development of therapeutic agents that modulate muscle function for the treatment of diseases and medical conditions. The company reported success in clinical trials for Aficamten, a treatment for symptomatic obstructive hypertrophic cardiomyopathy. Investors are optimistic about the prospects for this medication, which could turn out to be a safer, more effective alternative to the current market leader.”
Overall, CYTK ranks 1st on our list of the best mid cap biotech stocks to buy. While we acknowledge the potential of CYTK as an investment, 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 CYTK but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.