We recently published a list of 10 Best Biotech Stocks To Buy Under $20. In this article, we are going to take a look at where Arcutis Biotherapeutics, Inc. (NASDAQ:ARQT) stands against the other best biotech stocks to buy under $20.
The biotechnology industry is experiencing rapid growth, driven by increasing demand for innovative treatments, technological advancements, and government support. The aging population and rising healthcare needs are creating a strong market for new therapies, while breakthroughs in areas like gene editing, sequencing, personalized medicine, and AI are enabling the development of novel approaches. Between 2019 and 2021, venture capital firms invested over $52 billion in therapeutic-focused biotech companies worldwide. Of this total, two-thirds was allocated to start-ups with platform technologies.
By addressing critical unmet medical needs, biotech companies are transforming healthcare with groundbreaking therapies. A key development in this space is the launch of the National Bioeconomy Board as part of Biden’s Investing in America agenda. It aims to harness the potential of biotechnology for the U.S. economy.
In addition to this, the National Security Commission on Emerging Biotechnology is developing policy recommendations to streamline the regulatory process for biotechnology products. By lowering barriers to entry, more researchers can leverage biotechnology for agricultural applications, supporting U.S. farmers and improving food security. These efforts are expected to create new market opportunities.
Also Read: 10 Largest Biotech Hedge Funds and Their Top Stock Picks
Market Growth Forecast
The biotechnology industry has seen an increase in mergers and acquisitions activity, along with expectations of declining interest rates which have contributed to a strong start in 2024. As a result, projections indicate the global biotechnology market could reach an impressive $5.7 trillion by 2033, growing at a compound annual growth rate (CAGR) of nearly 14% from 2024 to 2033. Even the agricultural biotechnology market is forecasted to grow at a 7.9% CAGR, reaching a market value of $232 billion by 2032.
However, despite the market’s potential, significant risks remain when investing in biotech companies. A failure to meet clinical trial endpoints or secure sufficient funding before a product launch can lead to bankruptcy. The risk of failure is especially high in the biotech sector, where drug development typically takes over a decade and has an estimated failure rate of around 90%.
Hence, biotech stocks are often considered “high-risk, high-reward” investments due to their upside potential coupled with significant risks. If you’re interested in exploring this sector, a good strategy might be to focus on promising but cheap biotech stocks.
Our Methodology
To identify the top biotech stocks to buy under $20, we analyzed the biotech companies that were most popular among hedge funds as of Q2 2024 and traded under $20. Analysts are optimistic about these companies due to their potential to deliver strong returns for investors. Drawing from Insider Monkey’s comprehensive database of over 900 hedge funds, we ranked the best biotech stocks under $20 in ascending order based on their popularity among hedge funds 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).
A biotechnologist working in a laboratory, examining the effects of a Janus Kinase type 1 inhibitor on plaque psoriasis.
Arcutis Biotherapeutics, Inc. (NASDAQ:ARQT)
Number of Hedge Fund Holders: 32
Price: $9.38
Arcutis Biotherapeutics, Inc. (NASDAQ:ARQT) is a California-based biopharmaceutical company that develops treatments for dermatological diseases. Its lead product, Zoryve, is a topical roflumilast cream for plaque psoriasis as well as atopic dermatitis.
In Q1 2024, Arcutis Biotherapeutics, Inc. (NASDAQ:ARQT) recorded solid growth in prescriptions for both the cream and foam products. Net revenues totaled $21.6 million, with 70% coming from the cream and 30% from the foam, which is still in the early stages of its launch. To date, over 255,000 prescriptions for both products have been generated by more than 12,500 unique prescribers, reflecting the positive clinical outcomes experienced by healthcare professionals and their patients.
The strong performance and growth potential of Zoryve (Roflumilast) have made analysts quite positive about Arcutis Biotherapeutics, Inc.’s (NASDAQ:ARQT) outlook. The product has shown promising results in clinical trials for the treatment of psoriasis, and seborrheic dermatitis. It has also received FDA approval for mild to moderate atopic dermatitis. Since there is no branded product competition for seborrheic dermatitis, the approval and commercialization of the company’s product could help in gaining market share.
Arcutis Biotherapeutics, Inc. (NASDAQ:ARQT) stock has received a consensus rating of “Moderate Buy”. Meanwhile, the price target for the stock stands at $13.33, representing a potential upside of around 40% from the current price levels.
Overall, ARQT ranks 7th among the 10 best biotech stocks to buy under $20. While we acknowledge the potential of ARQT 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 timeframe. If you are looking for an AI stock that is more promising than ARQT 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.