10 Most Promising Biotech Stocks According to Analysts

In this article, we discuss 10 most promising biotech stocks according to analysts.

Last year was a period of transition for biotech firms. Following significant investment, the availability of cheap capital, and public recognition for companies developing COVID-19 treatments and vaccines, the initial public offering market stalled in 2022, and there was a reduction in the number of new drug approvals. As biotech companies plan for the remainder of this year, they must contend with ongoing uncertainty. Nevertheless, these challenges and uncertainties create several opportunities for well-funded companies.

It is expected that small private biotech firms will make a comeback in the initial public offering market in the later part of 2023 as the rate of interest rate hikes slows down. However, due to challenging economic conditions, investors are likely to be more selective in their choices and prioritize companies with drugs in human trials. After a successful year in 2021, the number of initial public offerings (IPOs) across all industries took a sharp decline worldwide in the past year. This decline was due to central banks’ implementation of aggressive interest rate hikes to combat inflation, thereby ending the period of easily available and low-cost capital. The biotech sector experienced a significant drop in initial public offerings in the last year, with only 47 IPOs that raised a total of roughly $4 billion. This was in contrast to 2021, where there were 152 IPOs that generated over $25 billion in funds.

A report by EY revealed that as of December 2022, biopharma companies held dealmaking capacity of over $1.4 trillion. This is due to the fact that pharmaceutical giants are facing the expiration of patents on their key drugs and are searching for new promising assets. Analysts have identified developmental obesity treatments, Alzheimer’s disease drugs, cell and gene therapies, and the breakthrough messenger-RNA technology as areas that are attracting investor interest. Sean Sun, portfolio manager at Thornburg Investment Management, said: 

“Now we’re in this sweet spot where you’re seeing signs of disinflation, you’re seeing risk appetite improve. All we need is one or two biotech IPOs to get good interest and the floodgates will open.”

Investors can also check out 11 Most Undervalued Biotech Stocks, 12 Cheap Biotech Stocks To Buy, and 12 Best Biotech Stocks To Buy Under $10. Some of the top biotech stocks include Pfizer Inc. (NYSE:PFE), Amgen Inc. (NASDAQ:AMGN), and Intellia Therapeutics, Inc. (NASDAQ:NTLA). 

Our Methodology 

To determine the most promising biotech stocks, we focused on pure-play biotech companies. We narrowed down our selection to biotech stocks that had the highest upside potential based on average analyst price targets. We have ranked our picks in ascending order of their average upside potential, as of February 24. 

Photo by National Cancer Institute on Unsplash

Most Promising Biotech Stocks According to Analysts

10. Legend Biotech Corporation (NASDAQ:LEGN)

Number of Hedge Fund Holders: 28

Average Upside Potential as of February 24: 57.48% 

Legend Biotech Corporation (NASDAQ:LEGN) is a clinical-stage biopharmaceutical company focused on the discovery and development of novel cell therapies for oncology and other indications in the United States, China, and internationally. On January 27, Legend Biotech Corporation (NASDAQ:LEGN) made an announcement that its CAR-T cell therapy called Carvykti, which is co-developed with Johnson & Johnson (NYSE: JNJ), achieved the primary objective in a Phase 3 clinical trial for individuals suffering from multiple myeloma. Legend Biotech Corporation (NASDAQ:LEGN) plans to present the trial results at an upcoming medical conference and to discuss the findings with regulatory agencies in order to make submissions for approval.

On January 27, Edward Tenthoff, an analyst at Piper Sandler, reaffirmed his positive stance on Legend Biotech Corporation (NASDAQ:LEGN) by maintaining an Overweight rating and setting a $78 target price. This comes after the company’s announcement that its Phase 3 trial for Carvykti, a treatment for relapsed and lenalidomide-refractory multiple myeloma in adults, achieved its primary endpoint. Piper Sandler forecasts a significant growth of Carvykti’s sales by 157% to $344 million in 2023 and highlighted Janssen’s expectation of peak sales of $5 billion for Carvykti.

According to Insider Monkey’s data, 28 hedge funds were long Legend Biotech Corporation (NASDAQ:LEGN) at the end of Q4 2022, compared to 29 funds in the prior quarter. Lei Zhang’s Hillhouse Capital Management is the largest stakeholder of the company, with a position worth $256.4 million. 

In addition to Pfizer Inc. (NYSE:PFE), Amgen Inc. (NASDAQ:AMGN), and Intellia Therapeutics, Inc. (NASDAQ:NTLA), Legend Biotech Corporation (NASDAQ:LEGN) is one of the prominent biotech plays to watch. 

TimesSquare Capital made the following comment about Legend Biotech Corporation (NASDAQ:LEGN) in its Q3 2022 investor letter:

“New to the strategy this quarter is Legend Biotech Corporation (NASDAQ:LEGN), a clinical-stage biopharmaceutical company engaged in the discovery and development of novel cell therapies for oncology and other indications. The company’s lead product is a CAR-T treatment for multiple myeloma and is currently in joint development/commercialization with Janssen Biotech. Chimeric antigen receptor T cells are genetically engineered for use in immunotherapy.”

9. Moderna, Inc. (NASDAQ:MRNA)

Number of Hedge Fund Holders: 52

Average Upside Potential as of February 24: 58.97% 

Moderna, Inc. (NASDAQ:MRNA) is a Massachusetts-based biotechnology company that discovers, develops, and markets messenger RNA therapeutics and vaccines for the treatment of infectious diseases, immuno-oncology, rare diseases, cardiovascular diseases, and auto-immune diseases in the United States, Europe, and internationally. On February 23, Moderna, Inc. (NASDAQ:MRNA) reported a Q4 GAAP EPS of $3.61, missing estimates by $1.14. The revenue of $5.1 billion outperformed Wall Street consensus by $80 million. 

On February 23, Morgan Stanley decreased its price target on Moderna, Inc. (NASDAQ:MRNA) to $185 from $205 due to higher expenses and capital expenditures, and maintained an Equal Weight rating on the company’s shares. Morgan Stanley reported that Moderna, Inc. (NASDAQ:MRNA)’s Q4 performance was generally consistent with expectations. However, the 2023 cost of goods sold estimate of 35%-40% exceeded expectations and was a significant downside factor in Morgan Stanley’s projections. On the other hand, the firm highlighted that potential early filings for PCV, launches of flu and RSV vaccines in 2024, and a stronger U.S. commercial COVID market could act as potential drivers for near-term growth.

According to Insider Monkey’s Q4 data, Moderna, Inc. (NASDAQ:MRNA) was part of 52 hedge fund portfolios, up from 44 in the prior quarter. Philippe Laffont’s Coatue Management is the biggest stakeholder of the company, with 6.3 million shares worth $1.14 billion. 

ClearBridge Select Strategy made the following comment about Moderna, Inc. (NASDAQ:MRNA) in its Q4 2022 investor letter:

“Moderna, Inc. (NASDAQ:MRNA) became a household name during the pandemic as one of the first developers of a COVID-19 vaccine. But the stock sold off sharply as COVID momentum, including high expectations for booster shots, began to wear off, causing investors to slash its fiscal 2023 earnings estimates by two-thirds over the last year. We believe those downward revisions clouded the prospects for the company’s fully funded pipeline of platform opportunities, including cancer, RSV and flu. The cash-rich company also recently expanded its partnership with Merck to improve cancer treatments.”

8. Roivant Sciences Ltd. (NASDAQ:ROIV)

Number of Hedge Fund Holders: 35

Average Upside Potential as of February 24: 61.18%

Roivant Sciences Ltd. (NASDAQ:ROIV) is a London-based biopharmaceutical and healthcare technology company that develops product candidates for the treatment of solid tumors, sickle cell diseases, hypophosphatasia, oncologic malignancies, psoriasis, atopic dermatitis, vitiligo, hyperhidrosis, acne, myasthenia gravis, warm autoimmune hemolytic anemia, thyroid eye diseases, sarcoidosis, and staph aureus bacteremia. Roivant Sciences Ltd. (NASDAQ:ROIV) is one of the most promising biotech stocks as per Wall Street analysts. 

On February 13, the company reported its Q4 earnings. The GAAP loss per share of $0.49 missed Street consensus by $0.09. Roivant Sciences Ltd. (NASDAQ:ROIV)’s revenue of $17.05 million exceeded estimates by $2.27 million. As of December 31, 2022, the company had cash, cash equivalents and restricted cash of approximately $1.5 billion. 

Neena Bitritto-Garg, an analyst at Citi, increased the company’s price target on Roivant Sciences Ltd. (NASDAQ:ROIV) to $14 from $11 and has maintained a Buy rating on its shares on January 5.

According to Insider Monkey’s Q4 data, 35 hedge funds were long Roivant Sciences Ltd. (NASDAQ:ROIV), compared to 28 funds in the prior quarter. Daniel Gold’s QVT Financial is the largest investor in the company. 

7. Beam Therapeutics Inc. (NASDAQ:BEAM)

Number of Hedge Fund Holders: 18

Average Upside Potential as of February 24: 61.78%

Beam Therapeutics Inc. (NASDAQ:BEAM) is a Massachusetts-based biotechnology company that develops precision genetic medicines for patients suffering from serious diseases in the United States. Beam Therapeutics Inc. (NASDAQ:BEAM) is one of the most promising biotech plays according to analysts, with an average upside potential of nearly 62% as of February 24. 

On February 1, Rick Bienkowski, an analyst at Cantor Fitzgerald, started coverage of Beam Therapeutics Inc. (NASDAQ:BEAM) with an Overweight rating and a $62 price target. In a research note to investors, the analyst suggested that despite only recently commencing Phase 1 clinical trials for sickle cell disease, Beam Therapeutics Inc. (NASDAQ:BEAM)’s platform, pipeline, and ability to establish partnerships with advantageous economics offer long-term value. The firm also recognizes substantial scarcity value in Beam Therapeutics Inc. (NASDAQ:BEAM)’s base-editing technology and believes that partner Verve Therapeutics’ Phase 1 data presentation in 2H23 could confirm the validity of Beam’s base-editing platform and in vivo treatment approach.

According to Insider Monkey’s fourth quarter database, 18 hedge funds were bullish on Beam Therapeutics Inc. (NASDAQ:BEAM), compared to 27 funds in the preceding quarter. Cathie Wood’s ARK Investment Management is the biggest stakeholder of the company, with 8.2 million shares worth $321.2 million. 

Here is what Baron Health Care Fund has to say about Beam Therapeutics Inc. (NASDAQ:BEAM) in their Q1 2021 investor letter:

“Beam Therapeutics Inc. is a biotechnology company pioneering a novel technology called base editing, which allows for individual base pairs (the letters of DNA) to be modified. Shares fell along with other biotechnology stocks driven by a sudden rise in treasury yields. Early stage biotechnology stocks are particularly sensitive to interest rates because their cash flows are further in the future. We believe we are entering into a phase of significant advancement for the gene editing field that will eventually lead to curative therapies, and we think Beam has a unique platform technology.”

6. CRISPR Therapeutics AG (NASDAQ:CRSP)

Number of Hedge Fund Holders: 28

Average Upside Potential as of February 24: 77.43%

CRISPR Therapeutics AG (NASDAQ:CRSP) is a gene editing company focused on developing gene-based medicines for serious diseases using its CRISPR-associated protein 9 (Cas9) platform. CRISPR Therapeutics AG (NASDAQ:CRSP) shares gained nearly 14% on February 22, the biggest intraday gain since January 2021, a day after the firm announced its Q4 2022 results with a corporate update.

On February 23, Oppenheimer maintained an Outperform rating on CRISPR Therapeutics AG (NASDAQ:CRSP) but reduced its price target on the shares to $102 from $110 following the release of the company’s Q4 results. The firm believes that the main focus this year will continue to be on the potential approval and commercial readiness of Exacel. According to recent disclosures, both the European Medicines Agency and the UK’s Medicines and Healthcare products Regulatory Agency have validated the Marketing Authorization Application submissions for exa-cel, and the rolling submissions to the US Food and Drug Administration are expected to be completed in the first quarter of 2023.

According to Insider Monkey’s Q4 data, 28 hedge funds were long CRISPR Therapeutics AG (NASDAQ:CRSP), compared to 29 funds in the prior quarter. Steven Boyd’s Armistice Capital is a prominent stakeholder of the company, with 1 million shares worth $42 million.

Like Pfizer Inc. (NYSE:PFE), Amgen Inc. (NASDAQ:AMGN), and Intellia Therapeutics, Inc. (NASDAQ:NTLA), elite hedge funds are piling into CRISPR Therapeutics AG (NASDAQ:CRSP) for exposure to the biotech sector.

5. Ginkgo Bioworks Holdings, Inc. (NYSE:DNA)

Number of Hedge Fund Holders: 25

Average Upside Potential as of February 24: 100.67%

Ginkgo Bioworks Holdings, Inc. (NYSE:DNA) was founded in 2008 and is headquartered in Boston, Massachusetts. The company develops a platform for cell programming, which is used to program cells to enable biological production of products, such as novel therapeutics, food ingredients, and chemicals derived from petroleum. Ginkgo Bioworks Holdings, Inc. (NYSE:DNA) is one of the most promising biotech stocks. 

On November 28, Gaurav Goparaju, an analyst at Berenberg, began coverage of Ginkgo Bioworks Holdings, Inc. (NYSE:DNA) and assigned it a Buy rating with a $6 price target. Ginkgo Bioworks Holdings, Inc. (NYSE:DNA) is utilizing its platform to commercialize synthetic biology on a large scale in various industries and is the only company with a widely-scaled horizontal platform in this field, according to the analyst. The analyst thinks that Ginkgo is in a favorable position to revolutionize cell programming in multiple industries.

According to Insider Monkey’s Q4 data, 25 hedge funds were long Ginkgo Bioworks Holdings, Inc. (NYSE:DNA), compared to 24 funds in the prior quarter. 

4. Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE)

Number of Hedge Fund Holders: 26

Average Upside Potential as of February 24: 108.11% 

Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE) is a California-based biopharmaceutical company, focused on the identification, development, and commercialization of treatments for rare and ultra-rare genetic diseases in North America, Latin America, Japan, Europe, and internationally. The company expects total revenue guidance for 2023 to be between $425 million to $450 million, versus a $426.25 million consensus. It is one of the most promising biotech stocks to invest in according to analysts. 

On February 17, Baird increased Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE)’s price target from $50 to $57 and maintained an Outperform rating on the stock. The firm’s rating is mainly influenced by the company’s valuation. However, Baird also observed that Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE) could experience more catalysts in mid-to-late 2023, which may further benefit the stock compared to previous years.

According to Insider Monkey’s fourth quarter database, 26 hedge funds were bullish on Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE), compared to 31 funds in the prior quarter. Avidity Partners Management is the biggest stakeholder of the company, with nearly 3 million shares worth $138.5 million. 

3. Intellia Therapeutics, Inc. (NASDAQ:NTLA)

Number of Hedge Fund Holders: 39

Average Upside Potential as of February 24: 142.17%

Intellia Therapeutics, Inc. (NASDAQ:NTLA) was incorporated in 2014 and is headquartered in Cambridge, Massachusetts. It is a genome editing company that focuses on the development of therapeutics. The company’s revenue of $13.6 million climbed 5.8% year-over-year, beating market estimates by $2.89 million. Intellia Therapeutics, Inc. (NASDAQ:NTLA) ended 2022 with a strong financial position, reporting approximately $1.3 billion in cash as of December 31, compared to $1.1 billion as of December 31, 2021.

On February 24, Geulah Livshits, an analyst at Chardan, maintained a Buy rating on Intellia Therapeutics, Inc. (NASDAQ:NTLA) but lowered the price target from $129 to $111. The reason for the reduced valuation is due to the emergence of new public and private players in the gene-editing technology sector, which is likely to increase competition in the in vivo approach to rare diseases. As a result, the analyst has trimmed Intellia Therapeutics, Inc. (NASDAQ:NTLA)’s in vivo platform’s value.

According to Insider Monkey’s Q4 data, 39 hedge funds were long Intellia Therapeutics, Inc. (NASDAQ:NTLA), compared to 36 funds in the last quarter. Cathie Wood’s ARK Investment Management is the biggest position holder in the company, with 9.4 million shares worth $328.6 million. 

Carillon Tower Advisers discussed its stance on Intellia Therapeutics, Inc. (NASDAQ:NTLA) in its Q2 2021 investor letter.

“Intellia Therapeutics is a clinical-stage genome editing company focused on the development of proprietary, potentially curative therapeutics. The company’s stock soared after announcing positive interim data from an ongoing phase 1 clinical study of its in vivo gene editing candidate, which is being developed as a single-dose treatment for hereditary transthyretin (ATTR) amyloidosis. This specific form of therapy would be the first of its kind resulting in the precision editing of a gene in a target tissue in the human body.”

2. Vir Biotechnology, Inc. (NASDAQ:VIR)

Number of Hedge Fund Holders: 17

Average Upside Potential as of February 24: 143.07%

Vir Biotechnology, Inc. (NASDAQ:VIR) is a California-based commercial-stage immunology company that develops therapeutic products to treat and prevent serious infectious diseases. It is one of the most promising biotech stocks to invest in, with an average upside potential of 143% as of February 24. 

Goldman Sachs analyst Paul Choi on February 21 upgraded Vir Biotechnology, Inc. (NASDAQ:VIR) from Neutral to Buy and increased the price target from $41 to $53. The upgrade is based on the expected mid-2023 release of VIR-2482 data, which is anticipated to demonstrate significantly better efficacy than currently approved and competing pipeline-stage flu vaccines. This outcome is predicted to drive upward revisions to consensus estimates and potentially result in substantial growth for the company’s shares. The analyst sees a “compelling risk/reward” on Vir Biotechnology, Inc. (NASDAQ:VIR)’s shares and considers the upcoming readout as an “underappreciated catalyst that could drive a major new leg of growth.”

According to Insider Monkey’s Q4 data, 17 hedge funds were bullish on Vir Biotechnology, Inc. (NASDAQ:VIR), compared to 18 funds in the last quarter. Cliff Asness’ AQR Capital Management is a significant position holder in the company, with 308,673 shares worth $7.8 million. 

1. Zai Lab Limited (NASDAQ:ZLAB)

Number of Hedge Fund Holders: 22

Average Upside Potential as of February 24: 162.73%  

Zai Lab Limited (NASDAQ:ZLAB) was incorporated in 2013 and is headquartered in Shanghai, China. The company develops and commercializes therapies to treat oncology, autoimmune disorders, infectious diseases, and neuroscience primarily in Mainland China and Hong Kong. It is one of the most promising biotechnology stocks to invest in. 

On January 30, Zai Lab Limited (NASDAQ:ZLAB)’s application for a new drug, sulbactam-durlobactam (SUL-DUR), was granted priority review by China’s National Medical Products Administration. The drug is designed to treat infections caused by Acinetobacter baumannii, including multidrug-resistant and carbapenem-resistant (CRAB) strains. Additionally, Innoviva, Inc. (NASDAQ:INVA) has filed an application for the same drug in the United States, which is also under priority review. This designation provides a shortened review period in both countries.

According to Insider Monkey’s fourth quarter database, Zai Lab Limited (NASDAQ:ZLAB) was part of 22 hedge fund portfolios, compared to 24 in the last quarter. Simon Sadler’s Segantii Capital is the largest stakeholder of the company, with 2.4 million shares worth $74.5 million. 

Here is what ClearBridge Investments International Growth ACWI ex-U.S. Strategy has to say about Zai Lab Limited (NASDAQ:ZLAB) in its Q4 2021 investor letter:

“Economies in Asia, meanwhile, are taking the opposite approach on stimulus, with China lowering its reserve requirement ratio for banks to support flagging growth in the world’s second-largest economy. Japan’s new government passed a large stimulus bill after its economy contracted in the third quarter. Despite these actions, sentiment remains decidedly negative in these regions. Our underweight to Japan proved beneficial during the quarter while our single holding in China – biotechnology company Zai Lab – sold off sharply mostly due to generally weak sentiment around Chinese health care stocks.”

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Disclosure: None. 10 Most Promising Biotech Stocks According to Analysts is originally published on Insider Monkey.