After I spent many years following Wall Street, there are a few characteristics about the “big money” that stand out for me. One of these traits is that many if not most large investors are very reluctant to buy stocks that have a 60%-80% chance of climbing a great deal in the long term but a 10%-15% chance of plunging in the short-to-medium term. This has led to the rise of biotech stocks to buy.
When you think about fund managers’ viewpoint, that makes a great deal of sense. For the most part, their bosses are focused on short-to-medium-term performance, and by the time the long term rolls around, there’s a good chance that they’ll be working somewhere else anyway.
And why should a fund manager take a chance of getting fired because of a few really bad picks and a subpar year or two? Of course, these characteristics can work in favor of long-term investors who can buy many of these stocks, enabling them to make huge profits. There are many biotech stocks that are in this category. Here are three of them.
ImmunityBio (IBRX)
ImmunityBio (NASDAQ:IBRX) has tumbled 28%, and 68% in the last month and so far in 2023, respectively.
As I noted in a previous column, more than 90% of bladder cancer patients who took the company’s protein “were able to avoid having their bladder removed.” However the Food and Drug Administration, after inspecting the factories of IBRX’s partners, discovered deficiencies at those facilities. As a result, the agency refused to approve the treatment.
However, I believe that ImmunityBio’s partners can either improve their plants or the drug maker can find new partners.
Similarly, Seeking Alpha columnist Clinically Sound Investor wrote “The drug is good, so resubmission, approval, and partnership are all still in play.”
In addition to the regulatory issue, bears are worried about the company’s “high cash burn and dilution.” But those challenges won’t be relevant if the firm’s protein turns out to be a blockbuster.
Revance (RVNC)
Revance (NASDAQ:RVNC) stock has dropped 18% in the last month and 39% in the previous three months.
The company developed DAXXIFY, an anti-wrinkle treatment whose positive effects remain in place significantly longer than those of Botox. Specifically, “DAXXIFY’s effects last about six months, while Botox’s impact only lasts for roughly 13 weeks or slightly over three months.”
On Aug. 8, Revance reported very strong second-quarter results as its sales jumped 105% versus the same period a year earlier to $58.1 million. And the revenue generated by DAXXIFY last quarter jumped 47% compared with Q1 to $22.6 million.
Moreover, according to Revance, DAXXIFY’s revenue “surpassed the total sales generated by any competitor to Botox in their first launch year.”
And finally, on Aug, 19, the company reported that the FDA had approved DAXXIFY as a treatment for cervical dystonia, a ” neck disorder.” According to the company, the total addressable market for the treatment in cervical dystonia is a significant $345 million.
TG Therapeutics (TGTX)
TG Therapeutics (NASDAQ: TGTX) has tumbled 49% in the last month and 61.5% in the previous three months.
TG’s drug for relapsing MS, Briumvi, was approved by the FDA last December. While TG faces competition from three similar treatments, TG’s drug requires significantly fewer injections than its competitors.
Moreover, indicating that Briumvi will indeed generate significant revenue, “European specialty pharmaceutical company Neuraxpharm” agreed to pay a hefty $645 million, excluding royalties, for the right to sell the treatment outside of North America.
In the U.S., the drug’s launch has gone fairly well but has been slower than expected, aggravating the Street.
However, I believe that the stock’s $1.58 billion market capitalization greatly undervalues the company’s longer-term outlook, making it one of the best biotech stocks to buy.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.