Most, if not all, of the market’s current mega-cap stocks started out much smaller. Investors who spotted their potential early had opportunities to make fortunes over time.
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Which smaller stocks today could be monsters in the making? Here’s why three Motley Fool contributors think Beam Therapeutics (NASDAQ: BEAM), CRISPR Therapeutics (NASDAQ: CRSP), and Sarepta Therapeutics (NASDAQ: SRPT) have what it takes.
Touching all the bases
Keith Speights (Beam Therapeutics): Some technologies simply have the “it factor.” When you hear about them, you get the feeling that they could shake things up in a huge way. I think base editing is such a technology. And Beam Therapeutics is arguably the best base-editing stock around.
Base editing is a type of gene editing. Instead of cutting DNA like other gene-editing methods, base editing converts a DNA base to another base. It’s kind of the genomic equivalent of a pencil with an eraser. Base-editing therapies, in effect, erase one DNA base and write in another. The big advantage of this approach is accuracy. Base editing avoids the off-target edits that can occur with other gene-editing methods.
Beam Therapeutics’ pipeline currently features two experimental base-editing therapies in phase 1/2 testing. BEAM-101 targets sickle cell disease. BEAM-201 is a chimeric antigen T-cell receptor (CAR-T) therapy for relapsed/refractory T-cell acute lymphoblastic leukemia (T-ALL)/T-cell lymphoblastic lymphoma (T-LL).
More clinical programs could be on the way. Beam plans to file for U.S. Food and Drug Administration (FDA) approval in early 2024 to advance BEAM-302 into clinical testing as a treatment for rare genetic disease alpha-1 antitrypsin deficiency. It also hopes to file for FDA approval in the first half of next year to advance BEAM-301 into clinical development targeting glycogen storage disease Ia.
Beam Therapeutics is still only in its early innings. However, if the company is successful with its first couple of base-editing therapies, it could open up opportunities to target many other genetic diseases and cancers. I think this stock could be a massive winner over the next decade and beyond.
A game-changing treatment could lead to mammoth returns
David Jagielski (CRISPR Therapeutics): One stock that could be worth significantly more in the next few years is CRISPR Therapeutics. The gene-editing company comes with some risk as it has no stable revenue coming through its operations today. But that could soon change.
It has been working with Vertex Pharmaceuticals on gene-editing therapy exa-cel. The therapy is a game changer because it can drastically improve the lives of patients with a couple of rare blood disorders — sickle cell disease and beta-thalassemia.
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Exa-cel can even be a functional cure, meaning there’s no need for ongoing patient treatment. The promise it holds is evident in the treatment’s potential price tag. Analysts from the Institute for Clinical and Economic Review believe that exa-cel is justifiable even at more than $2 million, given the savings it may generate for the healthcare industry.
Investors will learn by next month whether the FDA approves exa-cel for sickle cell disease, as its Prescription Drug User Fee Act (PDUFA) date is Dec. 8. And March 30 of next year is the PDUFA date for whether exa-cel gets the nod as a treatment for transfusion-dependent beta-thalassemia. If exa-cel obtains approval on either of those indications, it could put CRISPR Therapeutics on the map with larger healthcare companies and lead to more collaborations and growth opportunities.
CRISPR Therapeutics has more treatments in clinical trials, including VCTX210 and VCTX211, both of which target type 1 diabetes. It also has multiple CAR-T therapies in clinical stages. But nothing is as far along as exa-cel at this point. While the company will have to share the profits on exa-cel with Vertex, having an approved product can go a long way in solidifying CRISPR’s business and helping it to fund more opportunities.
According to the consensus analyst price target, CRISPR Therapeutics’ stock has an upside of 35% right now. Over the long run, though, as the company’s business evolves and potentially gets even larger, this could become a monster stock to own.
CRISPR Therapeutics still has a long way to go. However, if you’re willing to be patient and take on some risk, this might be one of the best healthcare stocks you can buy right now.
It’s just the beginning for this biotech
Prosper Junior Bakiny (Sarepta Therapeutics): No formula guarantees success in the biotech industry. However, a drugmaker’s innovative ability is undoubtedly an important factor that can lead to the outcomes investors seek.
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In that department, mid-cap company Sarepta Therapeutics looks great. Although it isn’t the largest or most famous biotech, it has already achieved significant breakthroughs in developing therapies for Duchenne muscular dystrophy (DMD), a rare, progressive genetic disease characterized by muscle degeneration.
Sarepta Therapeutics earned approval for Elevidys, the first gene therapy for DMD, from the U.S. FDA earlier this year. That’s in addition to several other treatments already in its portfolio that treat this challenging illness. But Elevidys targets the underlying genetic causes of DMD instead of just alleviating some of the disease’s symptoms.
The gene therapy is currently approved for DMD patients ages four and five. Sarepta plans to seek a label expansion to include patients of all ages, even though Elevidys failed to meet the primary endpoint in a recent phase 3 study. However, Sarepta’s executives stated that the FDA appeared to be open to a potential label expansion based on a review of all of the data from the clinical trial.
Sarepta Therapeutics’ proven innovative capabilities — including developing complex gene therapies — and its rising prominence in this small niche are great signs for the future. The company boasts more than 40 programs in its pipeline targeting DMD and other rare conditions. In my view, Sarepta Therapeutics looks like a pretty good pick to reward patient investors who get in now — before it becomes a monster stock.
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