The biotech industry is ripe with great investment opportunities due to technological advancements such as artificial intelligence (AI), market demand, and favorable regulatory support. Companies developing cutting-edge treatments such as gene editing, mRNA therapies, and personalized medicine appear to be attracting investor and analyst attention.
While investing in biotech stocks can be risky due to clinical trial failures and regulatory hurdles, successful drug approvals can result in massive stock gains. Let’s look at two such growth stocks that have the potential to generate significant long-term returns.
Growth Stock #1: Intellia Therapeutics
The first company on my list is Intellia Therapeutics (NTLA), a small-cap clinical-stage biotech focused on the development of CRISPR/Cas9-based gene-editing therapies. Intellia’s therapeutic strategy focuses on both in vivo and ex vivo gene editing applications to treat conditions like transthyretin amyloidosis (ATTR) and hereditary angioedema (HAE). Intellia Therapeutics stock, valued at $1.09 billion, is up 1.65% this year.
While ex vivo therapies modify patients’ cells outside the body, in vivo therapy edits genes directly within the patient’s body. Three of Intellia’s therapies are currently undergoing Phase 3 clinical trials. Notably, NTLA-2001, the company’s lead in vivo therapy for ATTR amyloidosis, is progressing well. The Phase 3 MAGNITUDE trial for patients with ATTR-cardiomyopathy (ATTR-CM) has started. Additionally, a MAGNITUDE-2 pivotal Phase 3 trial for NTLA-2001 for ATTR-polyneuropathy (ATTR-PN) has also begun.
NTLA-2002 is the company’s investigational treatment for hereditary angioedema (HAE). Intellia announced positive Phase 2 results in October 2024, indicating that the therapy was well tolerated with no serious adverse events reported. The enrollment for the HAELO Phase 3 trial is expected to be completed by the second half of 2025. While Intellia doesn’t have any approved products on the market yet, it generated $9.1 million in collaboration revenue in the third quarter of 2024.
On Jan. 9, the company announced several restructuring initiatives. Intellia has decided to discontinue the development of NTLA-3001 and select research-stage programs. It is also planning a net workforce reduction of roughly 27% in 2025. The goal is to focus all of the resources on NTLA-2002 for hereditary angioedema (HAE) and nex-z for transthyretin (ATTR) amyloidosis. The company believes that these therapies have the potential to produce significant near-term results. The reorganization is expected to result in a $8 million charge in the first quarter of 2025. As of the fourth quarter, the company had $862 million in cash, which it estimates will fund its pipeline development through the first half of 2027.
Intellia’s strategic focus on advancing its lead programs in CRISPR applications, combined with a solid financial foundation, positions the company for future growth. However, as with any clinical-stage biotech company, it faces significant risks until an approved and commercialized therapy hits the market and generates revenue.
Overall, Wall Street rates Intellia stock as a “Moderate Buy.” Of the 25 analysts covering NTLA stock, 17 have a “Strong Buy” recommendation, one suggests a “Moderate Buy,” and seven say it is a “Hold.” Analysts’ average price target of $50.36 implies the stock has upside potential of 370.6% over current levels. Plus, the Street-high price estimate for the stock of $106 suggests the stock can rally over 890.6% over the next 12 months. While these targets may seem far-fetched, many biotech stocks have skyrocketed when one of their successful products has hit the market.
Growth Stock #2: Royalty Pharma
Royalty Pharma (RPRX), the second biotech stock on my list, is a unique biotech company. Its business model focuses on purchasing existing royalties and providing capital to partners in exchange for future royalty streams. This approach provides innovators with immediate funding while also allowing Royalty Pharma a share in the commercial success of the therapeutic products, resulting in a win-win situation for both.
Its diverse portfolio includes royalties on over 35 commercial products and 14 development-stage product candidates. Notable and upcoming products include Vertex Pharmaceuticals’ (VRTX) Trikafta for cystic fibrosis, Pfizer’s (PFE) Xtandi for prostate cancer, AbbVie (ABBV) and Johnson & Johnson’s (JNJ) 7 Imbruvica, Roche’s (RHHBY) Evrysdi for spinal muscular atrophy, Syndax Pharmaceutical’s (SNDX) Niktimvo for chronic graft-versus-host disease (cGVHD), and others. Valued at $18.6 billion, Royalty Pharma stock has gained 27% year-to-date.
In the fourth quarter, royalty receipts increased 12% year-over-year to $729 million. The company received $2.77 billion in royalties in 2024, a 13% increase over the previous year, owing to “strong performance from Evrysdi, the CF franchise, Trelegy, Tremfya, and new royalty acquisitions.” In 2024, the company increased its development-stage portfolio by acquiring royalties for four potential new therapies. Looking ahead, Royalty Pharma expects to benefit from new product launches. These include Bristol-Myers Squibb’s (BMY) Cobenfy and Geron’s (GERN) Rytelo.
Recently, the company signed an R&D funding collaboration agreement with Biogen (BIIB). Under the agreement, the company will provide up to $250 million in R&D funding over six quarters for a Phase 3 trial of a potential first-in-class biologic for lupus treatment. Royalty Pharma will in return receive mid-single-digit royalties on annual global sales upon product launch. The company expects portfolio receipts to be between $2.9 billion and $3.05 billion in 2025, representing a 4% to 9% increase year-over-year. It ended 2024 with $929 million in cash and cash equivalents and a total debt of $7.8 billion. The company also pays a dividend, which yields 2.7%, compared to the healthcare sector’s average of 1.6%. The company’s dividend has also increased over the last five years, with the most recent quarterly dividend hike of 5% to $0.22 per share.
Overall, Wall Street rates Royalty Pharma stock as a “Strong Buy.” Of the six analysts covering RPRX stock, five have a “Strong Buy” recommendation, and one suggests a “Hold.” Analysts’ average price target of $40.67 implies the stock has upside potential of 25.7% over current levels. Plus, the Street-high price estimate for the stock of $51 suggests the stock can rally over 57.6% over the next 12 months.
