In 2023, the top-performing biotechnology companies with the most substantial stock appreciation were Soleno Therapeutics Inc., Ambrx Biopharma Inc., EyePoint Pharmaceuticals Inc., Immunogen Inc., and Gyre Therapeutics Inc. Today, we delve deeper into these corporations, examine their financial reports, explore the investment risks within the biotechnology sector, and evaluate the industry's prospects for the year 2024.

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The biotechnology sector in 2023: an overview

According to a report by Grand View Research, the global biotechnology market was valued at 1.55 trillion USD in 2023. The compound annual growth rate (CAGR) is projected to reach 13.96% from 2024 to 2030.

Based on data from Genetic Engineering & Biotechnology News, the market capitalisation of the top 25 biotechnology companies increased by nearly 78% from October 2019 to November 2023 inclusive, reaching 1.71 trillion USD.

The Food and Drug Administration (FDA) approved 55 new therapeutics in 2023, marking the second-highest count in the past 30 years. In total, the regulator approved 191 drugs throughout the last year, a 26% increase compared to the 2022 data. At the same time, 18 biotech companies went public in 2023, the same as in 2022, while 2021 saw 108 initial public offerings.

Our methodology

  • Stocks are traded on the NYSE and NASDAQ
  • Companies are not classified as funds
  • Sector: Biotechnology
  • Security price: Over 2 USD
  • Market capitalisation: From 300 million USD

The growth value was determined as the percentage difference between opening prices on 3 January and closing prices on 29 December 2023. The market capitalisation of each firm is indicated as of the material preparation date.

Top-performing biotech stocks of 2023

1. Soleno Therapeutics: +1826%

Founded in: 1999

Registered in: the US

Headquarters: Redwood City, California

Platform: NASDAQ

Market capitalisation: 1.43 billion USD

Soleno Therapeutics Inc. (NASDAQ: SLNO) specialises in developing and manufacturing drugs to treat rare genetic diseases. From January to December 2023, the company's stock value skyrocketed by 1825.84%, rising from 2.09 USD to 40.25 USD per unit.

On 26 September 2023, Soleno Therapeutics Inc. announced positive results from clinical trials of its experimental drug DCCR for treating Prader-Willi syndrome.

According to the Q3 2023 report, revenue for January to September 2023 inclusive was 0 USD. However, net loss increased by 49.03% compared to the same period in 2022, reaching 27.69 million USD or 2.65 USD per share.

2. Ambrx Biopharma: +562%

Founded in: 2003

Registered in: the US

Headquarters: La Jolla, California

Platform: NASDAQ

Market capitalisation: 1.75 billion USD

Ambrx Biopharma Inc. (NASDAQ: AMAM) develops innovative drugs to treat oncology diseases. Its stock surged by 562.32% in 2023, from 2.15 USD to 14.24 USD per unit.

On 16 February 2023, the biotech company released positive results from the phase 1 trial of ARX517, a drug for the treatment of prostate cancer. The medication demonstrated high effectiveness in reducing prostate-specific membrane antigen (PSMA) levels in patients with metastatic prostate cancer.

According to Ambrx Biopharma Inc.'s report for Q3 2023, revenue from January to September inclusive plummeted 73.39% compared to the corresponding period in 2022 to 1.2 million USD, and net loss decreased by 16.31% to 56.11 million or 1.03 USD per share.

3. EyePoint Pharmaceuticals: +551%

Founded in: 1987

Registered in: the US

Headquarters: Watertown, Massachusetts

Platform: NASDAQ

Market capitalisation: 0.79 billion USD

EyePoint Pharmaceuticals Inc. (NASDAQ: EYPT) is engaged in developing innovative methods for treating eye diseases. The company's shares surged by 550.99% in 2023, rising from 3.55 USD to 23.11 USD.

On 4 December 2023, EyePoint Pharmaceuticals Inc. announced positive results from the phase 2 trial of EYP-1901, a drug developed to treat wet age-related macular degeneration.

Based on the Q3 2023 report of EyePoint Pharmaceuticals Inc., revenue for January to September inclusive increased by 3.62% from the corresponding period in 2022, reaching 31.99 million USD, and net loss decreased by 3.58%, down to 56.70 million USD or 1.5 USD per share.

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4. Immunogen: +497%

Founded in: 1980

Registered in: the US

Headquarters: Waltham, Massachusetts

Platform: NASDAQ

Market capitalisation: 8.25 billion USD

Immunogen Inc. (NASDAQ: IMGN) creates innovative drugs to treat oncology diseases. The corporation's stock surged by 496.58% over the past year, from 4.97 USD to 29.65 USD.

On 3 May 2023, Immunogen Inc. announced positive results from the phase 3 trial of the ELAHERE drug for treating ovarian cancer. Based on these data, the company plans to submit a Marketing Authorization Application (MAA) in Europe and a supplemental Biologics License Application (sBLA) in the US for ELAHERE.

According to Immunogen Inc.'s report for Q3 2023, revenue for nine months skyrocketed by 264.49% from the same period in 2022, reaching 246.45 million USD, while net loss was down 91.15% to 14.51 million USD or 0.05 USD per share.

5. Gyre Therapeutics: +389%

Founded in: 2023

Registered in: the US

Headquarters: San Diego, California

Platform: NASDAQ

Market capitalisation: 1.43 billion USD

Founded on 30 October 2023 following the completion of the business merger between Catalyst Biosciences Inc. and Beijing Continent Pharmaceuticals Co. Ltd., Gyre Therapeutics Inc. (NASDAQ: GYRE) develops drugs for treating liver fibrosis across a broad spectrum of chronic liver diseases. In 2023, the corporation's stock soared 389.33% from 5.25 to 25.69 USD per unit.

According to the Q3 2023 report of Catalyst Biosciences Inc., revenue for January to September inclusive was 0 USD. Net loss amounted to 3.78 million USD or 0.10 USD per share, while a year ago, the company posted a net profit of 32.21 million USD or 1.02 USD per share.

Risks and challenges in biotech investing

  • The complexity of developments: the research and development of new drugs and technologies in the biotechnology sector typically require significant investments. It may take many years before regulators approve a new product and it becomes profitable
  • Clinical trials: not all drugs pass all phases of testing successfully. Negative results in any stage of clinical trials, even for one product in the entire range, can significantly impact the company's stock value and negatively affect the sales volumes of its other products
  • Regulation: biotechnology companies are subject to strict government regulations. Considerable effort and resources are required to navigate through all stages of regulatory approval before obtaining a permit to use a new drug for inpatient treatment and organising its sales in a specific country. The manufacturer will need permission from the local regulatory authority to enter another country's market. A denial from such organisations can have a strong negative impact on the company's financial position
  • Competition: the biotechnology sector is characterised by a high level of competition. New technologies and drugs may face similar or comparable products from other companies, putting pressure on product prices and market share
  • Financial risks: many biotechnology companies are typically unprofitable in the early years of product development and release. Therefore, there is a risk that the company may deplete its capital before successfully bringing its product to market and achieving profitability
  • Advancements in science: new scientific research may question the effectiveness, ethics, or relevance of a particular drug, proposing a new concept for treating specific diseases. This can impact the positions of manufacturers of existing products in the market
  • Ethical dilemmas: ethical dilemmas are possible in the biotechnology field, especially in the context of gene therapy and genetic modification. A company's new product may trigger public dissatisfaction and reputational damage
  • Demand instability: not all diseases create conditions for stable demand for medical drugs. For example, the need for vaccines to treat and prevent COVID-19 may differ significantly from the statistics of 2020 and 2021, suggesting that sales volumes of relevant drugs may also have noticeably decreased
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Investor insights: how to evaluate biotech stocks

Evaluating biotechnology stocks requires a comprehensive approach that considers their activities' financial and scientific aspects. Here are the key points to focus on:

  • Product pipeline research: examine the list of all products developed by the company and assess their development stage
  • Clinical results: study the effects of clinical trials; positive results and product safety are crucial for the company's development
  • Competitive environment: analyse the market competition level and evaluate how the company's products compare with competitors. Assess unique competitive advantages
  • Financial position: investigate the financial indicators of the company and its competitors
  • Regulatory issues: learn about the company's steps to comply with regulatory requirements
  • Partnerships and agreements: explore information about the companies with which the issuer of interest collaborates
  • Innovative technologies: assess how innovative the company's technologies and approaches are and which ones could provide a market advantage in the future

Future outlook: what’s next for biotech in 2024 and beyond?

Accessibility and efficiency of clinical trials

Clinical trials constitute a vital component of the new product development process in the biotechnology market. However, they tend to be both expensive and labour-intensive. According to projections from PDD experts, clinical trials are expected to become more accessible and efficient in 2024. This improvement is attributed to using artificial intelligence, enhanced computational capabilities, and the expansion of data volumes.

Diversity of clinical trial participants

PDD specialists anticipate that regulatory authorities will place greater emphasis on the diversity of clinical trial participants. This shift in focus could create favourable conditions for enhancing the effectiveness, accessibility, and safety of new medications. The rationale is that treatments and methodologies that may not yield positive outcomes for one group of patients might align more closely with anticipated results when applied to another group.

Progress in cell and gene therapies

Cell and gene therapies stand out as groundbreaking advancements in biotechnologies. They hold the potential to treat diseases previously deemed incurable successfully. According to data from Markets and Markets, a substantial increase in clinical trials and approvals for advanced treatment methods is expected in 2024. The focus will be on utilising CAR-T, TCR-T, stem cells, and gene editing.

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Conclusion

In 2023, the stocks of companies such as Soleno Therapeutics Inc., Ambrx Biopharma Inc., EyePoint Pharmaceuticals Inc., Immunogen Inc., and Gyre Therapeutics Inc. exhibited the most substantial appreciation. The catalyst for the price growth of the first four entities on the list was the positive outcome of clinical trials for new medications. At the same time, the latter experienced an upswing due to a merger with another firm.

We have thoroughly examined the risks and challenges associated with investing in biotech stocks, including clinical setbacks, stringent regulations, and fluctuating demand. Additionally, we have highlighted pivotal aspects that investors should consider when scrutinising biotechnology companies, for instance, evaluating the diversity of drugs from a single manufacturer, including those in the research stage and those available for sale.

Curious about what lies ahead for this industry in 2024? We have compiled forecasts from experts for your consideration. Notably, integrating AI technologies is anticipated to render research more accessible and efficient.

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1. What are biotech stocks?

Biotech stocks are shares in companies that produce medicines, vaccines, and other biological products. These companies are involved in biotechnology, utilising living organisms in their product development. They differ from pharmaceutical companies, which generally employ chemical processes.

2. What should investors consider when investing in biotech stocks?

Investors should consider the diversification of a biotech company's product pipeline, the stage of product development, and the company's financial stability. The biotech sector is known for its high volatility, so understanding the specific risks associated with each company is crucial.

3. How do you analyse biotech stocks for investment?

When analysing biotech stocks, consider key financial metrics like cash burn, gross profit margin, profit and revenue growth, research and development spending, and debt-to-equity ratio. It is crucial to understand the company's pipeline, the market potential of its products, and the likelihood of regulatory approval. Biotech investments require a deep understanding of the sector's unique characteristics and risks.

4. What is the difference between large-cap and small-cap biotech stocks?

Large-cap biotech stocks have market capitalisations of 10 billion USD or more and usually have multiple products treating various medical conditions. Small-cap biotech stocks, on the other hand, have lower market capitalisations and often focus on developing a single product or treatment, resulting in higher volatility based on clinical trial outcomes and FDA approvals.

5. How do clinical trials and FDA approvals impact small-cap biotech stocks?

Clinical trial results and FDA approvals significantly impact small-cap biotech stocks. Positive results or approvals can lead to substantial gains, as these are critical steps towards commercialisation. Conversely, negative results can drastically reduce the stock value, hindering the company's ability to bring a product to market.

6. What is the biotech industry's market size and forecasted growth?

The biotech sector is expected to grow significantly, with a forecasted annual growth rate of 13.96% until 2030, potentially reaching a market size of 3.88 trillion USD. This growth is driven by technological innovation, increased demand for chronic care, and heightened investment following the COVID-19 pandemic.

7. What role did AI play in biotech advancements in 2023?

AI made significant contributions, particularly in predicting protein structures. Algorithms like AlphaFold2, RoseTTAFold, and trRosettaX-Single enabled the prediction of protein structures from amino-acid sequences, significantly reducing the number of human proteins with unknown structural data. This advancement has implications across various life sciences disciplines.


* – Past performance is not a reliable indicator of future results or future performance.

The material presented and the information contained herein is for information purposes only and in no way should be considered as the provision of investment advice for the purposes of Investment Firms Law 87(I)/2017 of the Republic of Cyprus or any other form of personal advice or recommendation, which relates to certain types of transactions with certain types of financial instruments.