The biotech industry is experiencing strong growth and expansion amid increasing investments, robust demand, and a boosting IPO market. Also, the recently announced Fed rate cuts will benefit the market operations.

Amid this backdrop, investors could consider investing in solid small-cap biotech stocks BioCryst Pharmaceuticals, Inc. (BCRX), Harmony Biosciences Holdings, Inc. (HRMY), and Entrada Therapeutics, Inc. (TRDA) for significant upside.

The biotech industry continued to rebound in 2024 with pent-up demand, improving technologies, and an optimistic IPO market. September was marked as the busiest month for healthcare IPOs, encouraged by some strong debuts.

Also, innovative discoveries in areas like oncology, immunology, and neurology supported by increasing investments are bound to propel the biotech industry’s prospects. According to Biopharma Dive, over 12 deals were reported during the second quarter, totaling 28 this year, reflecting strong biotech mergers and acquisitions (M&A) activities.

Besides, the Fed's decision to cut rates for the first time in more than four years will ease the funding environment and also accelerate early-stage drugmakers' operations, and could potentially spur investments in biotech companies.

In addition, the growing R&D initiatives and adoption of digital technologies worldwide would benefit the industry’s growth. As per a report by Precedence Research, the global biotechnology market is expected to reach $4.61 trillion by 2034, growing at a CAGR of 11.5%.

Amid this economic and industry background, small-cap biotech stocks offer great potential for high returns and long-term growth for investors. Small-cap stocks are low-cost and have more growth opportunities.

Therefore, let’s delve into the fundamentals of the top three Biotech stocks, beginning with the third choice.

Stock #3: BioCryst Pharmaceuticals, Inc. (BCRX)

BCRX is a biotechnology company that develops oral small-molecule and protein therapeutics to treat rare diseases. The company markets peramivir injection, an intravenous neuraminidase inhibitor for treating acute uncomplicated influenza under the RAPIVAB, RAPIACTA, and PERAMIFLU names, and ORLADEYO, an oral serine protease inhibitor to treat hereditary angioedema.

On September 30, BCRX was awarded a $69 million contract by the U.S. Department of Health and Human Services for the procurement of up to 95,625 doses over a five-year period of RAPIVAB® (peramivir injection) for treating influenza.

On July 9, BCRX received approval from the General Directorate of Medicines, Supplies, and Drugs (DIGEMID) in Peru for its oral, once-daily ORLADEYO® (berotralstat) for the prophylaxis of hereditary angioedema (HAE) attacks in adults and pediatric patients 12 years of age or older.

During the second quarter that ended June 30, 2024, BCRX’s total revenues grew 32.5% from the prior year’s quarter to $109.33 million. The company’s adjusted income from operations was $21.93 million for the quarter.

Furthermore, the company’s cash, cash equivalents and, investments and total assets were $336.34 million and $472.42 million as of June 30, 2024.

Analysts expect BCRX’s revenue for the third quarter (ended September 2024) to grow 31.3% year-over-year to $113.89 million. Its revenue for the fiscal year 2024 is expected to grow 30.9% year-over-year to $433.84 million. Also, the company topped the consensus revenue estimates in all of the four trailing quarters.

Shares of BCRX have surged 56.2% over the past six months and 17.1% over the past year to close the last trading session at $7.20. Moreover, Wall Street analysts expect the stock to reach $15.33 in the upcoming 12 months, indicating a potential upside of 116.07%.

BCRX’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

BCRX has a B grade for Quality, Growth, and Value. It is ranked #21 out of 331 stocks in the Biotech industry.

In addition to the POWR Ratings we’ve stated above, we also have BCRX ratings for Sentiment, Momentum, and Stability. Get all BCRX ratings here.

Stock #2: Harmony Biosciences Holdings, Inc. (HRMY)

HRMY is a commercial-stage pharmaceutical company that focuses on developing and commercializing therapies for patients with rare and other neurological diseases. It offers WAKIX (pitolisant), a molecule with a novel mechanism of action to treat excessive daytime sleepiness in adult patients with narcolepsy.

On June 24, HRMY announced that the U.S. FDA approved its supplemental New Drug Application (sNDA) for WAKIX® (pitolisant) tablets treating excessive daytime sleepiness (EDS) in pediatric patients six years of age and older with narcolepsy. With this, WAKIX became the first FDA-approved non-scheduled treatment for pediatric narcolepsy patients.

During the second quarter that ended June 30, 2024, HRMY’s net product revenue increased 28.8% year-over-year to $172.81 million. Its gross profit increased 28.8% from the year-ago value to $140.67 million. The company’s non-GAAP adjusted net income and EPS came in at $60.61 million and $1.05 per share, up 32.1% and 38.1% from the prior year’s quarter, respectively.

Additionally, the company’s total assets stood at $858.38 million as of June 30, 2024, compared to $811.45 million as of December 31, 2023.

Street expects HRMY’s revenue for the third quarter (ended September 2024) to increase 15.3% year-over-year to $184.81 million, while its EPS is expected to grow 7.2% year-over-year to $0.68, respectively. Furthermore, the company surpassed the consensus revenue estimates in all of the trailing four quarters.

HRMY’s stock has gained 16.5% over the past six months and 6.6% over the past year to close the last trading session at $34.75. Wall Street expects the stock to reach $52 in the near term, indicating a potential upside of 49.38%.

HRMY’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.

The stock has an A grade for Value and a B grade for Quality. HRMY is ranked #14 among 331 stocks in the Biotech industry.

Click here to access HRMY’s ratings for Momentum, Growth, Stability, and Sentiment.

Stock #1: Entrada Therapeutics, Inc. (TRDA)

TRDA is a clinical-stage biotechnology company that develops endosomal escape vehicle therapeutics for treating multiple neuromuscular diseases. The company’s EEV platform develops a portfolio of oligonucleotide, antibody, and enzyme-based programs.

On June 24, TRDA announced positive preliminary data from its Phase 1 clinical trial, ENTR-601-44-101. It reported that ENTR-601-44 was taken well by healthy volunteers with no serious or drug-related adverse events and no clinically significant changes or trends noted in vital signs, ECGs, physical exams, or laboratory assessments.

ENTR-601-44 also showed significant plasma concentration, muscle concentration, and exon skipping at levels suggesting potential for a clinically meaningful starting dose in planned upcoming patient trials.

During the second quarter, which ended June 30, 2024, TRDA’s collaboration revenue increased 421.1% year-over-year to $94.69 million, and its income from operations was $53.42 million for the same period. The company’s net income amounted to $55.03 million or $1.55 per share, against a net loss of $25.93 million and $0.78 per share during the prior year’s quarter, respectively.

Street expects TRDA’s revenue for the fiscal year (ending December 2024) to increase 36.3% year-over-year to $175.89 million, and its EPS for the same period is expected to be $0.62. Also, the company has surpassed the consensus revenue estimates in each of the trailing four quarters, which is impressive.

TRDA’s stock has gained 21.9% over the past six months and 15% over the past year to close the last trading session at $16.39. Also, Wall Street analysts expect the stock to reach $21.50 in the near term, indicating a potential upside of 32.55%.

TRDA’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

The stock has an A grade for Value and Quality. It also has a B grade for Sentiment. Within the same industry, TRDA is ranked #13 among 331 stocks.

Click here to access additional ratings of TRDA for Momentum, Growth, and Stability.

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HRMY shares were unchanged in after-hours trading Wednesday. Year-to-date, HRMY has gained 4.02%, versus a 22.57% rise in the benchmark S&P 500 index during the same period.

Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.

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