Biotech stocks are on the rise. Investors are making hundreds of percent on clinical trials.
Biotech stocks have the unique ability to rise hundreds of percent in just a few days or weeks. These sudden spikes are caused by a number of fundamental factors, ranging from successful clinical trials to regulatory approvals of new drugs. In this article, we will delve into the reasons for this growth, provide specific examples, and explain how a private investor can capitalize on the potential of this sector in their strategy.
What influences the growth of biotech stocks
Clinical trial results
Every biotech company strives to develop a drug that can change the way a certain disease is treated. However, the path from the lab to the pharmacy involves several phases of clinical trials: phase 1, phase 2 and phase 3.
According to statistics, only 63% of drugs move from phase 1 to phase 2, about 33% move from phase 2 to phase 3, and only 58% of phase 3 drugs get approved. This makes every positive outcome extremely meaningful to investors.
We recommend our article: What are clinical trial phases and why should investors know about them?
Examples of growth based on clinical data:
- ImmunoGen (IMGN): the stock rose 140% after publishing Phase 3 data on its drug Elahere in 2022.
- Mirati Therapeutics (MRTX): positive results on an oncology drug drove the stock up more than 90% in a week.
- Argenx (ARGX): after success in trials against myasthenia gravis – stock up 70% in a matter of days.
FDA approval
Food and Drug Administration (FDA) approval paves the way for commercialization. Such news instantly reevaluates a business, especially if the company is focused on a single drug.
The FDA evaluates not only the efficacy but also the safety of a drug. Approval can be for full market access (NDA) or accelerated (Fast Track, Breakthrough Therapy), which also affects investor expectations.
Prominent examples:
- Axsome Therapeutics (AXSM): after the approval of its depression drug Auvelity in 2022, the stock rose more than 100%.
- Acadia Pharmaceuticals (ACAD): shares jumped 70% after the approval of Nuplazid for the treatment of psychosis in Parkinson’s disease.
Acquisitions and strategic partnerships
Pharmaceutical giants such as Pfizer, Roche, Novartis and Amgen regularly acquire or invest in biotech startups with promising research. This allows them to accelerate the market launch of new drugs and strengthen their own R&D portfolio.
Examples of acquisitions:
- Horizon Therapeutics was bought by Amgen for $27.8 billion – stock up 60% before the deal.
- Seagen (SGEN) rose more than 40% after news of Pfizer’s intention to acquire the company for $43 billion.
- Receptos, bought by Celgene, posted over 100% gains in the months before the deal was finalized.
High volatility as a profit and risk factor
Biotechnology is a highly volatile sector, especially among small-cap companies. Stock price can be affected by:
- Delays or failures in clinical trials
- Denials or requests for additional data from the FDA
- Financial reports with rising R&D costs
- Leaks of information about failed trials
Fallout example:
- Bluebird Bio (BLUE) lost over 80% of its capitalization after clinical programs were suspended due to safety issues.
The risks are high, but the potential returns are also among the highest in the market.
How to invest in biotech stocks
Choosing a strategy: short-term speculation or long-term investing
Short-term strategy – focused on trading before expected events: data publications, FDA decisions, partnerships. It implies active tracking of news, high liquidity and exit before the publication of results to minimize risks.
Long-term strategy – involves fundamental analysis of the company’s pipeline, market potential, scientific advances, level of competition and management team. Suitable for patient investors willing to hold the asset for 1-3 years.
Where to look for information about biotech stocks
Quality analytics and timely data are key:
- BioPharmCatalyst database of events (PDUFA, Clinical Outcomes)
- ClinicalTrials.gov detailed information on ongoing trials
- FDA.gov regulatory documents, decisions, priority reviews
It is also important to utilize:
- Yahoo Finance and Seeking Alpha for analyst reviews and market opinions
- Twitter, Reddit (r/biotechstocks) sources of rumors and sentiment
Examples of successful investments
- Moderna (MRNA): up over 700% in 2020 with the world’s first approved mRNA vaccine against COVID-19.
- Nuvation Bio (NUVB): after news of investment in oncology platform, shares doubled in 3 days.
- Iovance Biotherapeutics (IOVA): up 160% after receiving FDA approval for its TIL cell therapy.
- Crispr Therapeutics (CRSP): Growth of over 250% on the back of interest in gene therapy and partnership with Vertex.
A real success story: how a private investor grew capital 6x
In 2020, private investor Jason Dever from Texas invested $15,000 in Moderna (MRNA) stock after announcing the start of clinical trials for an mRNA vaccine against COVID-19. Despite the high risks, he closely monitored reports, FDA hearings, and analyst comments. After only 9 months, his investment had already exceeded $90,000. Such stories confirm that a careful approach and the ability to analyze the biotechnology sector can achieve impressive results even without institutional capital.
Comparison table: biotech vs other sectors (by returns)
| Sector | Average 5-Year Return | Risk Level |
|---|---|---|
| Biotechnology | 18–40% annually | High |
| Energy | 8–12% | Medium |
| Financial sector | 6–10% | Medium |
| Technology sector | 12–18% | Medium-high |
| S&P 500 ETFs | 7–9% | Moderate |
List of biotechnology stocks to watch in 2025
Below is a list of biotechnology companies that may attract significant investor attention in 2025 due to expected clinical trial data, potential FDA approvals, or strategic deals:
| Ticker | Company | 2025 Catalyst | Focus Area |
|---|---|---|---|
| MRNA | Moderna | Development of new mRNA vaccines for influenza and HIV | mRNA therapies, vaccines |
| VRTX | Vertex Pharmaceuticals | Launch of a new cystic fibrosis therapy | Rare diseases |
| CRSP | Crispr Therapeutics | Expected expansion of gene therapy applications | Gene editing technologies |
| REGN | Regeneron Pharmaceuticals | Phase 3 results for oncology drug candidates | Oncology, monoclonal antibodies |
| KRTX | Karuna Therapeutics | Data release for KarXT schizophrenia treatment | Neurology |
| IONQ | Ionis Pharmaceuticals | Potential approval of treatment for neuromuscular disorders | Genetic disorders |
| SAGE | Sage Therapeutics | Commercial launch of postpartum depression drug | Psychiatry |
| BLUE | Bluebird Bio | Resubmission of therapies following prior trial halts | Cell therapy |
| NBIX | Neurocrine Biosciences | Key partnerships and expansion into new markets | Neurology |
| XENE | Xenon Pharmaceuticals | Trials for epilepsy and sleep disorder medications | Central nervous system (CNS) |
The potential of the sector and the role of the investor
The biotech sector has a unique combination of scientific innovation and investment potential. The development of new therapies, the use of genetic engineering, immunotherapy and cellular technologies create the basis for multi-billion dollar businesses literally from a single molecule.
Buying biotech stocks is a lucrative investment for those who are willing to be analytical. Unlike mature sectors with predictable returns, biotech offers the opportunity to enter early in the growth stage and earn a multiple. Many startups, when successful in clinical trials and FDA approval, become targets of interest for large pharma companies, dramatically increasing their market capitalization. Investors who act on facts rather than rumors can not only protect capital, but also grow it substantially with a balanced strategy. The successful biotech investor is a careful researcher, willing to spend time studying each company. With the right approach, biotech stocks can be a catalyst for explosive portfolio growth and provide superior returns compared to most traditional sectors of the U.S. stock market.
