Innovation continues to drive the broader healthcare market, and the best biotech stocks are at the forefront of new developments and therapies to treat a wide range of conditions.
Just like technology, biotechnology is constantly evolving, which includes the development of personalized medicine and an uptick in orphan drug formulations.
With that in mind, here are the best biotech stocks of 2023 that are poised for future growth.
But first — before we dive into the picks, we will first provide a brief overview of the biotechnology market and what investors should know.
What is biotechnology?
In simple terms, biotechnology uses living organisms and biological systems for developing medical products.
With that in mind, biotechnology products are intended to prevent, treat, or even cure diseases and have been known to treat everything from cancers, blood disorders and cardiovascular diseases to hepatitis B, diabetes, bacterial infections and, of course, COVID-19 vaccines, among others.
The biotech market has especially been transformative in recent years thanks to recent innovations such as:
- biosensors, which have capabilities of tracking blood pressure, pulse, breathing and body temperature.
- 3D bioprinting, which is gaining notoriety by having the potential to develop everything from drugs and pills to human organs.
- bioplastics, which are organic materials that can biodegrade over time.
- gene editing, which alters a living organism by inserting, replacing, or entirely deleting a DNA sequence, for example hereditary illness such as Multiple Sclerosis.
When it comes to COVID-19 vaccines, the best biotech stocks all around the world implemented their best efforts to get treatments out the door as quickly and as safely as possible.
Following the pandemic that disrupted the world in March 2020, the rush to get vaccines to combat the disease became urgent.
By the end of 2020, the first vaccine was administered on December 8, and by June 2022 there were over 1,500 drugs and vaccines targeting COVID-19.
Through continued advancements, investing in the best biotech stocks has never been more interesting as innovative products continue to enter the market.
How to invest in the best biotech stocks
The best biotech stocks have the potential to bring investors big returns if things go according to plan — for example, if a product is considered effective and safe with no adverse side effects or if a massive breakthrough is made.
Biotech giant Moderna (NASDAQ:MRNA) was the second-ranked company with 12 vaccines targeting COVID-19. They are a great depiction of the impact new drug development can have on a stock, at points Moderna was trading at almost $500 a share during the volatility of the pandemic.
While someof the best biotech stocks might have massive share price increases following breakthroughs, the exact opposite can happen if something does not go according to plan — if a clinical trial does not go as expected or products do not meet their safety endpoints, among other things.
That being said, many of the best biotech stocks may have products that never actually make it to the market due to strict regulations from the US Food and Drug Administration (FDA) or Health Canada.
The FDA is the regulatory agency in the United States that approves the development and regulation of a wide range of products These include vaccines, prescription drugs, allergenics, cellular and gene therapy products and, of course, so much more.
In Canada, the process is somewhat similar. The best biotech stocks are required to prove their products are safe and effective before being approved for the market.
When it comes to both regulatory approvals in both countries, the process can be long and oftentimes frustrating for both companies and investors, but the payoff can be worth it.
Like with all investing, investors need to be mindful of the best biotech stocks they are investing in, which is where help from biotech analysts, investment firms, or stock analysts can come in handy. Websites like Stockhouse.com include discussion boards alongside their research tools so you can communicate with existing shareholders and leverage the knowledge of peers looking to invest or share insight on their findings.
Best biotech stocks to invest in
There are several options when it comes to investing in the best biotech stocks, and perhaps one of the safest ways to do so is through exchange-traded funds (ETFs).
ETFs are similar to mutual funds but can be traded over the course of a day similar to stocks. An ETF is a secured investment opportunity that focuses on a single commodity or sector.
Putting it simply, rather than investing in a single company, ETFs provide investors with exposure to an industry — like biotech — and come with fewer risks because they are low-cost and can increase portfolio diversification.
According to ETFDB.com, there are over 20 biotechnology ETFs for investors to choose from. The top three, with assets and previous closing prices as of May 27, 2023, are:
- iShares Biotechnology ETF (IBB), which has over $7.87 billion in assets and a previous closing price of $127.09. The index tracks biotechnology and pharmaceutical companies on the NASDAQ;
- SPDR Biotech ETF (XBI), which has $6.53 billion in assets and a previous closing price of $84.31. The SPRD Biotech ETF tracks the biotechnology market segment of the S&P Total Market Index;
- ARK Genomic Revolution ETF (ARKG), which has over $2 billion in assets and a closing price of $31.69. This ETF seeks long-term growth capital and tracks companies involved in CRISPR, targeted therapeutics, bioinformatics, and molecular diagnostics, among others.
Of course, investors can always find the best biotech stocks to add to their portfolio. In Canada, the top three performing best biotech stocks with market caps between $10 million and $2 trillion year-to-date according to data from TradingView.com are:
BriaCell Therapeutics (TSX.BTC)
Market cap C$123.68 million; year-to-date increase: 31.30 per cent; current share price $7.97
BriaCell Therapeutics is a biotechnology company focused on immuno-oncology and is developing targeted and safe treatments for cancer. The company’s lead drug candidate is Bria-IMT, which was designed to treat advanced breast cancer for patients who have not responded to previous chemotherapies.
Cardiol Therapeutics (TSX:CRDL)
Market cap $58.28 million; year-to-date increase: 26.39 per cent; current share price $0.91
Cardiol Therapeutics is a life sciences company focused on its lead drug candidate CardiolRx, which is being used to treat rare heart diseases. The company is also developing CRD-38, a novel drug intended to treat heart failure.
Sernova Corp. (TSX:SVA)
Market cap: $254.80 million; year-to-date increase: 2.44 per cent; current share price: $0.84
Sernova Corp. is a clinical-stage company developing products to treat chronic and debilitating diseases. Sernova is currently focused on its proprietary Cell Pouch and associated technologies that include immune-protected therapeutic cells.
- Biotechnology outlook
The last few years have not been easy for the market with clinical trial and regulatory setbacks, high research and development costs and loss of patents, among others.
But these sorts of hiccups are not solely restricted to the biotech industry alone because every industry fluctuates at one point or another due to the economy or political uncertainty.
Now that we are nearing the halfway mark of 2023, the biotechnology market — and in turn the best biotech stocks — are poised for exceptional growth in the coming years.
In 2020, it is estimated the market was valued at US$852.88 million and is projected to grow at a compound annual growth rate of 17.83 per cent between the forecast period 2021 to 2030 to reach $3.44 trillion.
Fueling that growth will be government policies, the launch of new products and continued investment in the biotechnology sector.
As such, the best biotech stocks will be key to watch for in the coming years as the market ramps up and innovative products continue to enter the market.
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