The biotechnology sector is one of the most exciting areas to invest in currently due to the growing number of treatments in the works for conditions with significant unmet medical needs. In no particular order, here are four small-cap biotech stocks that could make for some interesting trading ideas for investors interested in the sector.
Humacyte
This stock is trending on Yahoo! Finance today because the U.S. Food and Drug Administration granted another one of its products a special status. Humacyte Inc (NASDAQ:HUMA) is building bioengineered tissues that can be implanted into patients.
The FDA granted the company a third Regenerative Medicine Advanced Therapy (RMAT) designation for its Acellular Tissue Engineered Vessel (ATEV), which targets advanced peripheral artery disease (PAD). The designation is aimed at expediting the review process for regenerative therapies that target serious illnesses. The FDA also cleared Humacyte's investigational new drug (IND) application for its ATEV for PAD.
Humacyte spiked around 11% on Monday, and is up some 85% year to date.
Arcutis Biotherapeutics
This commercial-stage biopharmaceutical company is working on treatments for skin diseases like psoriasis, eczema and atopic dermatitis. Currently, Arcutis Biotherapeutics Inc (NASDAQ:ARQT) offers cream to treat plaque psoriasis and a foam to treat seborrheic dermatitis on the market, both with the active ingredient roflumilast sold under the Zoryve brand name.
Arcutis' pipeline contains three products: ARQ-252 to treat inflammatory skin diseases like chronic hand eczema; ARQ-255 for alopecia areata; and ARQ-234, potentially to target atopic dermatitis.
The company's stock has skyrocketed year to date, climbing some 200% as of this writing.
Monday was actually an excellent day for several biotech stocks — not just Humacyte. For Arcutis, investors are anticipating an FDA ruling on its supplemental NDA for its roflumilast cream to treat atopic dermatitis in patients as young as six years old. That ruling is expected on July 7.
Inhibikase Therapeutics
Inhibikase Therapeutics Inc (NASDAQ:IKT) is developing some promising treatments for Parkinson's disease and other neurodegenerative diseases. The company's lead candidate is risvodetinib for various stages of Parkinson's patients in the early stage of the disease or who have never been treated for the illness.
The drug candidate is also in trials for constipation stemming from nerve disease or injury, difficulty swallowing, and multiple system atrophy (MSA), an illness with some similarities to Parkinson's for which the FDA has not yet approved a single treatment.
IKT stock is down around 12% year to date, so there may be some gas left in the tank with this one in the near term.
Bicycle Therapeutics
Bicycle Therapeutics Ltd (NASDAQ:BCYC) is developing treatments for underserved patient populations via a totally new approach to targeting disease. The company describes the new kind of novel molecule it has developed as "bicycles," which differ from conventional small molecules in that they can easily be conjugated to other chemical payloads without losing their desired pharmacology.
Notably, Bicycle has some strong collaborations in place, including with Novartis (SIX:NOVN) and Bayer (OTC:BAYRY) Consumer Care. The company's pipeline currently includes: BT8009, in Phase 2/3 trials; BT5528, in Phase 2/ Expansion trials; and BT1718, also in Phase 2/ Expansion trials. All candidates target various kinds of cancer.
Bicycle stock is up 11% year to date, so for investors interested in this company's novel approach, there may still be some near-term upside.
Small-cap biotech ETFs
Investors who don't want to pick individual small-cap biotech stocks might consider an exchange-traded fund, although ETFs sometimes miss out on the most promising companies in the very earliest stages. In fact, it's extremely challenging to zero in on small-cap biotech because most ETFs focused on the sector target larger names.
Nonetheless, you can uncover some particularly interesting biotech ETFs by zeroing in on an area of particular interest. For example, the Range Oncology Therapeutics Index ETF (NASDAQ:CNCR) may be of interest to investors who want to support cancer treatment with their investment dollars.
This ETF is nearly flat year to date, up by about 1%.
Some other interesting ETFs include:
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ALPS Medical Breakthroughs ETF (NYSE:SBIO) – up 2% YTD
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Global X Genomics & Biotechnology ETF (NASDAQ:GNOM) – off 10% YTD
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AdvisorShares Psychedelics ETF (NYSE:PSIL) – down 30% YTD
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WisdomTree BioRevolution Fund (NYSE:WDNA) – off 6% YTD
For a broader view on the biotech sector, some options include the iShares Biotechnology ETF (NASDAQ:IBB), the SPDR® S&P Biotech ETF (NYSE:XBI), and the VanEck Biotech ETF (NASDAQ:BBH).
Of course, investors are always advised to do their own due diligence before investing in any stock or theme.