There’s no doubt that Moderna (MRNA) was a raging success for investors last year, as the famous pharmaceutical brand struck it big over the course of the coronavirus pandemic. Having already been a multi-bagger for shareholders in 2020, the Boston-based drug maker saw its stock price increase again almost 4-fold during 2021.
Indeed, anyone buying MRNA at the beginning of the COVID-19 crisis will have pocketed a 1000% gain at current market prices.
But for investors who missed the bandwagon, there are still some opportunities to make similar profits today. What stock could be that next Moderna? The two stocks we’ll look at here – Gritstone and DermTech – are giving off the same sort of vibes that Moderna did, and could be big winners in the years to come.
Oncology specialist Gritstone bio, Inc. (GRTS) began life as a clinical-stage biotechnology company focused on the development of cancer-related immunotherapies exploiting the CD8+ cytotoxic T cell response in humans.
The company recently branched out into other fields however, making headlines earlier this year when its foray into the COVID-19 vaccine space briefly saw its share price increase more than 300% in a matter of days.
While enthusiasm for Gritstone’s COVID offering has waned since then, there’s still plenty to get excited about with this young, innovative company.
For starters, GRTS is now pioneering a unique approach to immunotherapy treatment, incorporating new messenger RNA (mRNA) technology with its own artificial intelligence platform, EDGE.
Specifically, Gritstone’s COVID-19 program, CORAL, combines two vaccine vectors – the Self Amplifying mRNA (SAM) Based Vaccine and the Chimpanzee Adenovirus (CHAD) Based Vaccine – to create a dual action vaccine that not only triggers the creation of specific antibodies, but also results in a killer T-cell response that provides a more robust and long-lasting immune effect.
Studies have shown that targeting a range of different antigens – many of which are conserved between various viral lineages, such as SARS-CoV-2 and SARS – Gritstone’s enhanced COVID-19 treatment could have a potential protective effect against pan-SARS/coronavirus outbreaks in the future.
Gritstone’s flagship product, Granite, a personalized immunotherapy vaccine in Phase 1/2 studies, is also a promising prospect against a number of different cancers.
The company reported positive clinical data in September 2021, suggesting that its Individualized Neoantigen Immunotherapy Program demonstrates efficacy in the treatment of patients with end-stage colorectal cancer.
A new Phase 2/3 trial is now expected to start in the first half of 2022 to measure its usefulness in the treatment of newly diagnosed, metastatic, microsatellite-stable (MSS)-CRC patients.
Is The Market Opportunity Diminishing?
There are certainly some risks associated with GRTS right now. The first is that its foray into the COVID vaccine race pits it against some powerful, well-established players, many of whom have effective coronavirus products already out to market.
And the competition is growing too, meaning that the market share for successful treatments necessarily diminishes as time goes on. Furthermore, Gritstone’s CORAL candidates have yet to make it to Phase 2 trials yet, with the likelihood for failure still high.
There’s also the question of whether a vaccine that targets conserved traits is even needed, with Madhu S. Kumar, an analyst at Baird, claiming that new COVID variants will probably still be vulnerable to existing vaccines that target the spike proteins.
Since the stock exploded in value earlier this January, Gritstone shares steadily declined to lows of just under $7 in August. However, a slew of positive clinical data saw it rise to current levels of around $12.
Like many clinical stage companies, Gritstone isn’t profitable yet, but is fairly reasonably valued. It beat its latest earning and revenue estimates, and has a decent forward Price-to-Sales multiple of 14.
Recent news that its “off-the-shelf” cancer program, SLATE, has just been given the go-ahead to start Phase 2 dosing trials also comes at the end of a stellar month that witnessed a 56% rise in the drug maker’s value – hinting that the stock may be about to make big gains once again.
GRTS is still down over 50% from all-time closing highs of $27+, but if any more positive catalysts break soon, there’s a good chance this promising pharmaceutical outfit could revisit those lofty heights pretty soon.
Another trailblazing bio-pharm stock is DermTech, Inc. (DMTK), a precision dermatology company that is revolutionizing cancer diagnostics with its non-invasive skin genomics platform.
The firm currently specializes in detecting and diagnosing skin cancers, particularly melanoma, and through the novelty of its technology is poised to become a leader in the oncology space.
Indeed, DMTK’s proprietary SmartSticker has proven to be more accurate and effective solution than any of the other invasive biopsy techniques that are traditionally employed.
Skin cancer is the most prevalent form of cancer in the U.S., accounting for more cases than all other kinds combined. As such, the market opportunity for DermTech is huge.
Over 4 million biopsy procedures are performed every year, resulting in around 180,000 diagnoses of melanoma alone.
With DMTK’s non-invasive gene expression and mutation test, patients are spared any unnecessary surgery, improving both patient care and comfort. Additionally, the test reduces the probability of missing a melanoma diagnosis by less than 1%, and ensures that 100% of the lesion under investigation is sampled.
The test also guarantees early detection since it’s designed to detect the genomic drivers of cancer – drivers which often precede the kind of visual changes that physicians are normally on the lookout for.
$10 Billion Market Opportunity
As to the addressable market open to DermTech, the company believes there’s a $10 billion opportunity both within Medicare and commercial payors.
DMTK’s IP portfolio has broad protection for melanoma until at least 2030, and has issued patents in several countries including Canada, Japan, and many European nations, securing its market competitiveness for the foreseeable future.
The trend for non-invasive procedures is growing, with strong patient and clinician demand in many medical specialties.
Other firms have also successfully brought their own non-invasive procedures to market, including CareDX in the organ transplant space, Guardant Health (GH) in lung cancer detection, and ShockWave Medical (SWAV) for the treatment of calcified cardiovascular disease.
Unlike Gritstone, DermTech can’t be said to be cheap at today’s prices, but it does manage to compensate with some positive growth metrics. For instance, the firm quadrupled quarterly revenues between 2019 and 2021, and Q1 2021 was its first quarter where it clocked a positive gross margin on its assay revenues.
DMTK also has ample cash on hand at $258 million – and with a projected annual burn rate for 2021 of ~$40 million, the company should be good for funding expansion activities for the coming years.
That said, DermTech’s high sales ratio of 76 might frighten off the more conservative investor; but then again, DermTech isn’t a conservative company. Its trailing twelve month revenue has grown over 100%, and its working capital by more than 366%.
It expects soon to double its sales force to garner coverage for 13,000 dermatology clinical professionals, bringing in total revenues of $312 million at a market penetration of 10%. DMTK has a proven technology and will soon see returns on its potential – and at a market cap of just over $1 billion, that potential seems pretty big.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.