3 small-cap biotechs with potential breakthroughs in 2024

Key Points

• Amylyx may get its flagship treatment for ALS approved by the European Medicines Agency (EMA), opening another avenue for revenue growth.  
• Puma Biotechnology will begin a mid-stage trial for its lead cancer drug.  
• Cassava Sciences forecasts top-line results for a Phase 3 study on its Alzheimer's disease drug to be available by the end of the calendar year.  

There's a reason that many biotech investors prefer to stick with large-cap stocks. Investing in small-cap biotech stocks is not for risk-averse investors. Many are still clinical-stage companies, meaning they're neither profitable nor generate revenue. 

As investors saw in 2023, when the cost of capital becomes more inexpensive, bankruptcy becomes a real option. Last year, two dozen biotech companies sought bankruptcy protection. In 2024, others have joined that list. 

However, if you're looking for multi-bagger stocks, you'll rarely find them with large-cap biotech or pharmaceutical stocks. 

While there's no such thing as a "sure thing" in biotech investing, MarketBeat's tools can help you make a more informed decision, such as using the stock screener on the biotech stocks page. 

Also, look for companies that address a condition with a large addressable market and generate positive analyst sentiment. That's the case with the three small biotech stocks we're covering.

Amylyx may get Relyvrio approved in Europe 

While small-cap biotech stocks carry risk, Amylyx Pharmaceuticals Inc. NASDAQ: AMLX may be suitable for less risk-tolerant investors. The company already has a commercially approved therapeutic. In September 2022, the U.S. Food & Drug Administration (FDA) approved Relyvrio, a flagship treatment for ALS. 

Since then, Amylyx has started generating revenue and posted positive earnings in the last three quarters. However, AMLX stock is still down over 58% in the previous 12 months. But the tide may turn. The stock is up 3.9% since January 2024. One concern is short interest, which is about 11% overall and is up about 5% in the last month. 

Investors may also be concerned about the slowing pace of revenue growth. However, that would change if Relyvrio is approved by the European Medicines Agency (EMA). A key step in making that happen may come in the second quarter 2024. At that time, Amylyx is scheduled to present Phase 3 trials of its PHOENIX clinical trial, which will include additional safety and efficacy data. 

Puma Biotechnology prepares for mid-stage trials on lead cancer drug

If Amylyx is a "safe" choice among small-cap biotech stocks, Puma Biotechnology Inc. NASDAQ: PBYI is on the other end. Puma Biotechnology is a penny stock that trades for just $4.88 as of this writing. 

The company specializes in finding cancer treatments. Like Amylyx, Puma Technologies has a drug on the market. Neratinib (NERLYNX) was approved by the FDA in 2017 for two breast cancer indications. That is helping the company generate steady, but not necessarily growing, revenue. Nevertheless, the company has posted three consecutive quarters of rising earnings. 

But that's not why PUMA stock has soared 75% in the last 90 days. For that, you have to look at the company's pipeline. Its lead candidate, Alisertib, was approved to begin mid-stage studies for lung and breast cancer indications. 

Short interest has been climbing in the last 30 days, and analysts do not widely cover the stock. Nevertheless, the stock has a "buy" rating with an $8 price target of 63% higher than the closing price on February 5. 

Cassava close to having another tool to fight Alzheimer's disease 

Cassava Sciences Inc. NASDAQ: SAVA is rare among small-cap biotech stocks. Despite having a market cap of under $1 billion, the company has a share price of over $20 despite not having a product in the market. That's not something that you get very often with a clinical-stage company. 

The company is working on a treatment for Alzheimer's disease. In recent years, new treatments have developed to slow the progression of this insidious disease instead of just treating symptoms. Cassava's lead candidate, Simufilam, is nearing Phase 3 trials. 

Simufilam is different from drugs that seek to clear amyloid from the brain. Instead, it targets altered filamin A protein found in the brains of Alzheimer's patients. The drug is in a year-long Phase 3 trial, and the company expects to report top-line results by the end of 2024. 

Cassava owns exclusive worldwide rights to Simufilam and its related technologies. Small-cap companies often require third parties to help push a drug across the finish line. The absence of this third-party relationship is likely a key reason that SAVA stock has an upside of over 280%.