While a weakening economy and a subsequent dip in the stock market are unfortunate, they are inevitabilities. Even booming segments like the biotech sector are not immune to the general trend of recessions that Western economies experienced over the last 40 years or so. These downturns, however, provide opportunities for investors to buy stocks at lower prices. The case is the same for which biotech stocks to buy in a down market.
Knowing when to buy a stock during market turmoil can be the difference between sharp losses and growth. Market crashes can effectively lower the price of a stock trading at a price higher than what is presently justifiable.
Thus, here are three biotech stocks that could become bargain deals in the event of a recession.
Viking Therapeutics (VKTX)
Despite a rough start to April for markets, Viking Therapeutics (NASDAQ:VKTX) has seen remarkable growth in the past month. The company has been surging on news of regulatory and clinical trials going well and has used that momentum to keep growing. However, the company is likely speculatively overvalued, as none of its drugs have actually gone on the market.
Much of the hype around Viking Therapeutics comes from one of its primary projects, VK2809, which may someday help treat metabolic and liver disorders. Some analysts are even bullish on the company’s latest obesity drug, VK2735, as the world struggles more with obesity every day. However, both of these products have yet to generate sales revenue, meaning VKTX could take a healthy plunge in the event of a market crash.
Should the company survive the crash, it could be one of the best biotech stocks to buy at a discounted price. And once the company’s drugs hit the market, it could soar past current analyst predictions.
Eli Lilly (LLY)
A current favorite among biotech analysts, Eli Lilly’s (NYSE:LLY) revenues have seen healthy year-over-year growth. The company can primarily thank its two bigger hitters: Mounjaro, which treats diabetes; and Zepbound, which supports weight loss. While the long-term effects of such “wonder drugs” remain to be seen, they will likely continue to drive LLY’s value.
As such, a stock market crash may gently slow this growth while lowering the price of LLY shares. This comes from the fact that the company has genuine sales numbers to back its valuation rather than clinical speculation. Thus, a price cut could make LLY stock one of the best biotech stocks to buy for a stable, long-term play.
This is, of course, assuming that its weight loss drugs don’t have unforeseen consequences for patients down the road.
CRISPR Therapeutics (CRSP)
CRISPR Therapeutics (NASDAQ:CRSP) saw its stock price boom lately thanks to regulatory approvals for its new treatments. Between Food and Drug Administration approvals for its sickle-cell anemia treatment and overall analyst hype, the company’s value soared toward the end of 2023. The hype died down, however, as the reality of its $2.2 million price tag for sickle-cell anemia therapy sets in.
Though a correction was inevitable after its high in February, the stock still has room to trend down according to some analysts. While its current price stabilizes, CRSP stock could be hit quite hard in the event of a recession. This concern stems from the company’s heavy focus on pricey gene therapies as its major focal point.
Often when the economy dives, federal funding and grants for the kind of research CRSP relies on dry up. In these cases, CRISPR could see its price drop even further than the current trend, and provide buyers with a reasonably cheap entry point before recovering.
On the date of publication, Viktor Zarev did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.