Have you heard the expression "the wisdom of crowds"? Writer James Surowiecki had a best-seller in 2004 titled The Wisdom of Crowds focused on the idea that large groups of people make better decisions than individuals on their own or smaller groups.
If you think that Surowiecki's idea is on point, you might want to stay abreast of the most popular stocks on the Robinhood trading platform. And the biotech industry is an especially hot area attracting attention on the platform right now. Robinhood investors love these three biotech stocks. Should you?
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1. Catalyst Pharma
You might think that Catalyst Pharma (CPRX 2.65%) is a surprising stock to rank highly among Robinhood investors. After all, the company's market cap is below $400 million. Catalyst's revenue and earnings fell year over year in the most recent quarter.
So why do Robinhood investors love this stock? It could be that they see an attractive bad news buy. Catalyst recently announced disappointing results from a late-stage clinical study evaluating Firdapse in treating patients with neuromuscular disease anti-MuSK antibody positive myasthenia gravis. The drug also flopped in a late-stage study last year targeting another rare neuromuscular disorder, congenital myasthenic syndromes (CMS).
But Firdapse has already been approved in the U.S. and, more recently, in Canada, for treating autoimmune disease Lambert-Eaton myasthenic syndrome (LEMS). While the COVID-19 pandemic negatively impacted sales in Q2, the company has begun to see improvement.
Catalyst is also pursuing regulatory approval for the drug in Japan as a treatment for LEMS. It expects to announce results from a phase 1 study of Firdapse in treating spinal muscular atrophy type-3 later this year. In addition, the drugmaker is on the hunt to acquire another product or company.
2. Corbus Pharmaceuticals
Corbus Pharmaceuticals (CRBP -5.83%) is another popular small-cap biotech stock on Robinhood. Its market cap currently stands at around $580 million. The stock is up nearly 30% year to date.
Robinhood investors appear to be bullish about the prospects for Corbus' lead pipeline candidate, lenabasum. Corbus plans to announce results from a phase 3 study evaluating the drug in treating system sclerosis this summer. If those results are positive, the company could be in a good position to win FDA approval for its first product.
But that could be just the beginning. Corbus expects to report topline results from a phase 2b study of lenabasum in treating cystic fibrosis patients who are at high risk for recurrent pulmonary exacerbation in the third quarter of this year. It hopes to announce topline data from a phase 3 study of the drug in treating autoimmune disease dermatomyositis late next year. The company is also evaluating lenabasum in a phase 2b study targeting another autoimmune disease, system lupus erythematosus.
Corbus could add a couple of other pipeline candidates in the not-too-distant future. It's testing CRB-4001 in preclinical testing in treating nonalcoholic steatohepatitis (NASH), a fatty liver disease. The biotech also selected CRB-317 as a potential pipeline candidate in treating inflammation and fibrosis.
3. Moderna
Moderna (MRNA 0.89%) is probably the least surprising of the three biotech stocks most popular on Robinhood. The company has been in the news quite a bit in 2020 thanks to its promising coronavirus vaccine program. Moderna's shares have soared more than 250% so far this year, driving its market cap to over $27 billion.
You can count the number of COVID-19 vaccine candidates in late-stage testing on your fingers. And Moderna's mRNA-1273 is one of them. The biotech is on track to complete enrollment in the phase 3 study next month and could report preliminary results before the end of the year.
Moderna has already landed a $1.525 billion deal with the U.S. government to supply 100 million doses of mRNA-1273 if it wins FDA approval or emergency use authorization. The agreement also allows the U.S. government the option to buy another 400 million doses.
While its COVID-19 vaccine candidate has been in the limelight, Moderna's pipeline also features several other promising mRNA programs. These include vaccine candidates targeting cytomegalovirus (CMV), influenza, respiratory syncytial virus (RSV), and Zika plus several experimental mRNA cancer therapies.
Should you love these stocks, too?
These three biotech stocks are too risky for many investors. Corbus and Moderna don't have approved products on the market yet. Catalyst faces some challenges after two failures for Firdapse.
But are the stocks good picks for more aggressive investors? My view is that Corbus and Moderna are worthy of consideration. Corbus should have a big winner on its hands with lenabasum if late-stage clinical studies goes well. And while Moderna's market cap already reflects expectations of huge sales growth, I think the stock could go quite a bit higher if mRNA-1273 sails through phase 3 testing.
