2 Monster Stocks in the Making to Buy and Hold

Investing in relatively small, unprofitable companies has advantages and drawbacks. On the one hand, these stocks tend to have explosive growth potential, much more so than most of their larger counterparts. Identifying those smaller companies that could eventually establish themselves as leaders in their industries can lead to life-changing returns. However, this asset class also comes with a healthy dose of risk.

For those willing to take a chance, let's consider two biotech stocks that could eventually become solid, well-established drugmakers: CRISPR Therapeutics (NASDAQ: CRSP) and Viking Therapeutics (NASDAQ: VKTX). Both are attractive to long-term investors comfortable with heightened risk and volatility. Here's more on them.

Image source: Getty Images.

1. CRISPR Therapeutics

Let's start with the bad news about CRISPR Therapeutics. Gene editing medicines are still relatively new. In fact, CRISPR Therapeutics' own Casgevy was the first CRISPR-based gene editing therapy to earn regulatory approval. It comes with significant administration challenges and a high price tag. Additionally, it can be given only in authorized treatment centers and costs $2.2 million in the U.S., not an easy price to get third-party payers to agree to cover.

Now for the good news. CRISPR Therapeutics' gene editing platform can help develop therapies where there are currently few options -- or improve standards of care where there are plenty. Let's look at a couple of examples, starting with Casgevy itself. It targets two rare blood disorders: sickle cell disease (SCD) and transfusion-dependent beta thalassemia (TDT). Both typically require regular lifelong blood transfusions and significantly shorten patients' lifespans.

Casgevy is a one-and-done cure for both. An incredibly more powerful option for these patients. Let's now turn to some of CRISPR Therapeutics' pipeline candidates. There is CTX310, an innovative medicine that may help patients permanently lower their LDL cholesterol and triglycerides (TGs). These need to be kept in check since, at high levels, they are associated with significant cardiovascular problems, including heart attacks and strokes.

There are options to help lower TGs and LDL. Some medications, diet, and exercise all require consistency and discipline over long periods and aren't permanent solutions. Patients sometimes need to stay on drugs for life. CTX310 could change all that. It's another one-time treatment that could lower people's TGs and LDL practically overnight. It could be an excellent option for high-risk patients. CRISPR Therapeutics is also developing a long-acting anticoagulant called SRSD107.

Here, too, there are options, but they have drawbacks. Many cause heavy bleeding as a side effect, need to be administered once or twice a day, and so forth. CRISPR Therapeutics is looking to address these shortcomings with SRSD107, which could be administered twice a year, avoiding the severe side effects. Solid progress with these and other programs could drive CRISPR Therapeutics' growth through the next decade as its commercial efforts for Casgevy also gain momentum.

The stock is somewhat risky, but if it can launch a few transformative therapies in the next few years, it could deliver substantial returns.

2. Viking Therapeutics

Viking Therapeutics is developing medicines in one of the most promising therapeutic areas in the industry: weight management. It will have to go up against some of the largest players in the pharmaceutical industry -- or, for that matter, the entire healthcare sector. However, Viking's leading candidate, VK2735, has already demonstrated strong results in phase 2 studies. It is a dual agonist, meaning it mimics the actions of two gut hormones: GLP-1 and GIP. This approach has already proven highly successful, but there is still only one such medicine approved in the U.S.

A subcutaneous version of VK2735 is currently in late-stage clinical trials. Furthermore, the company had the foresight to develop an oral formulation of the medicine as well. Oral weight loss pills could further boost demand for these medicines, as many patients prefer not to use needles. Additionally, pills are easier to manufacture, store, and transport. That's why, for drugmakers, they could be just as commercially viable as subcutaneous injections, even with lower-efficacy results.

Viking Therapeutics appears well-positioned to enter the anti-obesity market within the next few years and is already working on next-gen candidates. The company is planning to request approval to start clinical trials for another dual agonist (of the amylin and calcitonin hormones) next year. Lastly, its VK2809, a potential therapy for metabolic dysfunction-associated steatohepatitis, also aced mid-stage clinical trials.

That's another area with a high unmet need. Viking Therapeutics could slowly establish itself if its mid- and late-stage candidates pan out. The risk is relatively high: any clinical setbacks will almost certainly sink the stock. But for those willing to factor in that possibility, the upside could also be enormous.

Prosper Junior Bakiny has positions in Viking Therapeutics. The Motley Fool has positions in and recommends CRISPR Therapeutics. The Motley Fool recommends Viking Therapeutics. The Motley Fool has a disclosure policy.