2 Innovative Cathie Wood Stocks to Buy If You Can Take the Risks

Cathie Wood’s portfolio manager Ark Innovation ETF (NYSEMKT: ARKK) loaded up on a pair of biotech stocks throughout August and early September, and it wasn’t the first time they caught his eye. Her style is to invest in growth businesses that pursue disruptive innovation in their industries. So while both are certainly risky plays, there’s reason to believe these two companies have a decent shot at success.

Here’s what she bought and why you might want to buy them too.

1. Intellia Therapeutics

Intellia Therapeutics (NASDAQ: NTLA) is a gene editing biotech stock of which Ark Investment Management owns about 0.2%. Intellia’s goal is to treat or cure rare inherited diseases by directly editing the dysfunctional genes responsible for causing each disease. That fits perfectly with Cathie Wood’s investment perspective. Powerful gene-editing technologies are basically the definition of disruptive innovation because, if they work, they would eliminate the need for legacy interventions that only manage disease.

Intellia’s pipeline is largely early stage. However, it has an advanced gene editing program for transthyretin amyloidosis (ATTR) that should enter phase 3 clinical trials in the next few months. It also has a midstream program for hereditary angioedema (HAE), which should report data from its Phase 2 clinical trial sometime before the end of this year; which could give shareholders a significant advantage if the data looks good. Both programs aim to offer the convenience of a single dose that permanently reduces a patient’s disease burden, so the commercialization of either would mark a major scientific achievement that would likely send the stock higher.

Financially, this biotech is in pretty good shape. At the end of the second quarter, it reported about $940 million in cash, cash equivalents and short-term investments, while its research and development (R&D) spending in the trailing 12 months (TTM) was close to 449 million dollars. Management calculates that at the current rate of spending, it has enough cash to last until the end of 2026.

The main risk in buying Intellia stock now — and it’s a big one — is that its ambitious gene-editing programs could fail at scientific or regulatory hurdles, immediately evaporating much of its value. The company is deep in uncharted territory, and it’s unclear whether regulators at the Food and Drug Administration (FDA) will be reassured by the standard of evidence it can produce, not to mention the uncertainty of whether its therapies can it really worked on its own. the standards.

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Another potential problem is that if Intellia succeeds in developing curative gene-editing therapies, it could one day be cured of having patients to sell them to. But that’s a distant concern for now.

If you can accept these risks without flinching, Intellia Therapeutics is a worthy biotech to add to your portfolio.

2. Recurrent pharmaceuticals

Cathie Wood’s portfolio holds just under 0.1% of the Recurring pharmaceuticals (NASDAQ: RXRX) shares, but it’s not the same kind of biotech as Intellia. While Recursion has a pipeline of five therapies in mid-stage clinical trials for rare diseases such as cavernous cerebral malformations (CCM), what likely appeals to Cathie Wood is the biotech’s commitment to using artificial intelligence (AI) in its drug development process.

On that front, the angle for investors is that Recursion is the biggest and most advanced AI-centric drug developer right now. And it’s about to get even bigger: It’s merging with another AI biotech drug developer, Exsciencein a transaction expected to close in early 2025.

The merged company, which will retain the Recursion name, will be left with a cash runway through 2026, a much larger oncology pipeline and the potential for up to $200 million in collaboration milestone payments over the next two years . In addition, the two businesses have a combined amount of approximately $850 million in cash, equivalents and short-term investments as of the second quarter, and the new entity is expected to realize efficiencies of approximately $100 million upon closing the transaction.

More importantly, the new company will be exposed to up to 10 clinical data readings over the next year and a half, each of which is a catalyst for the stock. These catalysts are not guaranteed to be positive, of course, so there is a high risk for investors. Besides, it’s not like using AI to develop more effective drugs has proven valuable — at least not yet. There is a risk that the use of AI will increase costs without any benefit, contrary to Recursion’s expectations and claims.

But it’s worth betting on Recursion Pharmaceuticals even before it achieves AI biotech leadership. After combining with Exscientia, its roster of collaborators will be a who’s who of international biopharma heavyweights, including players such as Merck, Rocheand Sanofias well as the leading manufacturer of AI chips, Nvidia.

If those companies thought Recursion was worth working with, they probably weren’t. So you might follow in their footsteps and buy some stocks if you’re comfortable with the idea that the stock might lose some value before it has a chance to go up.

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Alex Carchidi has no position in any of the shares mentioned. The Motley Fool has positions in and recommends Intellia Therapeutics, Merck and Nvidia. The Motley Fool recommends Roche Ag. The Motley Fool has a disclosure policy.

Cathie Wood’s 2 Breakthrough Stocks to Buy If You Can Avoid the Risk was originally published by The Motley Fool