The biotech scene can be seen as fairly risky for new investors who want to put money to work. After all, it’s really tough to gauge which innovative biotech firms will have something genuinely ground-breaking to come out of their pipelines.

Indeed, the fundamentally sound blue chips with solid balance sheets tend to be a great way to go if you’re looking for a good shot at long-term gains to be had from the biotech or biopharma scene. Also, going the route of an exchange-traded fund (ETF) is a great way to spread your bets across several promising names in the space.

Perhaps the iShares Biotechnology ETF (NASDAQ:IBB) is tough to top for new investors who aren’t all too well-versed in the complex realm of cutting-edge biotech innovation and all the lengthy clinical trials along the way. Sure, you could pick the mid-cap biotechs with the most stacked and promising drug pipelines in the more advanced stages. But that alone does not guarantee success.

At the end of the day, an advanced-stage drug could fall flat at any time, and once news of such breaks, you’ll be looking at some pretty steep losses, perhaps extremely steep when it comes to the biotech firms with market caps south of $100 billion.

Simply put, you need a strong stomach if you’re to specialize in the arena of biotech. Still, with emerging growth trends—think AI and GLP-1 drugs—opening new doors to growth, I’m inclined to warm up to the biotechs as the shot at greater growth may be worth the added risks.

Mind the bumps in the biotech scene!

With so much speculation surrounding a handful of names, it can be tough to tell where the real long-term value lies. Though biotech may be a wilder ride, I think growth investors shouldn’t ignore the space because of its complexity.

Indeed, some of the most profound innovations could arise from the biotech arena in the coming years, especially once firms can harness the power of artificial intelligence (AI). From AI-powered drug discovery to the rise of personalized medicine, it’s hard to think of a sector of the economy that stands to be as heavily impacted as health.

It’s difficult to predict when AI-induced economic profits will arrive and just how large they’ll be. In the meantime, there is no shortage of other innovative fields that could propel the biotech scene higher over the medium term. Undoubtedly, the rise of GLP-1 drugs, which may boast applications well beyond weight loss, makes biotech firms very intriguing for those seeking a timelier trend to ride higher.

GLP-1 drugs are a promising growth engine

The GLP-1 boom has helped firms like Eli Lilly (NYSE:LLY) and Novo Nordisk (NYSE:NVO) heat up in recent years. As more players look to break into the market with their own offerings, these GLP-1 pioneers will need to up their game.

As more data comes in, perhaps Lilly and the company can stay at the top of their game as new offerings aim to be more effective, affordable, and with fewer side effects.

Indeed, there’s a huge market from GLP-1s (it also seems to be expanding) and one that could continue to drive significant gains for the firm with the best product. For now, it seems like Lilly has that “most advanced” product with Mounjaro. However, whether Lilly can keep raising the bar could be the trillion-dollar question in these coming years. 

Perhaps the “sweet spot” could see firms like Lilly embrace AI to help accelerate the advancement of GLP-1 projects in the works. It’s an exciting time for the firm, even though shares are taking a breather to start the new year.

The bottom line

With shares of LLY in a bear market over recent GLP-1 demand jitters, perhaps now’s a good time to be a buyer of the dip. In any case, many durable growth engines will make it harder to ignore the biotech scene. Perhaps the volatility is worth embracing for those searching for outsized growth prospects at a somewhat reasonable price, at least compared to some of the bid-up names in the AI scene right now.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.