We recently published a list of the 10 Best Mid Cap Biotech Stocks to Buy. In this article, we are going to take a look at where Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE) stands against the other best mid cap biotech stocks to buy.

Is the Biotech Sector Oversaturated?

On March 6, Jared Holz, Mizuho health care equity strategist, appeared on CNBC’s ‘Power Lunch’ to discuss investing in biotech and the oversaturation in the sector. He said that looking at the denominator of biotech stocks in the public market, we’re standing at the 700-800 range, depending upon the day. Almost a quarter of these have enterprise values in negative territory. That basically means that investors and companies, in some respects, have exhausted options. For any value to be created, it is necessary to shift focus and devise another plan of attack through an asset they don’t currently own, and resuscitate the company.

In some respects, investors and analysts are always looking for a clear pathway for biotech as a sector to perform better. However, Holz said we are in a tough place if a quarter of the index is filled with companies with more cash than the market cap. That is why he suggested, which some people consider somewhat hyperbolic, getting rid of the tail here, as there are too many assets out there.

Thousands of biotech companies are competing against each other for tiny market or revenue opportunities. Holz opined that venture funds should stop making so many companies that end up superseding each other in a few years. It would be helpful to dissolve all the biotech stocks with negative values and return the cash to shareholders.

READ ALSO: 12 Best Diagnostics Stocks to Invest In Right Now and 7 Most Undervalued Biotech Stocks To Invest In. 

How Can One Make Money in Biotech?

Biotechs pose a tempting scenario, as a company’s stock could be worth $5 with a potential blockbuster drug in the pipeline that could cure even cancer. The company’s stock could surge to hundreds of dollars if the clinical trial succeeds. However, at the same time, it could plunge down to $0 if the trial doesn’t. Holz thus says that the sector is incredibly tempting, and thousands of investors put their careers on the line daily to attempt to figure this out.

He characterized biotech as one of the only sectors in all of equities where single stock picking is the only way to make money. Building on his years-long experience covering the industry, he said that the index has barely been up since the past decade. It has been essentially flat. Meanwhile, every other index that one can find has doubled or more. Therefore, there is an obvious issue with the broader complex. But if you find the right asset, you can kill it in the sector.

Our Methodology

We sifted through stock screeners, financial media reports, and ETFs to compile a list of 30 biotech stocks with a market cap between $2 billion and $10 billion. We then selected the top 10 with the highest number of hedge fund holders, as of Q4 2024, and ranked them in ascending order. We sourced the hedge fund sentiment data from Insider Monkey’s database.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

A research team in a laboratory peering through microscopes at a biologic product.

Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE)

Market Cap: $3.58 billion

Number of Hedge Fund Holders: 57

Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE) develops, acquires, and commercializes novel products to treat genetic diseases. Its product portfolio includes Crysvita, Mepsevii, Dojolvi, and Evkeeza. In 2024, the company expanded its business through four products in five indications worldwide.

Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE) plans to expand its commercial business base in 2025, supported by several products in launch mode worldwide. This progress sets the company on a path to full-year GAAP profitability in 2027. It also exceeded expectations with its 2024 results, reporting a total revenue of $560 million. The company expects 2025 total revenue to be between $640 million and $670 million.

Piper Sandler analyst Allison Bratzel maintained a Buy rating on Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE) on March 17 and set a price target of $115.00. J.P. Morgan analyst Anupam Rama also maintained a Buy rating on the company on March 6, setting a price target of $104.00. Analysts are bullish on the stock, and its median price target of $38.69 implies an upside of 124.86% from current levels.

Baron Health Care Fund stated the following regarding Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE) in its Q3 2024 investor letter:

“We purchased Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE), a biopharmaceutical company focused on developing treatments for rare genetic diseases. Impressively, the company has gotten 4 drugs approved across 5 indications in 10 years, and it has a large clinical pipeline with several potential blockbuster opportunities in late-stage development. While the company’s approved products continue to grow 20%-plus, we are most excited about the company’s new product pipeline. Setrusumab is in Phase 3 studies for Osteogenesis Imperfecta, a rare genetic disorder that causes bones to break easily. The drug helps patients increase bone mineral density and reduces the number of fractures patients experience. We think this could be transformative for patients and could be a $1 billion-plus peak sales drug. We are also excited about Ultragenyx’s GTX-102, an antisense oligonucleotide that treats Angelman Syndrome, a rare genetic disorder that affects the nervous system and causes severe development delay and intellectual disability. Early data showed dramatic improvement for patients across several behavioral and cognitive endpoints, and Ultragenyx just started a registrational study. The company is also working on a drug for Wilson disease, a rare genetic disorder that causes copper to build up in the body, where we will get proof-of-concept data soon. We think each of these programs has potential for significant value creation, transforming the company to one with significantly higher revenue and profits.”

Overall, RARE ranks 3rd on our list of the best mid cap biotech stocks to buy. While we acknowledge the potential of RARE as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than RARE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.

Disclosure: None. This article is originally published at Insider Monkey.