Investors are always on the lookout for the best returns, and seeking stocks with potential for great upside. At first glance, biotech stocks wouldn’t seem to be great candidates for success – they come along with high overheads and expensive product research, and long lead times before taking anything to market. But that hasn’t stopped investors from putting money into highly speculative biotech companies. The keys here are a willingness to shoulder some risk, and an understanding that success will be based not on traditional factors like earnings and sales metrics but on clinical trial results and governmental regulatory decisions. Investors in biotech stocks need to find targets with positive catalysts on the near- to mid-term horizon, including promising drug candidates and/or novel approaches to unmet medical needs. Find these, invest patiently, and wait – the upside potential is often immense. Using the TipRanks platform, we’ve found two clinical-stage biotech companies which fit that profile. Let’s take a look at their details, along with recent commentary from Wall Street’s analysts. Viracta Therapeutics (VIRX) We’ll start with Viracta, a clinical stage biotech firm focused on the treatment of Epstein-Barr related cancers. E-B is one of the most common virus infections found in humans; it is part of the herpes family of viruses, is known as the cause of infectious mono – and has been reliably linked to a range of cancers, including various lymphomas, and gastric and nasopharyngeal cancers. Estimates are that 90% or more of the world population carries the virus, and it results in more than 250,000 viral-related cancers annually. Clearly, finding a targeted treatment for cancers caused by a nearly ubiquitous viral infection will have a strong impact on public health. Viracta has one drug candidate in its research program, nanatinostat. This candidate has been granted a Fast Track Designation by the FDA for use in combination with the anti-viral drug valganciclovir as a treatment for EBV+ lymphoid malignancies. In combination, nanatinostat targets the viral genome and induces a specific genetic expression; the anti-viral then disrupts the DNA replication cycle and kills the tumor. Results in Phase 1b/2 clinical trials were positive, and a further clinical trial, the NAVAL-1 pivotal trial, is planned for later this year. In addition to the Fast Track Designation, the nanatinostat/valganciclovir combination has also received Orphan Drug Designations in the treatment of T-cell lymphoma, plasmablastic lymphoma, and post-transplant lymphoproliferative disorder. These programs are still in pre-clinical research phases, with a Phase 1b/2 clinical study scheduled for 2H21. Earlier this year, Viracta completed a merger with Sunesis Pharmaceuticals, an all-stock deal that ended with Viracta shareholders owning 86% of the combined company, with 14% going to Sunesis investors. The merger will allow the combined company to focus on Viracta’s development pipeline – and it put the VIRX ticker on the NASDAQ. VIRX held over $120 million in cash and cash equivalents as of the merger closure on February 24. During the merger, Viracta gained ownership of two clinical-stage drugs in Sunesis’ pipeline. On March 23, Viracta announced that it had reached an agreement with XOMA by which XOMA purchased the future milestones and royalties of the Sunesis candidates. The purchase included an up-front payment of $13.5 million, along with up to $20 million in future payments based on a pre-commercialization, event-based milestone. The sale to XOMA allows Viracta to focus on the EBV+ nanatinostat pipeline. In a recent report on Viracta, Leerink analyst Andrew Berens said, “We think the drug will carve a niche in later lines of therapy, eventually moving earlier as physicians gain experience with the drug and company generates additional data. Could see some usage in patients who are unable to get full intensity standard of care because of EBV infection.” In a key point, the analyst adds, “This provides the company with multiple shots on goal, given that the pivotal NAVAL-1 trial, set to initiate in 2Q21, will simultaneously evaluate a number of cohorts.” Berens initiated coverage with a Buy rating and an $18 price target, suggesting room for an 82% one-year upside. (To watch Berens’ track record, click here.) There are three reviews on file for this ticker, and they are unanimous – all recommend to Buy this stock. This clear positive outlook gives VIRX a Strong Buy analyst consensus rating. The shares are selling for $9.89, and their $33 average price target implies an upside of 234%. (See Viracta’s stock analysis at TipRanks.) Akouos, Inc. (AKUS) The next stock we’re looking at, Akouos, offers investors a chance to truly get in on the ground floor. This company’s work is still at the pre-clinical stage – but it offers a great deal of potential. Akouos has locked onto the fact that most hearing disorders are genetically based, and that current treatment is dependent on hearings aids and cochlear implants. The company is looking for a different approach, one not based on mechanical assistance. Akouos is developing a series of targeted adeno-associated viral (AAV) vector-based gene therapies for hearing loss. That novel approach, if successful, will offer hearing loss patients a less invasive route for treatment. The AAV approach aims to put corrected copies of the affected genes directly into the inner ear, allowing the body to heal itself and restore hearing. This is a truly novel approach to the problem, and the work is still in its early phases. Akouos has six product candidates, at various levels of preclinical testing. Earlier this month, Akouos announced an important milestone in its AK-OTOF program. The drug candidate was granted both Orphan Drug Designation and Rare Pediatric Disease Designation by the FDA. These designations open pathways for faster regulatory review, as well as funding assistance. Akouos plans to submit its investigational new drug application (IND) for AK-OTOF in 1H22. On the business end, Akouos finished 2020 with over $308 million in cash on hand, and in February the company raised $105 million in gross proceeds from a Series B financing round. This comes after last summer’s IPO, held in June, in which the company put 14.375 million shares on the public market at $17 each. The IPO raised $244.4 million before expenses. These recent cash infusions bode well for Akouos’ ability to maintain its research programs; the company’s cash position has improved dramatically since December 2019, when it had just $25.1 million available. 5-star analyst Joseph Pantginis, of H.C. Wainwright, initiated coverage of this stock recently. Noting the company’s novel approach to a serious problem, he writes, “Akouos’ approach is promising in our belief, as it leverages synthetic AAV variants (known as ancestral AAV or AAVAnc) to provide the appropriate missing gene to the entire sensory epithelium in the inner ear with high efficiency. Importantly, the therapy is coupled with a novel, minimally invasive surgical delivery strategy which overcomes the common limitations associated with reaching the inner ear.” At the bottom line, Pantginis gives a bullish outlook: “We project Akouos emerging as a key player in the space. We see the company’s clear focus and innovative approach as highly competitive in the current landscape of hearing loss disorders.” The analyst initiated a Buy rating on AKUS, and his $25 price target indicates room for 57% share growth in the next 12 months. (To watch Pantginis’ track record, click here.) Akouos has been in the public markets for just 10 months, and in that time has picked up 5 analyst reviews. These break down 4 to 1 favoring the Buys against the Hold, and give the stock its Strong Buy consensus rating. AKUS is trading for $15.96, with a $30 average price target suggesting a one-year upside potential of 88% from that level. (See Akouos’ stock analysis at TipRanks.) To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights. Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.