Three biotech stories to invest in now: LSD therapy, challenge to leader, first sales

Late spring and early summer are the busiest seasons in biotech. May and June bring the industry's largest conferences and investor meetings, where companies unveil clinical data on their drug candidates. For small-cap biotechs, these events are often make-or-break moments: strong data can double a stock's value in a single day, while disappointing results can send shares tumbling. We selected three companies facing such moments in the coming weeks and months.

We deliberately chose three small caps at different stages of drug development to illustrate how biotech risk can take very different forms. For Definium, everything hinges on clinical data. The company does not yet have an approved product, and its prospects will largely be determined by the outcome of ongoing studies of DT120, its proprietary lysergide tartrate oral formulation being developed for major depressive disorder and generalized anxiety disorder. Viridian is a regulatory-risk story. Clinical trials of veligrotug for thyroid eye disease have already been completed, and the key catalyst now is the FDA's decision. The agency has granted the drug both Breakthrough Therapy and Priority Review designations, with a PDUFA target action date of June 30. Kura represents commercialization risk. Its drug Komzifti (ziftomenib) has already been approved by the FDA for relapsed or refractory acute myeloid leukemia with an NPM1 mutation and has reached the market. The main question now is how quickly physicians adopt the therapy and whether the company can expand its use into earlier lines of treatment.

The most important point for investors to remember is that promise does not equal safety in biotech. Stocks can be rapidly revalued on the back of a single event, including strong clinical data, a regulatory approval, a partnership with a large pharmaceutical company, or a successful commercial launch. But those same catalysts can drive equally sharp declines if the outcome disappoints. For that reason, biotech stocks are often best viewed as a small, intentionally high-risk portion of a portfolio – a complement to more stable investments rather than a substitute for them.

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Definium (market capitalization: about $2.2 billion) is not a new player. Before January, the company was known as MindMed and was considered one of the most prominent names in psychedelic medicine. Its lead drug candidate, DT120, is a modern pharmaceutical formulation of LSD, the psychedelic that became a symbol of the 1960s counterculture movement. The drug is administered as an orally disintegrating tablet and is currently in phase III clinical trials as a potential treatment for depression. The company also emphasizes the compound's history. LSD was first synthesized in 1938 by Swiss chemist Albert Hofmann while searching for medicines derived from ergot fungus, and its psychoactive properties were discovered in 1943.

The next major catalyst is the release of topline results from the phase III Emerge study, which the company expects by the end of the second quarter of this year. The trial is evaluating DT120 in patients with major depressive disorder, the most common form of clinical depression. It enrolled 149 participants, with roughly half receiving placebo. Efficacy is being measured using the Montgomery-Åsberg Depression Rating Scale (MADRS), one of the most widely used tools for assessing depression severity.

DT120's approach is fundamentally different from conventional antidepressants. Definium aims to achieve durable symptom improvement following one or several supervised administrations of the drug rather than through continuous treatment.

There is also an important risk. Because LSD produces pronounced psychoactive effects, study participants and physicians may be able to determine who received the drug and who received placebo. This complicates efforts to demonstrate that symptom improvement is attributable to the medicine itself rather than patients' expectations. To reduce this risk, Definium added a low-dose treatment arm to subsequent studies, Panorama and Ascend, to make it more difficult for participants to determine which treatment they received.

Definium estimates its addressable market at 21 million patients. However, the opportunity could ultimately prove much smaller because LSD-based treatment requires medical supervision, and adoption will depend on regulators, physicians, and insurers' willingness to cover the therapy.

The biggest risk for investors is the absence of a commercial product. Another source of uncertainty is the complex regulatory environment surrounding psychedelic medicines.

Definium shares have gained around 84% year to date and 229% over the last 12 months. All 16 analysts covering the company rate the stock a "buy" or "overweight." Their average target price is $39.50 per share, implying upside of around 63%.

Viridian (capitalization: about $1.8 billion) is transitioning from a development-stage biotech company to a commercial-stage business. Its drug candidate veligrotug has not yet been approved, but it could become the company's first marketed product. The therapy is being developed for thyroid eye disease (TED), a rare autoimmune condition that causes inflammation of tissues around the eyes, and visible physical changes can significantly reduce patients' quality of life.

The next key catalyst is the FDA's decision on veligrotug, which is expected by June 30. For investors, the event is binary: approval would open the door to the company's first product sales, while a rejection or delay could send the stock sharply lower.

There is currently only one approved treatment for TED on the market: Amgen's TEPEZZA. Veligrotug and TEPEZZA target the same biological pathway – the IGF-1R receptor – whose effectiveness in the disease has already been established. Viridian's potential advantage is greater convenience.

The commercial opportunity has already been validated by TEPEZZA's success. The drug generated around $1.90 billion in U.S. sales in 2025. The number of patients with active TED in the country is estimated at 44,000-100,000. If successfully launched, Viridian's therapies could eventually approach the current market leader's sales level of around $2 billion in the U.S.

The primary risk remains the FDA's decision. The regulator could extend its review timeline or request additional safety or manufacturing data. Even if approved, veligrotug will have to compete against TEPEZZA, which already has a strong position in the market. Over the longer term, next-generation subcutaneous therapies – including Viridian's own candidates – could also put pressure on sales.

Viridian shares have fallen 46% year to date. Sixteen Wall Street analysts rate the stock a "buy," versus a single "hold" rating. The average target price is $33.90 per share, roughly double the closing price on June 1.

Kura (capitalization about $800 million) is no longer a story driven solely by expectations. It is now a commercial-stage company. Its drug KOMZIFTI (ziftomenib) received FDA approval in November. It is the first and only approved oral therapy for adults with relapsed or refractory acute myeloid leukemia, an aggressive cancer of the blood and bone marrow, harboring a specific genetic mutation. Around 21,000 new cases of acute myeloid leukemia are diagnosed in the U.S. each year, and roughly 30% are associated with NPM1 mutations.

The next key catalysts are public events investors will be watching closely. In June, Kura and its partner Kyowa Kirin will present updated frontline ziftomenib data at the European Hematology Association Congress. Positive results could expand the number of patients eligible for treatment.

In early August, Kura is expected to report second-quarter results, including the first meaningful sales figures for KOMZIFTI and commentary from the management on the pace of the commercial launch. The report will serve as an important test of the company's business model. The drug generated $5.8 million in revenue in the previous quarter, and investors will be looking to see whether growth is accelerating.

Kura's valuation depends not only on future regulatory approvals, but also on how quickly physicians incorporate the drug into clinical practice. That makes Kura a more commercially driven story than earlier-stage biotech companies, where clinical data remain the primary catalyst.

There are risks, however. The addressable market is limited, competition within the menin inhibitor class is increasing, and the drug's safety profile requires continued monitoring. The FDA has highlighted the risks of severe inflammatory reactions associated with treatment, as well as potential effects on heart rhythm. In addition, one strong quarter of sales does not guarantee sustained demand. Early prescriptions may reflect pent-up physician interest rather than a durable growth trajectory.

Kura shares are down 10.5% year to date but remain up 47.5% over the last 12 months. According to MarketWatch data, the stock has 14 "buy" calls versus one "hold" rating from analysts. The average target price is $31.20 per share, implying upside of around 240%.