The biotechnology industry is rapidly changing, thanks to artificial intelligence (AI). 

In the fast-paced world of biotech investing, small-cap stocks often get overlooked. However, some have the potential to yield significant long-term gains. These emerging biotech companies, each priced under $10, have groundbreaking pipelines. 

For investors willing to embrace some risk for the possibility of outsized returns, these two small-cap biotech stocks could offer significant upside as they race to develop next-generation therapies.

Small-Cap Stock #1: Jade Biosciences

Jade Biosciences (JBIO) is a clinical-stage biotechnology company focused on developing innovative therapies for autoimmune diseases with significant unmet needs. Jade (formerly a private biotech) recently completed a merger with Aerovate Therapeutics and will now operate under the name Jade Bioscience. The stock began trading on the Nasdaq Exchange under the symbol JBIO on April 29, 2025. 

The company’s lead candidate is JADE-101, an anti-APRIL monoclonal antibody being developed to treat Immunoglobulin A nephropathy (IgAN), a chronic autoimmune kidney disease that is underdiagnosed but has a high unmet need.

The company intends to begin the first-in-human clinical trial in the second half of 2025. It expects interim data in the first half of 2026. The company has also advanced JADE 201 (from the JADE 002 program) and is working on another antibody program, JADE 003. Both are currently in the preclinical development phase. In addition to the merger, Jade secured $300 million in a private placement and converted $95 million in convertible notes to fund its pipeline until at least 2027.

At the end of the first quarter, its balance sheet showed cash and cash equivalents totaling $49.9 million. The merger brought in an additional $205 million in proceeds, providing runway through 2027. 

In Q1, the company spent $20 million on R&D, maintaining its aggressive approach. Jade has a strong capital position right now. Furthermore, if JADE 101 is successful, Jade may have a first-mover advantage in the IgAN treatment market. However, as a clinical-stage biotech company, success may be years away. Thus, Jade is a high-risk, high-reward investment opportunity for those who are willing to take the risk.

Overall, Wall Street says JBIO is a “Strong Buy” with all four analysts in coverage optimistic about the stock. Analysts have set a mean target price of $16.67 for the stock, which implies upside potential of 74% from current levels. Its high price estimate is set at $19, which suggests the stock can go as high as 98% over the next 12 months. 

Small-Cap Stock #2: TScan Therapeutics

With a market cap of $81.5 million, TScan Therapeutics (TCRX) is a clinical-stage biotech company focused on T-cell receptor-engineered T-cell therapies (TCR-T) to treat cancer. TScan stock has dipped 50% year-to-date, compared to the overall market gain of 1.8%. 

The Phase I ALLOHA trial is evaluating TScan’s lead programs, TSC 100 and TSC 101, with the goal of preventing relapse following allogeneic hematopoietic cell transplantation (HCT). The company is planning a registration trial for TSC-101 in the second half of 2025 after receiving feedback from regulators. Additionally, TScan intends to file an investigational new drug (IND) application for TSC-102-A0301. 

While TScan continues to generate no revenue, its collaboration with Amgen (AMGN) resulted in $2.2 million in net revenue in the first quarter. TScan continues to spend heavily on R&D, which totaled $29.8 million in the quarter. Being in the clinical stage, it reported a net loss of $34.1 million, compared to $30.1 million in the prior-year quarter. On its balance sheet, TScan had $251.7 million in cash, cash equivalents, and marketable securities. The company expects to use this cash balance to fund its operations until the first quarter of 2027.

With a strong balance sheet, validated platform, promising dual pipelines, and data releases expected in late 2025, the company has significant potential. It is still a high-risk, high-reward small-cap biotech. For long-term investors, this biotech stock is the one to watch. 

Overall, Wall Street analysts rate Tscan stock a “Strong Buy.” Of the eight analysts covering the stock, seven rate it a “Strong Buy,” while one suggests it is a “Moderate Buy.” The stock’s average analyst target price of $9 suggests upside potential of 525% over the next 12 months. The high price target estimate stands at $12, which suggests the stock can climb as much as 733% from current levels.