From speculation over mergers and acquisitions to the hype surrounding clinical readouts, it seems biotechnology stocks are all the rage this year.

The iShares Biotechnology exchange-traded fund has risen nearly 23% this year against a 14% gain in the benchmark S&P 500 index. The State Street SPDR S&P Biotech ETF has fared even better, surging 30%.

Ask these analysts, and they will say more upside awaits.

Morgan Stanley is making high-risk, high-reward calls on a handful of biotech stocks. If their pipeline drugs succeed, they could represent a multibillion-dollar opportunity.

"These Moonshots are not our highest-probability outcomes, but they may be our highest-upside opportunities," analysts wrote in a lengthy research note on Sept. 11, describing clinical events where "investor expectation is low yet potential payoff is very high."

One pick is Argenx, the maker of autoimmune drug Vyvgart, which topped $1 billion in annual sales in just its second year on the market. Analysts see another blockbuster in empasiprubart for chronic inflammatory demyelinating polyneuropathy, a neurological condition marked by progressive muscle weakness and sensory loss.

In the most optimistic "moonshot" scenario, empasiprubart is projected to generate $6.6 billion in peak global annual revenue in 2036. This could lift the analysts' target share price to $1,450 from $1,250. A continuing late-stage trial pits empasiprubart against the current standard of care.

If successful, analysts believe the drug could be the first suggested treatment after diagnosis rather than merely a fallback for patients. A crucial trial readout is expected in the fourth quarter, but until then, the firm assigns the drug only a 50% probability of success, meaning it is just as likely to fail as it is to go to market.

RNA technology, a type of medicine that modifies or silences genetic messages inside cells, has been just as hyped as it is scrutinized. Investor attention has centered on Moderna's portfolio of mRNA-based vaccines, but there are plenty of other players including Arrowhead Pharmaceuticals, which often sits at the center of acquisition rumors due to its robust pipeline.

Arrowhead's ARO-MAPT therapy is designed to silence the gene that produces the tau protein, which forms toxic tangles in the brains of Alzheimer's patients. Its main advantage is convenience: It is given as a routine shot every three months, skipping the invasive spinal injections required by rival RNA therapies.

Assuming the drug secures regulatory approval, Morgan Stanley calculates $3 billion in annual sales. This could bring the share price to $180 from the firm's $120 target, representing a 50% increase. Early-stage data is expected later this month.

Denali Therapeutics, developing an Alzheimer's drug of its own, is another "moonshot" candidate. Lead candidate DNL921 is designed to improve drug delivery into the brain while mitigating severe side effects. The drug candidate resolves two safety flaws seen in older therapies by dramatically lowering brain swelling or bleeding and preventing anemia caused by off-target attacks on red blood cells.

Analysts ascribe shares a "moonshot value" of $48 a share, up from their $40 price target currently, based on an estimated $355 million in unadjusted U.S. annual revenue. In their official base-case valuation model, the analysts assign only a 20% probability of success to the program, translating to $71 million in non-risk adjusted revenue.

The next major test comes next year with the release of early-stage safety and biomarker data. In the nearer term, data for a different candidate built on the same platform, DNL628, could offer insights into the technology.

Incyte is one of the larger drugmakers on Morgan Stanley's list, with a market capitalization of nearly $25 billion. The company already boasts nine products on the market and is working to expand its footprint in oncology. However, just because it has escaped the pitfalls of early-stage biotechs doesn't make the investment case any less speculative.

Incyte's "moonshot" candidate binds to a mutated protein to prevent continuous cell growth. Analysts believe this therapy, combined with chemotherapy, could redefine first-line pancreatic cancer care, provided its response depth and durability beat current benchmarks without compromising full drug delivery.

Analysts believe Incyte shares could rise as high as $131, up from their $119 price target, if the treatment were to achieve $800 million in annual peak sales. The drugmaker is set to share relevant data at the annual meeting of the European Society for Medical Oncology in late October.

Other drugmakers are rearing to break into the weight-loss drug market, widely considered a duopoly between Eli Lilly and Novo Nordisk. Viking Therapeutics stock surged on Tuesday after the biopharmaceutical company shared a clinical update for its obesity and diabetes candidate. Roche shared positive news of its own, though the readout failed to boost shares.

California-based Neurocrine Biosciences is best known as the developer of Ingrezza, a blockbuster treatment for tardive dyskinesia. However, Morgan Stanley believes the drugmaker stands a fighting chance against Lilly and Novo if its obesity candidate, NBIP-2118, pulls through.

Analysts are willing to value Neurocrine at up to $207 a share versus their current price target of $183, assuming commercial success and 15% share capture of a $150 billion market. While the drug's mechanism of action has been validated in trials for similar candidates, NBIP-2118 remains early in clinical testing. The next catalyst is a Phase 1 readout assessing both weight loss and the preservation of muscle tissue, expected in 2027.

Sana Biotechnology is possibly the biggest gamble. The company has yet to commercialize any of its products. With shares trading around $3 on Tuesday, this gives it a market capitalization under $1 billion, making it the smallest player on the list.

However, the most speculative pick might also have the most potential: Sana's candidate SC451 in Type 1 diabetes could restore insulin production in a one-time treatment without suppressing a patient's immune system over the long term. Analysts believe the next biggest challenge is manufacturing, describing it as "the key scale test."

Morgan Stanley sees the stock price increasing more than fivefold to $67 from its $12 target, based on roughly $12 billion in unadjusted U.S. sales, 34% peak market share for the indication, and 100% probability of success. Their base case assigns just a 20% likelihood of success, 23% peak market share and $1.9 billion in risk-adjusted sales.

Sana is set to provide follow-up data when the European Association for the Study of Diabetes convenes in early October, which could shift the narrative around the shares. The readout could prove consequential: Sana stock quadrupled in a single session last year following positive trial results for a different drug candidate.

Study leader Per-Ola Carlsson said at the time that the data offered hope for a scalable, curative treatment for patients with Type 1 diabetes. Time will tell if history repeats itself.