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Better Buy: Biogen vs. Axsome Therapeutics

By Keith Speights - May 23, 2020 at 7:36AM

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One biotech has been big long-time winner, the other is a promising up-and-comer with no revenue -- yet. But picking an investment is always a bet on the future.

If you've seen one biotech, you've seen... one biotech. They're all different, with unique opportunities and challenges. And beyond their core differences, their situations vary widely depending on what stage of their business lives they are in. 

Biogen (BIIB 0.98%), for example, is well established. It has made billions of dollars through the years from its multiple sclerosis (MS) franchise and has now expanded into new therapeutic categories. Axsome Therapeutics (AXSM 1.94%), on the other hand, is young enough that it doesn't have any approved products on the market yet, but its pipeline includes several highly promising candidates.

Which of these two biotech stocks is the better pick for long-term investors? Here's how big Biogen stacks up against up-and-coming Axsome.

Smiling male scientist holding a test tube with a test tube rack in front of him

Image source: Getty Images.

The case for Biogen

Biogen's top-selling multiple sclerosis drug Tecfidera continues to roll, with sales rising 10% year over year to $1.1 billion in the first quarter. Two other MS drugs in the company's lineup, Tysabri and Fampyra, delivered even stronger sales growth. Biogen is also making plenty of money from an MS drug that isn't in its lineup. The company's royalties from Roche's sales of Ocrevus soared 45% year over year in Q1 to $162 million. 

But Biogen's catalog isn't limited to multiple sclerosis treatments. The company's spinal muscular atrophy (SMA) drug Spinraza, which it licensed from Ionis Pharmaceuticals, has been a blockbuster success story. Biogen's biosimilar program is also performing well. The biotech currently has approved biosimilars to top immunology drugs Enbrel, Humira, and Remicade.

Even with all these winners, Biogen's revenue growth has slowed significantly. The problem is that sales are declining for its multiple sclerosis interferon products Avonex and Plegridy, and its royalties from Rituxan are slipping.

Biogen could have a solution to that problem, though. The company's pipeline includes half a dozen late-stage programs. And one of those candidates could reverse Biogen's fortunes all by itself -- the experimental Alzheimer's disease drug aducanumab. 

Aducanumab has almost literally risen from the ashes. Last year, Biogen threw in the towel on the drug after disappointing late-stage clinical study results. But a few months later, the company stunned the biopharmaceutical industry with its announcement that further analysis of later trial data had shown enough promise for it to submit aducanumab for FDA approval. Biogen had hoped to do that in early 2020, but in April, the company pushed its planned filing window back to the third quarter.

Meanwhile, the company sits atop a cash stockpile of more than $4.8 billion. It wouldn't be surprising for Biogen to put that money to use by making more licensing deals to bolster its pipeline, or perhaps even acquiring a smaller biotech.

The case for Axsome Therapeutics

We can't point to Axsome's financial results as a reason to invest in the company: Its first-quarter revenue was a big goose egg, and it posted a bottom-line loss of nearly $32.5 million. But its financial performance seems likely to improve a lot in the not-too-distant future.

Axsome reported impressive results in December 2019 from a late-stage study evaluating AXS-05 in treating major depressive disorder (MDD). The biotech expects to file for FDA approval of the drug in the MDD indication in the fourth quarter of this year. 

There's even more potential for AXS-05, though. Axsome announced positive results in April from a phase 2/3 study of the drug in treating Alzheimer's disease agitation. It plans to meet with the FDA later this year about advancing AXS-05 into late-stage studies as an aid to smoking cessation treatment. The biotech also intends to begin a second late-stage study of the drug in treatment-resistant depression (TRD) in Q3 after it failed to meet the primary endpoint but hit key secondary endpoints in a late-stage study in TRD earlier this year. 

In addition to AXS-05, Axsome's pipeline includes three other late-stage candidates. The company plans to file for FDA approval of migraine drug AXS-07 in the fourth quarter. It has reported positive results from a late-stage study of AXS-14 in treating fibromyalgia. And it's on track to begin late-stage testing of AXS-12 as a treatment for narcolepsy in the second half of this year. 

AXS-05 holds the potential to become a blockbuster drug, and AXS-07 could contribute another $300 million in peak annual sales. With Axsome's market cap currently hovering around $3 billion, the stock should have plenty of room to run if the company's two lead candidates win regulatory approval.

Better buy

Normally, I'd pick the stock of a profitable biotech with multiple blockbuster drugs on the market over that of a clinical-stage biotech. But in this case, my view is that Axsome is the better pick over Biogen.

I don't have a warm-and-fuzzy feeling about aducanumab's prospects for FDA approval. Granted, I could be wrong -- and If I am, Biogen's shares will soar. Axsome, though, has a good shot at winning approvals for both AXS-05 and AXS-07. The future could also be bright for its other pipeline candidates.

Axsome is a riskier choice than Biogen is. But given that the established biotech's growth is fizzling, there's new competition on the way for Spinraza, and there's plenty of uncertainty about the fate of aducanumab, an investment in Biogen carries its fair share of risk too. 

Keith Speights has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Biogen. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Biogen Inc. Stock Quote
Biogen Inc.
$220.35 (0.98%) $2.13
Axsome Therapeutics, Inc. Stock Quote
Axsome Therapeutics, Inc.
$46.20 (1.94%) $0.88

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