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2 Top Biotech Stocks to Buy for Summer 2021

By Cory Renauer - Jun 5, 2021 at 5:31AM

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Progress in these companies' drug development pipelines should give shareholders plenty to look forward to.

This summer promises to be extra hot for a pair of biotech stocks that hardly anyone had heard of just a couple of years ago. BridgeBio (BBIO 0.94%) is launching its second drug right now, and Axsome Therapeutics (AXSM -1.62%) could be knee-deep into its first new drug launch before it's time to send the kids back to school this fall. 

Both are poised to produce market-beating gains for investors. Here's how they could make it happen. 

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Image source: Getty Images.

1. BridgeBio

This biotech company behaves like a portfolio manager with control over a suite of subsidiaries, each of which is dedicated to an individual drug program. On May 28, QED Therapeutics became the second BridgeBio affiliate to earn FDA approval for a new drug.

That drug, Truseltiq is an easy-to-swallow capsule that makes it harder for mutated fibroblast growth factor receptors to drive tumor growth. It's currently approved to treat advanced-stage patients with a rare form of bile duct cancer called cholangiocarcinoma; clinical trials already underway could support the expansion of its drug label to include larger patient populations. 

In February, the FDA approved the first new drug developed by a BridgeBio affiliate. Nulibry, from Origin Biosciences, is a cofactor replacement therapy for patients who can't produce their own cPMP due to an often-fatal condition called molybdenum cofactor deficiency type-A.

While Nulibry is a relatively straightforward cofactor replacement treatment, nearly all of BridgeBio's development pipeline consists of innovative new treatments for serious diseases with clear genetic components. Investors can anticipate more new drugs that resemble Truseltiq emerging from that pipeline.

One of BridgeBio's affiliates has in late-stage testing a transthyretin (TTR) stabilizer called acoramidis that patients can take orally. The drug, if approved, could produce several billion dollars in sales annually. In 2019, Pfizer (NYSE: PFE) launched a TTR-stabilizer in the U.S. called Vyndaqel that generated $1.3 billion in revenue last year.

Top-line data is expected in the fourth quarter from a long-term outcome study of acoramidis in patients suffering heart damage caused by TTR amyloidosis. If the results make acoramidis look competitive with Pfizer's drug, BridgeBio's stock could jump overnight.

Physician smiling at a patient.

Image source: Getty Images.

2. Axsome Therapeutics

This biotech is taking advantage of known drug interactions to develop new treatments for common neurological maladies. Axsome Therapeutics' lead candidate, AXS-05, is a combination of bupropion, a popular antidepressant, and dextromethorphan, an ingredient in most cough medicines. 

Treatment with AXS-05 beat the pants off a placebo in pivotal clinical trials. In April, the FDA started reviewing Axsome Therapeutics' application for the drug as a treatment for major depressive disorder (MDD).

Every year, physicians in the U.S. write more than 100 million prescriptions for serotonin reuptake inhibitors such as Zoloft, Lexipro, Celexa, and Prozac to treat people with anxiety and depression. Addressing those patients' serotonin levels can be incredibly helpful, but it doesn't always get the job done. Plus, serotonin-based drugs come with debilitating side effects that are far less common among MDD patients who take bupropion. As an extra-strength version of a drug that physicians are already comfortable with, AXS-05 could quickly become one of the most prescribed treatments of its type.

We'll know more about AXS-05's future as a treatment for MDD after the FDA issues an approval decision. That is expected to occur in August. Further ahead, AXS-05 could also earn approval as a treatment for agitation caused by Alzheimer's disease. In the Advance-1 clinical trial, Alzheimer's patients taking AXS-05 showed significantly less agitation than those given a placebo or bupropion. Patients treated with AXS-05 even reported fewer side effects than those randomized into either control group.

There are currently more than 6 million people in the U.S. with Alzheimer's, and more than two-thirds of them also suffer from agitation. With AXS-05's clean safety profile, it won't take much to convince healthcare providers to give it a shot, if it's approved. 

Axsome Therapeutics will probably wait for an approval decision for AXS-05 as an MDD treatment before submitting a supplemental application to expand its addressable patient population to include Alzheimer's disease agitation.

In the meantime, the company expects to submit a new drug application for the second candidate from its pipeline that has produced convincing evidence of efficacy, AXS-07. In May, the company told investors a new drug application for AXS-07 as a migraine treatment will probably reach the FDA before the end of the second quarter.

Know the risks

Axsome Therapeutics has a market cap of $2.3 billion, but it doesn't have any reliable revenue sources yet. If any unforeseen obstacles get in the way of AXS-05, its stock could fall hard.

With two FDA-approved drugs already in its arsenal, BridgeBio is in a stronger position financially. This portfolio company's $8.7 billion market cap, though, says investors have priced in the prospect of a great deal of success in the next few years. Any trouble with acoramidis or Truseltiq could lead to steep share price declines.

These look like risks worth taking. Just remember to keep these stocks in a well-diversified portfolio.

Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

BridgeBio Pharma, Inc. Stock Quote
BridgeBio Pharma, Inc.
$10.70 (0.94%) $0.10
Axsome Therapeutics, Inc. Stock Quote
Axsome Therapeutics, Inc.
$42.43 (-1.62%) $0.70

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