There are plenty of biotech stocks that are expensive. Their valuations depend on highly risky pipeline candidates achieving success. But not every biotech stock is priced at a premium.

We asked three Motley Fool contributors to select biotech stocks that are currently available at a discount. Here's why they identified AbbVie (ABBV 1.77%), Axsome Therapeutics (AXSM -0.50%), and Jazz Pharmaceuticals (JAZZ 0.31%) as biotech stocks that are too cheap to ignore. 

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A big biotech bargain

Keith Speights (AbbVie): Many investors categorize AbbVie as a big pharma stock instead of a biotech stock. However, several of the company's top-selling drugs are biologics, notably Humira and Skyrizi. That gives AbbVie a claim to being one of the biggest biotech stocks around.

It's also one of the biggest biotech bargains around. AbbVie's shares currently trade at close to 9.5 times expected earnings. That's well below the average forward earnings multiple of 11.7 for biotech stocks in the S&P 500

The primary reason behind AbbVie's discount valuation is that Humira faces competition from biosimilars in the U.S. market starting in 2023. The drug generated roughly 36% of the company's total revenue in the second quarter. There's no question that the inevitable sales decline for Humira will hurt.

However, AbbVie has known for years that Humira would eventually lose steam. The company has invested heavily in building up its pipeline and making strategic acquisitions to prepare for its post-Humira future.

Two drugs play an important part in that future: Rinvoq and Skyrizi. Both are autoimmune disease drugs that should be able to pick up the mantle from Humira. Rinvoq recently beat Sanofi's and Regeneron's Dupixent in a head-to-head study in treating atopic dermatitis (eczema). AbbVie thinks that Rinvoq and Skyrizi will together generate risk-adjusted sales of $15 billion in 2025 -- enough to largely offset the declining sales for Humira.

The company also has other products it's counting on to deliver growth, notably blood cancer drug Venclexta, antipsychotic drug Vraylar, and migraine drugs atogepant and Ubrelvy. AbbVie should be able to return to solid growth after a brief revenue dip in 2023.

Don't forget AbbVie's juicy dividend yield of 4.3%. The company is a Dividend Aristocrat that highly prioritizes steady dividend increases. AbbVie's dividend plus its long-term growth prospects make this a bargain biotech stock you'll definitely want to consider.

Zhiyuan Sun (Axsome Therapeutics): Axsome has fallen on hard times lately, losing nearly 50% of its equity value since the beginning of the month. Usually, when biotech stocks see this much of a change in their share price, it's because one or more of their drug candidates failed during clinical trials. However, that's far from the case with Axsome. 

The U.S. Food and Drug Administration recently identified deficiencies with Axsome's regulatory filing for AXS-05, the company's potential novel treatment for depression. But the agency neither issued a Complete Response Letter nor a Refusal to File. Axsome announced that the FDA did not ask for more data regarding the drug. It seems very likely that the issues could be remedied.  

Axsome's other setback came from the FDA rescinding Orphan Drug Designation for AXS-12 in July. AXS-12 is under investigation for the treatment of cataplexy (sudden muscle weakness) in narcolepsy (excessive daytime drowsiness). The problem was that the company couldn't win approval for AXS-12 before the FDA approved another drug in the indication.

I believe that the bad news has taken too heavy of a toll on Axsome's stock price. The company's market cap now stands at less than $1 billion after the sell-off. But Axsome still has three planned New Drug Application submissions: AXS-05 for the treatment of depression, AXS-07 for the treatment of migraine headaches, and AXS-14 for the treatment of fibromyalgia.

All three drug candidates met their primary endpoints in phase 3 trials. Keep in mind that AXS-12, which had met endpoints in phase 2, could still succeed and become a branded competitor to other narcolepsy drugs on the market. For these reasons, consider buying Axsome stock on the dip.  

There's nowhere to go but up for this undervalued biotech 

Prosper Junior Bakiny (Jazz Pharmaceuticals): Jazz Pharmaceuticals is currently trading at 9.1 times forward earnings and 2.6 times forward sales. Both figures are attractive enough for investors to strongly consider initiating a position, provided, of course, that the biotech's prospects are bright. On that front, investors have nothing to worry about. 

One of the company's current best-selling products is Xyrem, which has been the top sleep disorder drug by sales since 2014. It is currently being challenged by another one of Jazz Pharma's drugs called Xywav, a medicine for excessive daytime sleepiness associated with narcolepsy that earned FDA approval in July 2020. During the second quarter, sales of Xyrem dropped by 25% year over year to $334.2 million.

The decline was primarily caused by Xyrem's patients switching to Xywav due to the latter's better safety profile. Meanwhile, Xywav's revenue for the quarter came in at $124.2 million. Given that the drug was only approved last year, investors can expect Xywav to post growing revenue for many years to come.

In May, Jazz Pharma closed its acquisition of GW Pharmaceuticals, a cannabinoid-focused biotech, for $7.2 billion. The deal helped diversify Jazz Pharma's lineup by adding cannabinoid drug Epidiolex.

Epidiolex was first approved in the U.S. in 2018 for treating seizures associated with Lennox-Gastaut Syndrome and Dravet syndrome. More recently, the drug earned label expansions as a treatment for seizures associated with tuberous sclerosis complex.

Jazz has other exciting products in its lineup, including relatively new additions such as cancer drugs Zepzelca and Rylaze. It also has promising pipeline candidates, such as nabiximols, a potential treatment for muscle pain and spasm caused by multiple sclerosis.

Jazz has lagged well behind the overall market in the past year. But powered by its long-standing leadership in the market for sleep medicines, new additions to its lineup, and its recent acquisition of GW Pharma, this biotech stock looks like a steal at current levels.