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3 Biotech Stocks With Huge Catalysts This Fall

By Cory Renauer – Sep 29, 2021 at 6:12AM

Key Points

  • This fall, Compass Pathways expects topline results from a large clinical trial testing psilocybin as a potential new option for millions of Americans with treatment-resistant depression.
  • Neurocrine Biosciences expects phase 3 results this year from a study that could expand the approval of its lead drug, Ingrezza, to include Huntington's disease patients.
  • Ionis Pharmaceuticals and its collaboration partner Biogen are expected to read out results from a phase 3 trial with an experimental ALS treatment called tofersen.

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Clinical trial results expected this fall could send shares of these stocks screaming higher, or lower.

Do you ever get the feeling that something big is about to happen somewhere in the stock market? Well, you're probably right. In the biotechnology industry alone, a record 71 start-up drugmakers raised at least $50 million in their initial public offerings last year, and this year is shaping up to be even bigger.  

With so many well-funded research teams out there, choosing a few to follow closely is more difficult than ever. To make things just a little easier, here are three of the most significant biotech catalysts on the way.

Scientists at work in a laboratory.

Image source: Getty Images.

Compass Pathways

Compass Pathways (CMPS -4.10%) is a clinical-stage biotech company trying to treat mental health conditions with psychedelic drugs. Before the end of 2021, the company expects to report topline results from the largest study to date of psilocybin for treatment-resistant depression.

In 2017, around 7% of American adults experienced bouts of major depression. Antidepressants are widely prescribed, but a majority of patients who seek treatment don't achieve remission after their first treatment. Around one-third still don't feel better after four courses of treatment.

There's no shortage of anecdotal evidence supporting the use of psilocybin as a treatment for depression. That said, depression isn't an easy thing to measure consistently from one study location to another. Plus, clinical trial volunteers randomized to receive placebos have a tendency to improve on their own, which has a frustrating effect on studies.

While there's probably a bright future for psychedelic drugs as treatments for depression, trial results expected this fall might not contain the evidence investors need to see before this stock can rise much further. Compass Pathways' lead candidate, COMP360, is being tested in conjunction with psychological support from specially trained therapists. Depression studies are notoriously unpredictable, and adding this extra element of variability won't help.

Investor looking at a stock chart.

Image source: Getty Images.

Ionis Pharmaceuticals

Ionis Pharmaceuticals (IONS 0.75%) develops RNA antisense drugs that can inhibit the expression of specific genes responsible for rare diseases. The company's most successful drug to date is a blockbuster spinal muscular atrophy treatment called Spinraza. 

Biogen (BIIB 0.56%) has a license to develop and commercialize Spinraza, which generated around $1 billion in top-line sales in the first half of 2021. Over the same period, the big biotech delivered $132 million in Spinraza royalties to Ionis Pharmaceuticals.

This fall, we should find out whether or not the partners have another blockbuster drug on the way. A phase 3 trial with amyotrophic lateral sclerosis (ALS) patients and another RNA antisense candidate called tofersen is expected to read out topline results before the end of October.

Tofersen could be the first treatment that addresses the root cause of ALS for a subgroup of patients with superoxide dismutase 1 (SOD1) mutations. In a phase 1 trial, treatment with tofersen significantly reduced the amount of mutated SOD1 available to cause trouble for patients. If SOD1 reductions translate into measurable reductions in the rate of brain damage ALS patients experience, Ionis stock could soar.

Doctor looking at a brain scan.

Image source: Getty Images.

Neurocrine Biosciences

Neurocrine Biosciences (NBIX 2.67%) is another mid-size biotech stock that could shoot higher in response to an upcoming phase 3 clinical trial readout. Neurocrine Biosciences' lead drug, Ingrezza, is on pace to generate more than $1 billion in sales this year as a treatment for patients with tardive dyskinesia. This is a condition often caused by long-term use of antipsychotic drugs that results in involuntary facial movements.

Before the end of 2021, we should know if the company can expand Ingrezza's patient population to include Huntington's disease patients troubled by involuntary movements.

Austedo is an already established treatment from Teva Pharmaceutical (TEVA 0.80%) for involuntary movements caused by Huntington's disease. It's on pace to generate more than $700 million in sales this year despite a black box warning about an increased risk of suicidal behavior.

Another successful showing for Ingrezza in terms of efficacy is a must, but investors want to keep their eyes on Ingrezza's relatively clean safety profile. If it remains intact through phase 3 studies with Huntington's disease patients, this indication alone could soon add more than $1 billion annually to total revenue for this biotech.

Cory Renauer has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Compass Pathways plc and Ionis Pharmaceuticals. The Motley Fool recommends Biogen and Neurocrine Biosciences. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Neurocrine Biosciences Stock Quote
Neurocrine Biosciences
NBIX
$122.15 (2.67%) $3.18
Teva Pharmaceutical Industries Stock Quote
Teva Pharmaceutical Industries
TEVA
$8.87 (0.80%) $0.07
Ionis Pharmaceuticals Stock Quote
Ionis Pharmaceuticals
IONS
$41.56 (0.75%) $0.31
Biogen Stock Quote
Biogen
BIIB
$305.15 (0.56%) $1.70
COMPASS Pathways plc Stock Quote
COMPASS Pathways plc
CMPS
$10.05 (-4.10%) $0.43

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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